3 Ways Shipping Costs Impact Cart Abandonment

3 Ways Shipping Costs Impact Cart Abandonment

When you shop in a physical store you expect to pay the price displayed on the tag (plus taxes of course!). But, what if when you got to the register to checkout you were hit with an additional unexpected fee? You’d be frustrated, right? You’d probably even decide not to make the purchase at all. This is exactly what happens to people shopping on your website. What’s the culprit? Shipping charges.

Nearly 70% of all online shopping carts are abandoned and research shows that high shipping costs are the number one reason that e-commerce consumers don’t complete their order. So it’s no surprise that approximately 60% of online retailers credit free shipping, with conditions, as one of their most successful marketing tools. Higher conversion rates aren’t the only benefit of implementing free shipping, most e-commerce retailers also see an increase in the average order value.

So what is it about free shipping that appeals to consumers so much?

  1. Shipping costs are often “unexpected.” Because shipping costs usually aren’t displayed until during the checkout process, customers feel duped by the added cost.  A recent study conducted by Etsy infuriated both buyers and sellers by hiding shipping costs until checkout. The result was a decrease in orders on the site, proving that customers don’t like to be surprised with extra costs.

  2. Consumers don’t see shipping as an extra service. Since shipping an online purchase is required, customers see shipping as a cost of business for the company and, therefore, not their responsibility. Shipping an order is no longer going above and beyond for your customers, it is expected. And due to this fact, customers often feel taken of advantage of when forced to pay ever increasing shipping costs and may abandon their carts as a result.

  3. Consumers overvalue free. It is within human nature to value something that is free even more than a better quality item at a small price. Free shipping can out perform discounted shipping or reduced order totals. In fact, most customers prefer a $6.99 savings of free shipping to an offer that would take $10 off their order total! In this example, you would actually save money by offering free shipping and your customer would be happier!

How can you use this information to your advantage?

The good news is that you don’t need to offer free shipping all the time, or even at all, to take advantage of this pattern in consumer behavior. You have a few options when it comes to finding a solution to the “shipping dilemma.”

  1. Be up front about shipping costs. You can do this in various ways and it will all depend on what will work within your own site. You could display the shipping costs on each product page or have the shipping costs display in a pop-up when an item is added to the cart. By being more upfront with your customers about their actual order total, they will feel less frustrated and surprised at checkout.

  2. Use a flat rate for shipping. Again, this takes the surprise and guesswork away from your customers. If you have a consistent shipping price, regardless of order size, your customers will always know what to expect when it comes time to checkout.

  3. Better still, set a free shipping threshold. This is becoming a popular option among many online retailers and can, as mentioned above, actually increase your average order values. However, this will require some research on your part to determine what your company’s threshold should be. The key with this strategy is to make consumers “reach” for the free shipping. If the threshold is set too low, customers won’t spend any more than normal and you’re eating the cost. But, if the threshold is too high, customers will be unwilling to spend so much extra in an effort to achieve free shipping. When determining your threshold you’ll need to determine the median order value of your customers and use this as a guide.

  4. The most customer friendly option: free shipping, all the time, no exceptions. This strategy could be risky depending on your products and margins. However, some companies make it work! An example: Chubbies, a men’s shorts company, boasts free shipping and returns.

Testing Your Decision

Whatever strategy you choose, it’s a good idea to test it out and see how your customers respond.  Consider the A/B test administered on the NuFace website. Using this method, half of your customers should proceed to shop on your original site, as it runs now. The other half of your customers, however, should be unknowingly redirected to identical site except for the fact that this site has integrated your chosen shipping strategy. The test should run at least a few weeks in order to collect accurate and significant data, but the exact length of the test should be decided upon by each individual company.

After running your test be sure to carefully analyze the results. This could be difficult if you don’t have good analytics running on your site, so be sure to install effective and thorough analytics before the test. If your first choice strategy doesn’t yield the results you were hoping for, don’t get discouraged. Give the strategy some time to take effect. Or you can always choose another strategy! It’s important to remember there isn’t a one-size-fits-all answer to the “shipping dilemma” and your company will have to work to figure out what works best for you and your customers.

Which shipping strategy will you choose?

Relevant AddShoppers Apps

The newly launched Conversion Saver app, available to AddShoppers’ Enterprise social commerce platform users, provides exclusive offers to your customers based on their behavior whether they are entering the site, abandoning their cart, or exiting the site. The app is fully customizable, and easy to launch, giving you the power to target campaigns to your unique customer base. The use of this app can increase your conversion rate up to 25%!

But what about offering free shipping to customers if they share the product they are purchasing? The Social Rewards app does just that! This app provides double the benefits to your company by not only giving your customers the free shipping they want, but by increasing your brand’s exposure and creating more loyal customers. Again, the app is fully customizable and you can change the social reward to fit your customers.

Let us know what you think! Share your results, thoughts or questions in the comments section, we love to hear from you.