Getty Shipping and returns are two of the most expensive costs in an e-commerce company. Shipping and returns are two of the biggest costs in an industry with razor-thin profit margins. How can e-commerce retailers optimize their logistics to maximize their profits and minimize shipping costs? These are just a few of the options you should consider. Amazon Prime has become a standard for free shipping. Customers can see the benefits of free shipping from their perspective. The price they pay is clearly displayed, so there's no need to add shipping costs. They feel they are getting a better deal. These two factors mean that customers are more likely to purchase if they receive free shipping. However, Amazon Prime doesn't really offer free shipping because customers have to pay for it. Customers who place regular orders feel that shipping is free because they pay a yearly fee. This includes all the benefits. Customers also know they can get almost anything they need within 24 hours.
BooHoo, a fashion powerhouse, and other retailers were able to capitalize on the Prime subscription model's success by creating their own subscription model that offers next-day free shipping for a small annual fee. Although the shipping cost is not covered by the fee, customers will be more loyal to the brand because it is less than the cost of shipping. Because they've already paid shipping, customers are more inclined to purchase from the retailer again for future purchases. Shipping costs are covered by additional purchases. You can get standard shipping free, expedited shipping, same-day delivery, and live rates from multiple carriers. Amazon even offers customers the option of a variety of shipping options, especially if products aren’t available through Prime or come from overseas. It's not just the cost of shipping orders that retailers have to pay. It is not just small businesses that can be impacted by the cost of returns. H&M currently tests paid returns in Norway, the U.K. This move will be interesting to watch, as customers are repeating the actions of Zara in many European countries. Boohoo charges customers for returns if customers don't sign up for their Premier service. This means customers are more likely to subscribe and become repeat customers, as they know they will be covered for the cost of returning goods. It may be beneficial for retailers to explore and test different returns options. Some businesses may find that absorbing the costs of returns is the best way to avoid isolating their customers. Retailers can identify ways to reduce returns by understanding why customers return their orders. In fashion, it can be as easy as adding a note on listings to indicate whether the items are true to size. Customers can leave reviews about their experience with the item to help reduce returns (download). Amazon already offers this feature. As customers shop again with you, you can offer better personalization options, such as via your mobile app, to make more recommendations based on size and related products. Retailers can face significant challenges when increasing inventory and orders increase. These include having enough capital to invest, customers buying the products at risk, adequate storage space, and shipping costs. Direct delivery from the supplier allows retailers to avoid having to transfer shipping costs to their customers. This is especially useful if the order includes heavier or larger items, as well as orders going abroad. There is no one-size-fits all solution that will solve every problem with shipping and returns. Forbes Business Council is the leading organization for growth and networking for business leaders and owners. Do I qualify?