Feb 12, 2019 | Blog, Warehouse Management Software
From ShipHero – The Top Pick Among Warehouse Management Software Companies
In the vastly competitive world of e-commerce, it can be a challenge to stand apart from the crowd. With limitless options available at their fingertips, consumers are always looking for the lowest price and the greatest value. As a business owner, you must walk the fine line between offering competitive prices and still keeping your head above water in terms of margins.
When it comes to grabbing the attention of consumers and converting them into paying customers, it is sometimes the little things that matter most. While most business owners understand the importance of branding, marketing, and advertising when it comes to improving sales, many underestimate the true value of offering free shipping.
You may be surprised to learn that high shipping costs are attributed to an astounding 55% of abandoned carts. So, the answer is clear — offer free shipping, and the sales will come, right? Well, it’s not that simple.
Keep reading to learn more about the pros and cons of offering free shipping and how to effectively make it work for your business without going bankrupt.
What’s So Great About Free Shipping?
One of the greatest benefits of shopping online is that it is incredibly easy to compare prices. Amazon, Jet, and even Google want to show you the highest rated products, at the lowest prices, with the least expensive (or free) shipping options. With so much competition out there, e-commerce stores need to find ways to convert visitors into paying customers and to keep those customers coming back.
That’s where free shipping comes in.
Free shipping is a huge benefit for customers, and it is often the deciding factor between one site and another. Though shipping is free for the customer, however, they are not free for the merchant, and those costs can add up quickly. That’s why you see so many websites offering free shipping for a minimum spending amount – the sale of those add-on items helps the company recoup the costs associated with shipping the order.
To give you an idea of just how powerful offering free shipping can be, consider recent research that showed 58% of shoppers will add additional items to their cart in order to qualify for free shipping at a set dollar amount. Not only that but shoppers will also spend 9.4 percent more when they need to meet a free-shipping minimum. So, while you may still be eating the cost of shipping yourself, by using free shipping strategically, you’re able to generate more revenue from it.
The Psychology Behind Free Shipping
The question any e-commerce business owner wants to know is, “Does free shipping really work?” The benefits for the customer are obvious, but how do you actually make it work for your business without dipping into your margins too much? The first step in answering this question is learning about the psychology behind free shipping.
First and foremost, it must be mentioned that free shipping is rapidly becoming the norm. Consumers are less likely to think of it as an option and more likely to think of it as a staple. Everyone from giant online retailers like Zappos and Wayfair to department stores and small businesses have begun to offer free shipping. For many of those companies, free shipping is only available for customers who meet a spending minimum but, for others, all orders ship free.
What’s the psychology behind the free shipping strategy? It all comes down to the consumers perceived value of shipping. Prior to purchasing, a customer determines the overall value of their purchase by performing quick subconscious math, weighing the costs and benefits associated with buying the product. If shipping ends up being too expensive for an item that we could just as easily get at a nearby store, the math doesn’t add up and the cart is abandoned.
Another reason why free shipping is so powerful has less to do with the shipping part and more to do with free part. According to Dan Ariely, Professor of Psychology and Behavioral Economics at Duke University, people change their behavioral patterns when something free comes along. In his book, “Predictably Irrational”, Ariely gives us a real-world example of the power of free in action. When Amazon introduced free shipping on some of its European sites, the number of orders increased dramatically. However, not in France. That is because instead of being reduced to zero, the shipping price in France was reduced to only 1 franc (about 10¢ USD). Yet this minor cost was enough to prevent a jump in sales.
How Free Shipping Is Typically Used
Though free shipping is everywhere, companies use this tactic in various ways. Here are some of the different free shipping techniques you’ll typically see in action:
- Free shipping on all orders – no qualifications or restrictions.
- Free shipping for members or subscribers only.
- Free shipping on orders that meet a minimum threshold.
- Free shipping on qualifying items.
- Free shipping to a brick-and-mortar store for pickup.
- Free shipping for buying during a certain window.
Every e-commerce store is different, so the free shipping policy you select will be unique to your company. You’ll need to find the right strategy that keeps your customers happy, that drives sales, and that helps you recoup the costs for offering the program.
What Are the Benefits for Your Company?
Though the idea behind free shipping is sound, it isn’t fool-proof. There will certainly be times when the customer simply isn’t interested in adding more items to their cart to qualify for the discount. There are also cases where the additional revenue from those add-ons doesn’t actually cover the cost of shipping. Additionally, and most importantly, free shipping may fail to work if the consumer isn’t in the right phase of the buying cycle.
The buying cycle begins when the consumer becomes aware of a need that must be filled. Next, the consumer considers ways (products) to meet that need and starts to assess the pros and cons of different options. Eventually, the consumer settles on a particular product and makes the purchase. Free shipping comes into play during the final stage of this process – the purchase. If the consumer isn’t ready to make a purchase, the lure of free shipping may not be enough to close the sale.
On the other hand, when free shipping DOES work, it provides several benefits. Here is a quick summary of the potential benefits free shipping has to offer for e-commerce business:
- Increase in sales – We’ve already covered the fact that offering free shipping increases sales, but how exactly does it do it? For one thing, offering free shipping leads to a reduction in cart abandonment – it helps push potential customers over the edge to close the sale. It can also set your company apart from the competition and increase perceived value.
- Increase in ARPU – Average revenue per user (ARPU) is heavily affected by free shipping policies, especially when you set a minimum spending threshold. In a way, free shipping is an upsell technique you can use to increase the size of an average customer’s order.
- Increase in loyalty – Offering free shipping makes your customers happy, and a happy customer is more likely to come back. When you offer free shipping as part of a loyalty or membership program, it helps to increase repeat sales. Just take a look at what Amazon Prime has done to increase loyalty in the Amazon marketplace.
Free shipping is a tool e-commerce businesses can use to increase conversion rates and keep customers coming back, but it is not a perfect system. Keep reading to understand how to make it work for your shop.
How to Make Free Shipping Work for You
If implemented properly, free shipping could make a big difference for your business. You’ll need to design a free shipping policy that suits your business and ensures that you recoup the costs of shipping on most orders.
Here are some simple steps to follow when designing a free shipping policy for your business:
- Calculate how much you need to sell to recoup the cost of shipping. Spend some time running the numbers to see whether you can make up the money you lose by covering the cost of shipping yourself. This will help you determine whether you can offer free shipping for all orders or if you need to add some stipulations such as a minimum purchase.
- Decide on a minimum purchase threshold. If you run the numbers and see that you could be losing too much money by offering free shipping on all purchases, consider adding a minimum spending threshold. By requiring customers to spend a hypothetical $50 or $100 to qualify for free shipping, you can guarantee that your profit margin on those orders will be higher and consistent.
- Use free shipping as an incentive during short-term campaigns. If it simply isn’t feasible for your site to offer free shipping all the time, you can still use it as a promotional tool for short-term marketing campaigns. Seasonal sales and new product releases are excellent opportunities to drive sales and adding free shipping as a bonus can boost sales even further.
- Consider offering free shipping on certain items. If your business sells a wide variety of products, the profit margins are going to be different for different goods. You can choose to offer free shipping only on items where the profit margins line up or on items you want to sell more of.
- Offer free shipping as a benefit for membership, subscriptions, and loyalty programs. Membership and subscription programs are a great way to get repeat business, but you need to offer your subscribers benefits – free shipping is a good one.
- Limit free shipping offers to returned items. If you’re not in a position to offer free shipping on all of your orders, offering it for returns is still a step in the right direction. It gives your customers peace of mind knowing that if they are unhappy with the product, it won’t cost them anything to return it.
- Use free shipping as a loss leader. The definition of a loss leader is a product sold at a loss to attract customers. However, it can also be applied to free shipping. For example, if you owned a subscription based e-commerce business, you may find that offering free shipping on the first order may increase conversions. Whereas you can make up the cost of shipping due to the higher average lifetime value of the customers (since they’re recurring orders).
Any of these free shipping strategies might work for your business, but you’ll have to take the time to choose the right one. To give you an idea what these strategies look like in action, here are some statistics from companies that have successfully implementing a free shipping strategy:
- According to research published by CNBC, offering free shipping on returns (a policy offered by Zappos) boosted sales by 357%.
- Red Door saw a 90% increase in sales after establishing a minimum purchase threshold – free shipping on orders over 75%.
- Research from Marketing Land revealed that 9 out of 10 customers were more likely to do their shopping online when offered free shipping. Of those, about 30% made weekly purchases.
- According to David Bell of Wharton University of Pennsylvania, customers find a free shipping offer with an average savings of $6.99 to be more appealing than a product discount worth $10.
As you can see, there are many ways to work free shipping into your business plan. It may take some work to find the right tactic, but it is definitely worth implementing.
Simple Tips for Implementing a Free Shipping Strategy
Now that you have a better understanding of the psychology behind free shipping and the benefits of offering it to your customers, you may be wondering where to start. Here are some simple tips to help you implement a free shipping strategy for your online business:
- Calculate your free shipping threshold. This number should be close enough to what your average customer typically spends but enough to cover your costs. To determine this number, look at data from your last 6 to 12 months of sales to find the sweet spot between setting your spending threshold too high and setting it too low.
- See what your competitors are offering. Though the most important thing is to make sure you’re not losing money, you also want to see what your competitors are doing because you want to give potential customers a reason to choose you over them.
- Do a test run before committing to a free shipping strategy. You don’t have to commit to any free shipping tactic right away – you can run a promotion for two to four weeks to test out your free shipping policy and then evaluate the data to see what works best given your unique e-commerce scenario.
- Don’t forget about returns. Returns are a necessary evil in the world of e-commerce, and it is your challenge to find the balance between keeping your customers happy and keeping your business alive. Think about the options such as free returns, customer-financed returns, or a flat rate for customer returns.
- Once you settle on a free shipping policy communicate it clearly. Customers want to know exactly what they’re getting when they make a purchase. Think of it less like a policy and more like a marketing tactic. Make sure everyone that lands on your site is well aware that you offer free shipping.
- Work the cost into your product prices. If you really want to offer free shipping but you can’t afford to eat the costs yourself, you might be able to work the cost (or at least some of it) into your product pricing. Just make sure you don’t go so high that you lose out to your competition.
Though including free shipping on your e-commerce store has the potential to increase sales and customer loyalty, it might not be right for your business at this time. If your profit margins are already low, for example, adding free shipping to the mix may cut your profits even more or negate them entirely.
The Bottom Line
Free shipping is an excellent marketing tool that has led to incredible benefits for many e-commerce businesses. Before you tack on a free shipping policy for your own business, however, you need to weigh the pros and cons – you also need to think practically about whether it will work and how to implement a free shipping policy.
When considering a free shipping policy, there are three questions you need to answer:
- Are your margins high enough to cover the costs?
- Will you still be making a profit once all costs are covered?
- How do you plan to use free shipping as a marketing tool?
Answering these questions will help set you on the right path toward determining whether free shipping could be a beneficial tool for your company. If you decide that it is, take the time to choose the best policy and follow the tips you’ve received here to start implementing your policy.
Need great software to run your warehouse? ShipHero is a leader among warehouse management software companies. See what we can do for you here.
Feb 19, 2019 | Blog, Warehouse Management Software
The ecommerce fulfillment experts at ShipHero on the top trends for 2019
The e-commerce industry has experienced unprecedented growth over the past decade and it shows no signs of slowing down. Research shows that e-commerce could account for $4.88 trillion in global retail revenue in 2021. But what factors are driving this change?
Today we’re going to be taking a look at the 2019 e-commerce trends that account for this massive growth and how you can utilize them for the benefit of your own business.
Let’s dig in…
1. Customer service is becoming more automated.
An e-commerce business can live or die by its customer service strategy, and advancing technology continues to provide new ways to engage with and meet the needs of your customers. Chatbots, for example, are a new trend that enhance the customer experience with minimal cost when compared to traditional customer service teams.
If you’re unfamiliar, chatbots are live chat services that run via an algorithm. Think of it as a “if the customer says X, the chatbot says Y”. Statistics show that the majority of consumers find the greatest benefit of chatbots to be 24-service. While these automated chat services are still in their infancy, they still give e-commerce businesses the ability to scale certain aspects of their customer service department.
If you’re interested in integrating a chatbot into your store, there are hundreds of different services and chatbot use strategies, based on your e-commerce platform, to fit your needs.
2. Direct-to-Consumer models are on the rise.
Consumers want to receive their orders quickly, correctly, and at the best price possible. A tactic many e-commerce companies are starting to use is direct-to-consumer sales. This model eliminates middlemen such as wholesalers and retailers while building a closer relationship with the customer.
Studies show that 52% of consumers will go directly to a businesses website in order to purchase their products. Why? Much of the reason comes down to the relationship that businesses are able to create selling direct. All channels — from marketing to shipping — are consistent under the umbrella of the brand itself. Businesses in all industries are taking notice of the direct-to-consumer rise. Tesla cut out car dealers in order to sell direct to their customers, Nike is predicted to grow their direct sales to $16 billion in 2020 and, remarkably, 61% of wine sales in 2017 came from direct-to-consumer sales.
To succeed in direct-to-consumer sales you need a top-notch ecommerce fulfillment partner. ShipHero can help.
3. Voice-enabled technology will become the new battleground for e-commerce.
According to new research, over 35 million Americans used a voice-activated device at least once a month in 2017 – this number represents a nearly 130% increase over 2016. Smart home assistants and voice recognition systems are on the rise for various aspects of home automation, and 2019 will see a rise in the use of these systems for e-commerce. E-commerce giant Amazon is betting heavily on it. According to an Amazon press release, customers use of Alexa for shopping more than tripled this year compared to last year. The reasoning behind its growth is simple — consumers are looking to technology as a way of gaining back their time. Rather than having to click around in search of an item you’re out of, you can simply request it from Alexa in seconds. The algorithm will scour your past purchases to make a relevant product suggestion and after you confirm, the order is placed.
4. Analytics will continue to advance.
Integrated technology and analytics platforms such as Google Analytics provide e-commerce businesses with valuable data about the performance of their customer base, sales, and products. However, current analytics is almost exclusively used to show what has happened in the past and not what could happen in the future. The relatively new field of Predictive Analytics provides e-commerce businesses with a deeper understanding of customer habits and preferences by analyzing past data and using it to help increase conversion rates. The best current representation of predictive analytics in action would be the rise in product recommendation sections on e-commerce sites. These products are not random. More often than not, they are unique to the visitor based on viewing habits, past purchases, and more. As technology advances further, machine learning will allow for even greater predictability and e-commerce personalization.
5. Amazon will continue to dominate the e-commerce market.
Over the years, Amazon has become an e-commerce powerhouse. In 2018 they dominated the industry with record profits and often hover around the most valuable company in the world. In 2019, it is likely that Amazon will continue to dominate the market, which leaves smaller companies with just one option – to find new ways to remain competitive.
The goal is not to compete directly with Amazon but find ways to integrate it into your e-commerce model by using their marketplace for your own products or fill in the gaps that Amazon has. One of the best ways you can do this is by building a remarkable brand on your own platform. Amazon, while widely used, doesn’t have the ability to offer a fully cohesive brand because they sell products from other vendors. Think of it as the difference between your local grocery store and Trader Joe’s — which has a greater brand appeal? By selling your products direct, as mentioned above, you have the ability to create a more consistent brand experience, which allows for a stronger relationship between your business and the customer.
6. The middleman will slowly disappear.
Each year, the supply chain for e-commerce businesses grow shorter. This no better visualized than in the meteoric rise of B2B marketplace, Alibaba. Today, all you need is an idea and some cash (or credit) to turn it into a reality. Don’t have access to investment capital? You can still bring your idea to market with sites like Kickstarter and Indiegogo. The middlemen and third-party distribution channels, are starting to fade away as the need for their services becomes obsolete.
7. Mobile payment platforms will become the norm.
Though there are still situations where cash is king, e-commerce platforms will always rely on digital payment platforms. However, the type of digital payment will begin to shift. As mobile traffic accounts for nearly half of global web traffic, it is estimated that global mobile payment revenue will rise from $450 billion in 2015 to over $1 trillion in 2019.
As an e-commerce business, review your analytics to see where your traffic and conversions are coming from. Are you seeing an upward trend in mobile visits? Consider implementing Apple Pay and Android Pay to allow for seamless payment. Remember this: Consumers are more likely to convert when there are less steps to completing a purchase.
8. Subscription services will continue to expand.
Over the past few years, subscription boxes like Dollar Shave Club have become extremely popular. While this realm of e-commerce began with the intention of delivering highly used consumer goods (e.g. meal delivery boxes) they have expanded to include almost every industry imaginable — from coffee to clothing. From 2014 to 2017, the subscription box market has grown by an incredible 890%. This growth is due to two factors. First, businesses are looking for every way possible to increase customer lifetime value by turning products into services. Second, customers are looking to receive highly-used products on a regular basis without having to put extra effort or thought into the purchase.
9. Social media will continue to drive sales.
In recent years, social media has become the number one channel for e-commerce businesses to grow and develop their brand. This, in turn, has led to an increase in sales. According to data from BigCommerce, online stores that have a social presence have 32% more sales on average than stores that don’t. Why is this? It comes down to the ability to build a relatable brand that stays top of mind. Also consider that organic social costs are relatively minor in the world of digital marketing and yet they play the biggest factor in building a relationship with customers.
10. Shoppable posts will become more common.
Social media platforms like Instagram already provide excellent opportunities for brands to convert followers to customers, and we’ll continue to see this as a major trend for 2019. Research shows that 80% of Instagram users already follow at least one business and 60% use Instagram to find new products. Furthermore, 75% of those who use the platform to find new products end up engaging further with the brands they discover. To put this trend to work for your business, upload your product catalog to Facebook. This will allow you to “tag” posts with products that will lead followers (Facebook and Instagram) back to the page on your site where they can make a purchase.
11. Augmented reality will change the way customers shop.
One of the downsides of shopping online versus in a brick-and-mortar store is that you can’t physically try the product before you buy. One way online retailers have started to bypass this hurdle is by incorporating mixed reality technologies into their e-commerce platform. For example, IKEA’s Place app makes it possible for customers to catch an augmented reality-powered glimpse into what the products would look like in their own homes. Though AR and VR technology isn’t a perfect fit for every e-commerce industry, it could help some retailers stand out from their competitors. To best analyze whether your business could benefit from augmented reality, ask yourself the following questions…
- Is there a need to see the product in a certain environment?
- Is there a benefit to the customer seeing or comparing different variations of the product in person?
- Are there details of the product that need to be thoroughly examined prior to purchase?
If you answered “yes” to any of these questions, consider integrating augmented reality into the future of your e-commerce store. With e-commerce giants like Shopify investing in it for their customers, it’s becoming easier than ever to integrate into your own site.
12. International e-commerce will continue to expand eastward.
According to recent research, nearly 4 billion individuals (just over half the world’s population) can now be classified as “middle class”. Of that number, almost 9 in 10 of the next billion middle-class consumers will be Asian. With more money comes more purchasing power. Though expanding into international markets has its fair share of challenges, it does present a gigantic opportunity for some companies.
If you’re considering expanding into international markets, understand how you can properly serve this newly evolving Asian middle class. To put this opportunity into perspective, consider that research shows the middle class markets in China will account for $14.1 trillion and India will account for $12.3 trillion in 2030.
Final Thoughts
In the end, a successful e-commerce business is one that provides a valuable product or service and creates an overall satisfying customer experience (from interacting with the brand to using the product). Don’t feel compelled to utilize all of these trends in the coming year. Rather, review these trends and start to think about the current state of your own business to understand what areas of your supply chain or marketing strategy provide the most potential for growth.
Nov 16, 2020 | Blog, Fulfillment, Warehouse Management Software
Based on ShipHero’s sales volume, today, November 16, appears to be the unofficial kickoff of the holiday shipping season for DTC brands. It was ShipHero’s busiest shipping day ever. Three of our brands shipped over $1 million of goods today. Total volume was up 14% from last Monday and far eclipsed Cyber Monday of 2019.
ShipHero is here to handle your ecommerce order fulfillment, handling even the busiest days smoothly. Find out more here.
Nov 23, 2020 | Blog, Fulfillment, Warehouse Management Software
ShipHero provides warehouse management software and outsourced ecommerce order fulfillment to over 4,000 brands, processing an annual gross merchandise volume (GMV) of over $5 billion.
In an effort to provide useful data to the DTC community during Covid and the rapid changes occurring in our industry, we are sharing some of the broad segment trends from the products on our platform. Here is the data for the week ended November 23, 2020:
More charts available on data.shiphero.com.
Do you find this information useful? Let us know! Twitter: @weareshiphero or Email al@shiphero.com.
Nov 28, 2020 | Blog, Fulfillment, Warehouse Management Software
ShipHero Ecommerce Fulfillment Update
Saturday, November 28, 2020
ShipHero Ecommerce Fulfillment is in high gear as we surpassed our all-time record volume.
Yesterday was our best sales day ever and today will be our second-best ever.
Here are the statistics for Black Friday and today, Saturday November 28:
Black Friday (as defined by UTC, so starting at 7PM Eastern Thursday) ShipHero orders were up 79% year-over-year.
On Saturday (as defined by UTC, so starting at 7PM Eastern Friday) orders were up 117% year-over-year (more than doubling versus last year).
In addition, on Black Friday, the calendar day, as defined by Eastern Time, ShipHero processed 648,847 orders, up 87% year-over-year. Shopify reported being up 58% YoY for that same period.
As always, ShipHero is here to meet the holiday demand with fast and accurate ecommerce fulfillment. See what we can do for you here.
Nov 30, 2020 | Blog, Fulfillment, Warehouse Management Software
ShipHero provides warehouse management software and outsourced ecommerce order fulfillment to over 4,000 brands, processing an annual gross merchandise volume (GMV) of over $5 billion.
In an effort to provide useful data to the DTC community during Covid and the rapid changes occurring in our industry, we are sharing some of the broad segment trends from the products on our platform. Here is the data for the week ended November 30, 2020:
Today is Cyber Monday and the holiday rush is in full swing, as shown by the huge increases in volume over prior weeks. The ShipHero team is on it, helping our customers meet the surging demand.
More charts available on data.shiphero.com.
Do you find this information useful? Let us know! Twitter: @weareshiphero or Email al@shiphero.com.
Dec 1, 2020 | Blog, Fulfillment, Warehouse Management Software
ShipHero Ecommerce Order Fulfillment Update
Tuesday, December 1, 2020
ShipHero just completed another successful Black Friday and Cyber Monday, helping our SaaS and fulfillment customers meet their holiday order rush.
Cyber Monday volume was up 124.14% year-over-year, more than double that of 2019.
For the Black Friday to Cyber Monday period, average order value was up 15.36% year-over-year, increasing to $91.59 from $79.40 a year ago.
Also, during this period, ShipHero total unit volume increased 104.06% year-over-year. The more than doubling of orders is due to the growth new customers using ShipHero as well as sales increases at existing customers.
ShipHero is here to meet your customers’ demand during the holidays and year-round, with fast and accurate ecommerce order fulfillment. See what we can do for you here.
Dec 1, 2020 | Blog, Warehouse Management Software, Warehouse Operations
From the E-Commerce Experts at ShipHero – The Leader in Warehouse Management Software
We hope everyone had a wonderful Thanksgiving and are at least halfway through filtering your email inbox of the BFCM bombardment! Now, here’s a fun fact: around the same time the first Thanksgiving was held in the 17th century, the subscription business model was also first pioneered by publishers of books and periodicals, where travelling salespeople would go door-to-door to convince readers to sign up for continual editions! At the time, this was viewed as a wild derivation from the traditional business model that favored one-off transactions to instead emphasize recurring transactions and payments. Fast forward to today, as brands have progressively searched for ways to improve their holistic shopping experience and nurture relationships with their customers, it seems that they have figuratively taken a page out of these pioneer’s books and forged the rise of the new Subscription Economy.
The Subscription Economy is the term used to describe the trend of otherwise traditional businesses shifting to a subscription business model, where they offer recurring use or access of their product or service, whether monthly, yearly, seasonal or otherwise, rather than the traditional, one-time transaction. A myriad of prestigious companies have successfully employed this business model such as content streaming services like Netflix or Hulu, fitness centers and gyms, software companies like Dropbox, recurring subscription box companies like BirchBox, and more recently, traditional product companies that typically sell goods on a fixed cadence; for example, GNC for vitamins AKA “Subscribe and Save”.
With the recent introduction of Shopify’s Subscription APIs, online e-commerce brands using Shopify can now offer product subscriptions and completely transform how they engage with their customer base. This type of business model typically produces a long-term contract and relationship with a customer, allowing businesses to offer steep discounts for loyal customers that sign up for pre-determined and scheduled purchases.
Let’s briefly list the benefits of the subscription business model and then discuss how your business can make the shift to offer product or service subscriptions.
Benefits of Subscription Models
For reference, some examples of business models that have successfully employed the subscription model include:
- Netflix allowing access to content for a monthly fee
- ButcherBox sending customers a box of meat on a set cadence; customers can subscribe to receive the box every 4, 6 or 8 weeks
- GNC giving a 20% discount on vitamins when signing up for a monthly or 90 day recurring order
- Magazines offering monthly or yearly subscriptions
Brands and businesses that have utilized the subscription business model have reported better customer relationships, better aggregate data, and better diversity in product offerings.
1. Turn Customers in Subscribers
Most large companies report that brand new costumes only generate 15 to 25% percent of their revenues, which means that return customers generate the bulk of the revenue. Focusing on return customers and subscribers allows companies to lower the acquisition costs of targeting a new audience, while also cultivating brand loyalty.
2. Gather More Fruitful Customer Data
As reported by Shopify, modeling and storing subscription data allows merchants to offer benefits like recurring revenue reports on active subscribers, new subscribers, and churned subscribers. This allows your company to better engage with your audience and create targeted content along the customer journey.
Many large brands report developing separate marketing strategies for subscribers and non-subscribers, as well as strategies to convert non-subscribers to subscribers including email campaigns and targeted discounts for subscription and account creation.
3. Sell the Same Product in Multiple Ways
Utilizing the subscription model, a single product could be sold in multiple ways, such as selling the good as a one-time purchase as well as a subscription, including bundles or cross-selling. Bundling, cross-selling and subscriptions gives brands the creative freedom to understand how their customers would prefer to engage with their products and services.
3 Steps to Building a Successful Subscription Model
Once you have decided to build a subscription model for your business, here are three simple steps to get you on your way!
1. Develop a Pricing and Bundle Strategy
When shifting to a subscription business model, subscription pricing and incentives are the most important and complex aspect to consider, because it directly drives the three basic growth strategies: acquire new subscribers, increase engagement and revenue per existing customers, and reduce customer turnover. A fixed subscription price can often be counterproductive because it foregoes the plethora of opportunity for flexible and creative pricing strategies.
Many brands choose to develop pricing strategies according to the factors that matter most to their business. For example, if your business aims to optimize quantity of engagement, customize the pricing to incentivize more usage (e.g., unlimited usage deals). Alternatively, if you want to increase your average order quantity, set subscription pricing that pushes subscribers to order in bulk at a set schedule with discounted prices. Finally, if customer loyalty is your desired result, consider developing reward programs or additional “points” for those that choose to subscribe at checkout.
As you can see, the subscription model offers endless opportunities for flexibility and creativity in customer engagement. There are also freemium options, early bird offers, free trials, bundles and more. Consider your business goals and start with a simple pricing tier, then adjust as you learn from your subscribers what they want!
2. Provide a Way for Customers to Manage Subscriptions
Cultivating strong customer relationships are absolutely essential in the subscription business model. Of course getting new subscribers is important, but in the Subscription Economy the bulk of customer transactions are alterations to active subscriptions like subscription renewals, suspensions, add-ons, upgrades, terminations and more.
As such, brands must provide customers with an intuitive method to manage their accounts throughout the subscription lifecycle. For this reason, Shopify has released a suite of APIs with webhooks to link to your app, thereby giving your subscribers all they need to manage their active subscriptions.
3. Scale with Infrastructure
Successful subscription businesses must rely on their automated processes and enterprise-grade systems to scale their subscription models to provide around-the-clock customer support and business continuity. Subscription-based companies, or those that want to start offering subscriptions, absolutely need seamless integrations with commerce systems, payment gateways, as well as fulfillment and logistics companies.
For that reason, warehouse management software companies like ShipHero integrate directly with Shopify to allow your brand to get as creative as possible with your product and service offerings, all while ensuring the reliable fulfillment capabilities that your customers have come to expect.
Not to mention, creating and shipping customized bundles, kits or bulk orders can get complicated and expensive through traditional fulfillment methods. That’s why ShipHero offers BulkShip: an intuitive interface to design preassembled bundles of products, such as a makeup kit you’d buy at CVS, or a more complex bundle that would get assembled at fulfillment. A good example of this could be a clothing subscription, where the customer selects the sizes, and then the kit is assembled, as Nicholas shows in the video link here.
By offering a subscription service, your brand will most likely be selling a variety of items in a variety of ways, so BulkShip allows brand owners to group orders quickly and pick a lot of the same product at once, making the fulfillment process quick and efficient.
Happy holidays from all of us at ShipHero! And if you like our blogs, be sure to Like & Subscribe 😉
Dec 3, 2020 | Blog, Warehouse Management Software, Warehouse Operations
With the explosion of e-commerce showing no signs of slowing, retailers are increasingly leaning on the technological capabilities and geographic reach of fulfillment providers to place inventories in position for faster last-mile services.
Retailers are placing a greater emphasis on e-commerce versus brick-and-mortar shopping as consumers continue to show hesitancy to shop in stores amid the COVID-19 pandemic. But that emphasis on e-commerce requires positioning inventory closer to the customer in order to shorten the last-mile. As a result, retailers are turning to fulfillment providers with cloud-based technology capabilities to manage their inventories in real-time.
ShipHero CEO Aaron Rubin was asked about the growing trend in ecommerce fulfillment where companies are attempting to place their inventory closer to their customers.
“Retailers will streamline operations, reduce brick-and-mortar presence, and outsource fulfillment to focus on their core service offerings,” Aaron Rubin told JOC.com.
He expects a continued shift from brick-and-mortar dependence to an ecommerce-focused model and noted that many bankrupt retailers with physical stores are relaunching as online retailers and ramping up quickly by utilizing ShipHero’s fulfillment network, which currently consists of seven US warehouses. ShipHero’s warehouse management system software is in 500 warehouses at present.
Read more here at Joc.com. (registration required)
Dec 10, 2020 | Blog, Warehouse Management Software
Aaron Rubin is a longtime veteran of ecommerce. His growing annoyance with the shipping costs related to his business drove him to create ShipHero, a remote company that offers outsourced ecommerce fulfillment services and warehouse management software to other ecommerce businesses.
Recently, more than 1 in every 200 ecommerce packages delivered in America were shipped through ShipHero.
Aaron was interviewed on the Tropical MBA Podcast, discussing how his first ecommerce business nearly went bankrupt, how a need to “scratch his own itch” led to the creation of ShipHero, and offered his take on where the ecommerce industry is headed in the future.
Listen to the podcast here.
