Savviest E-tailers are Spending 7 Percent or Less of Sales on Shipping. Where Do You Stack Up?
In 2005, when Amazon first launched Prime, select goods arrived on our doorsteps in two days. Fast and free shipping was a pleasant and delightful surprise. A “gold standard” of shipping was established and—fast forward 13 years—today, many of our favorite online stores have found ways to catch up by offering free shipping to their end buyers as well.
Whether the cost of shipping is baked into the price of items, or paid by the buyers and sellers, the cost of shipping is most definitely not free.
To dig in, Shippo looked at aggregate shipping spend during the holiday season 2017 (November and December) with a large sample of customers. We learned that while no two e-commerce businesses are exactly the same, some industry segments are doing better than others when it comes to optimizing their shipping costs as a percentage of sales.
Who’s spending the least?
We ranked a sample of 500 of our customers by the amount they spent on shipping as a percentage of sales and found that businesses ranking in the top fifth overall are spending less than 7 percent on shipping per order value.
We then took the median spend in each category and found that categories leading the pack with the lowest shipping costs (as a percentage of sales) were:
- Auto (and accessories)
- Computer Hardware (including mobile accessories)
Who’s spending the most?
Businesses ranking in the “bottom fifth” are spending upwards of 14 percent of their average order value on shipping, up to a whopping 40 percent on the highest end. The three industry categories with the least optimized cost of shipping are:
- Games & Entertainment
- Food Products & Baked Goods
- Home, Office & Garden
We know that shipping can be costly and incredibly complicated. At the end of the day, someone is paying for the shipping (whether it’s the business or the end buyer). The only question is: is it baked into the product price or broken out?
We know that it’s not always feasible to offer free and discounted shipping since the cost of shipping can be so high. Retailers should make sure to always pair any free shipping offers with a specific call to action for the customer. This can include adding items to their cart to qualify for free shipping. That way, they can attract customers with free or discounted shipping without eating into their own margins.
For more tips on free shipping, visit our blog post outlining three unique ways to offer free shipping.
About this data
With more than 70,000 customers, Shippo gives a comprehensive look at e-commerce shipping data. Shippo can measure shipping costs across all its customers over time. By extracting information from tens of thousands of aggregated order values, Shippo can connect customers to insights and data about their shipping spend as a percentage of sales.