Now with WooCommerce: Treat shipping as a profit center

Free Shipping is Dead

You've heard it from anyone that's ever given you advice on your e-commerce site because Zappos does it. And if they do it, for great customer service, and you want to be known for your great customer service, then you should do it too. Right? [note: I love Zappos] If they don't talk to you about Zappos, it's Amazon (and maybe it's Amazon first). If you have a Prime account, 2-day shipping is FREE.

Trust me, I love Amazon Prime, and if anything, it's caused me to buy more stuff from them – which is what they want. But only kind of. Because with each additional order, my free shipping costs them. Have you seen this analysis of the Amazon Prime program? In short, the news is “no bueno” (which is not good, for those of you that don't even know that much Spanish).

In short, free shipping will kill you.

You have Options

Now before you click to another site, let's look at some of the options that others would have you consider (but not me):

  1. Still offer free shipping, but hide the price in a new, higher product price. Bad idea.
  2. Don't offer free shipping, but calculate your costs accurately (as well as your order data), and price it per product, strategically. This is better, but sure is a lot of up front math. And when customers sense that they could save a bit by selecting the same product on another site, they'll jump (even if it's just for that one product).
  3. Offer flat rate shipping. If all your products are alike, this could work. When they differ, and some are heavy, you could get hurt.
  4. Make shipping a pass-thru, where you get the cost from UPS or Fedex, and just hand it to them. This requires little up front work (if you have the right software), but site guests will see that you're pricing isn't profitable and some may stay. Others may still go looking for free.

The Silver Lining

There's good news about those four options that I don't love so much. WooCommerce, if you're using it for your site (which I highly recommend) supports all three cases.

  1. Changing your prices inside of the Product Catalog is easy.
  2. Pricing per product is available via this $35 extension.
  3. Flat rate shipping is supported in the baseline version of WooCommerce.
  4. Real-time calculated pricing is available via these $50 extensions for Fedex, UPS & USPS.

Free Shipping is Alive

Weren't we going to talk about profit centers? If we want to think about shipping as a profit center, we're going to have to do some serious math. Thankfully, I'm going to make it easy for you. And guess what? It let's you offer Free Shipping!

Your best option is to determine when to offer free shipping. Unlike Amazon Prime, you want to determine the order total that makes giving free shipping away make sense. To do that, you need to think about your average order, your operating margin, the total revenue you currently get, the average cost per shipping you pay, and even your conversion rates. Did I scare you? I should. Doing this is normally some seriously hard work and includes spreadsheets (and if you know me personally, you know I hate those).

Thankfully, the director of merchant development at Yahoo! small business has created the spreadsheet for you. Michael Ober is the man behind the spreadsheet and he helps you calculate when it makes sense to give away free shipping.

Use the spreadsheet right, and you can see your incremental revenue and, wait for it….profit.

WooCommerce can help

I told you earlier that WooCommerce supported all the other shipping methods. The good news is it can help you with this strategy as well. All you need is a single extension called, Table Rate Shipping (v2), which sells for $95. Yes, it's a bit pricey, but trust me, it's worth every penny!

What you see is a simple way (after you've figured the price break in the spreadsheet) to state that after the total in the cart goes above XX, the shipping cost is free. Until then, it is YY. The nice thing? YY can be a flat rate or a percentage of the cart total (excluding tax).

So go, download that free spreadsheet and pick up this extension, and make some money!