Do Shoppers Hate Your Shipping Fees? Here’s How to Tell.

Shipping costs are incredibly influential on the customer experience and, ultimately, revenue. In fact, 56% of consumers abandoned carts due to delivery concerns. Specifically, 48% of shoppers abandoned their cart, because the extra costs (including shipping) were too high. 

We all know free shipping is preferred by most customers—our recent study found 62% of shoppers won’t purchase with a retailer without free shipping. But, it’s not always financially feasible (or savvy!) to completely remove all shipping fees.

If you are charging shipping fees, how can you tell if you’re charging too much? Or, are you not charging enough? 

Here are a few measurements to consider to determine if your shipping costs are attracting loyal customers or deterring them. 

What is your e-commerce conversion rate?

Average conversion rates for e-commerce stores range from 2.5-3%. Naturally, shipping offers—including free shipping thresholds or bundles, flat-rate shipping, expedited shipping, and real-time shipping rates—will affect your conversions. 

Test different options to see what improves your conversion rate. If you are testing free shipping, consider ways to increase the average order value (AOV) to capture additional revenue in exchange for free shipping. And, be sure to communicate any A/B tests with your fulfillment team, so they know to expect a spike in bundle requests, faster shipping selection, etc. 

How do your shipping costs compare to industry benchmarks? 

Another way to measure if you’re charging appropriately for shipping is to look at industry benchmarks. In our 2023 E-commerce Benchmarks Report, we found that most industries have shipping costs at 10% or less of AOV.

Of course, this varies by industry, so make sure you’re capturing data that’s relevant to your business. Similarly, consider total fulfillment spend as a percentage of AOV. Track all fulfillment-related spend—including labor, storage, pick and pack, parcel fees, etc.—and divide that by total e-commerce revenue. This will give you a sense of the additional operational costs beyond the shipping label fee. One estimate lists total fulfillment spend at 20% of AOV. 

While most businesses spend about 10% of their AOV on shipping labels and 20% of their AOV on total fulfillment spend, it’s also important to understand how that translates into shipping options at checkout. Be sure to research your competitors to see what they’re offering. You certainly do not have to match their offers, but make sure your fees are appealing in a competitive context. 

Do shipping incentives impact loyalty program sign-ups? 

High-growth brands are using shipping fees (or lack thereof) to incentivize customer loyalty and repeat purchases. Almost 70% of loyalty program members cite free shipping as a key motivation for joining. In fact, Amazon’s loyalty program, Amazon Prime, was built entirely on offering unlimited 2-day delivery on over 1 million in-stock items for the original annual price of $79 for U.S. consumers. 

Track loyalty signups and promotional content that highlights these special shipping options to see if these incentives are driving new membership. This allows brands to look at shipping not just as one of the largest costs of the supply chain, but also as a key revenue and loyalty driver for accelerating brands. 

How to offer more cost-effective shipping rates

If you’re finding that your shipping costs are too high, there are many high-value tactics to employ, such as leveraging a multicarrier shipping software like Shippo, negotiating deeper discounts with the carriers, and employing tech integrations to automatically pull real-time rates at checkout. 

For the complete step-by-step list to unlocking best-in-class shipping rates and providing an exceptional post-purchase experience, download our “Operator’s Guide to E-commerce Loyalty: A Post-purchase Playbook.” 

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There’s no getting around it: shipping is expensive for e-commerce and omnichannel brands. But, with the right testing and understanding, your brand can leverage shipping costs to convert customers, foster repeat purchases, and drive revenue. 

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