Shipping Strategy
Want to improve your online strategy and drive more revenue? One of the best places to start is your shipping and order fulfillment. Check out these eight tips to become a master at shipping OEM parts quickly, efficiently, and profitably!
1. Set your baseline shipping strategy
Depending on how your OEM program operates, determining your baseline strategy is crucial when selling online. There are overhead costs to consider, competitive pricing offers to take into account, and online buying habits that your customers stick to. Remember to compare conversion rates on parts with free shipping vs. parts that don’t offer free shipping when determining your baseline. Split-test your most popular products to gather enough data from your customer base. Once you’ve determined which option is more appealing to your customers, you can determine your pricing strategy.
2. Test your thresholds
If you’re offering free shipping on parts, you need to determine the pricing threshold that still yields a profit. What’s the absolute highest and lowest you can price a part, offer free shipping and still make some money off it? How many conversions do you need to generate enough revenue?
Let’s look at an example. You test offering free shipping on parts at two different threshold prices, $100 or higher vs. $150 or higher. You notice that the conversion rate on the $100 orders is 20%, compared to the conversion rate on the $150 orders at 7%. The higher conversion rate on $100 parts orders with free shipping yields a higher profit for the parts department, so your team can assume that the $100 priced parts/parts orders should be the threshold for free shipping.
3. Direct attention away from cheaper parts
Don’t waste free shipping on smaller, cheaper parts. Ultimately, they don’t have much of an impact on the bottom line. Even with hundreds of sales for more affordable parts, they won’t cover the cost of offering free shipping most of the time. Instead, offer a lower shipping rate on those parts. If your shipping rates are decent enough, it’ll still encourage customers to purchase from you. If you work with specific carriers to get the best shipping rate on cheaper parts, find the best fit for your parts department’s needs.
4. Add money-saving shipping features
Cut down on costs and the time it takes for re-shipments and shipment tracking with features like Shipping Protection. With Shipping Protection, you can protect most packages from loss, theft, and damage—at no extra cost. This will boost buyer confidence, and in turn, protect your dealership's reputation.
5. Negotiate better rates on shipping
As you hit certain sales volume thresholds, you can often negotiate better rates from shipping carriers like UPS and FedEx. With those discounts in place, you can pass a portion of your savings onto your parts shoppers by adjusting your store’s shipping markups based on your negotiated rates. This will make you more competitive, and in turn, increase traffic and conversion rates.
6. Set up multiple shipping options and carriers
Fast and easy shipping is one of the biggest contributors to making buying decisions among today’s consumers. Offering convenient delivery options is a crucial component of your shipping strategy.
For the best performance, RevolutionParts always recommends offering USPS shipping, in addition to at least one of the other major carriers (UPS or FedEx). Within each of those carriers, it’s important to offer a variety of options to attract different sorts of buyers: ground shipping is often the cheapest, and will typically resonate with most shoppers, but if someone needs a part quickly they’re often willing to pay more for speedier service. Offering expedited or overnight shipping – with increased markups – can ensure that you’re maximizing profit margins when processing orders for buyer who need their parts sooner rather than later.
7. Don’t overpay for packing materials
Good packaging matters and it helps you keep your brand image consistent across all stages of the customer buying experience. The right packaging in your shipping strategy can help:
- Reduce returns and refunds
- Improve the customer experience
- Increase brand awareness
- Drive repeat sales
Ensure you always have a variety of boxes on hand, and if you need to purchase packing materials, don’t buy retail — buy in bulk straight from the manufacturer to save money.
8. Fine-tune your pricing rules
Finding the right balance between shipping cost and parts pricing is essential to the success of your online store. It’s important to take into account the psychology of parts buyers. A part listed for $40 with $12 shipping is less attractive than a $52 part with free shipping.
Buyers love getting things for free, and with our marketplace channel tools for eBay and Amazon, shipping costs can be “baked into” the parts price, making your listings appear more attractive. Competitive pricing can often lead to higher sales volume, which opens the door to other opportunities for profit, such as backend OEM incentives or negotiated shipping rates from your carriers.
9. Build your reputation
Seller reputation pays off in the long run. If you can build an army of return customers, your business can thrive amidst detrimental industry trends. Great customer service, fast consistent shipping, and high-quality products all bake into an infallible seller reputation. If you can consistently deliver on these three initiatives, then you might be able to increase profitability by gradually raising your prices – customers are often willing to pay more if they know for sure they are shopping with the most dependable business out there.