How to Offer and Succeed With Premium Shipping Options

A few notes on Amazon’s COVID-19 and holiday restrictions:

  • On July 13, Amazon announced quantity limits and storage restrictions for third-party sellers across all categories on top of their impending +200% FBA warehouse storage increases in Q4.
  • ShipBob will not restrict storage capabilities, nor will we increase our storage rates in Q4 2020.
  • ShipBob has capacity across our fulfillment network, we will be opening additional fulfillment centers, and we are hiring hundreds of fulfillment associates.
  • ShipBob offers Fulfillment by Merchant (FBM) and if you utilize Amazon fulfillment today, we highly recommend diversifying your fulfillment options for the holidays (e.g., use both FBA and FBM) to maximize sales.

 

The word ‘premium’ refers to superior quality. While you might not think of this adjective in the context of logistics, premium shipping has become increasingly popular as ecommerce grows.

It’s no secret that Amazon dominates the ecommerce shipping space with its industry-leading delivery speeds. As part of its Premium Shipping options, Amazon customers can get everything from one-day delivery to two-day shipping.

Many ecommerce businesses choose to sell on Amazon for this reason. Amazon sellers that qualify for premium shipping options can reap the benefits of attracting and converting more marketplace shoppers.

However, selling on Amazon has its drawbacks. Amazon can make changes to policies and fees overnight that can impact sellers, they have strict eligibility requirements you must maintain, and you sacrifice having a direct relationship with your customers for sales on the channel.

Luckily, there are alternatives to Amazon that allow you to offer a premium shipping experience while retaining more control of your brand.

What is Amazon Premium Shipping?

Premium Shipping refers to the fastest shipping methods available on Amazon — including one-day and two-day shipping — for orders in the United States. Premium Shipping is an earned feature only available to Amazon sellers who meet high delivery performance standards.

How many days is Premium Shipping?

In the United States, Amazon Premium Shipping options are one-day shipping and/or two-day shipping.

Who is eligible for Premium Shipping on Amazon?

To be eligible to offer Premium Shipping on orders in the United States, you must:

  • Have been selling on Amazon for more than 90 days
  • Demonstrate the following requirements for 30 days:
    • A Valid Tracking Rate of 99%
    • An On-Time Delivery Score rate of 97% or greater
    • A seller-initiated cancellation rate of less than 0.5%

Note: Amazon has a 10-day delay due to receiving carrier data, so your 30-day performance is technically reviewed on day 40.

Is Amazon Premium Delivery worth it?

In general, customers are happy to have fast shipping options and many shoppers turn to Amazon when they need items quicker than standard shipping can deliver. One of Amazon’s key competitive advantages is that they have the fulfillment and logistics network capable of delivering packages this quickly.

While Amazon is a leader in ecommerce with Premium Shipping capabilities, there are drawbacks to selling on Amazon.

Amazon doesn’t use your branding

Part of the premium shipping experience is branding. You want customers to see your boxes and your logo. If you let Amazon handle fulfillment, customers will see Amazon Prime boxes and tape. Customers may associate Amazon with your products — not your brand.

Requirements and fees are subject to change

During the early days of the COVID-19 pandemic, Amazon decided to pause fulfillment for non-essential FBA orders. This caused major delays, and many merchants saw their sales plunge and had to change to Amazon’s Fulfilled by Merchant (FBM) program to keep up with demand.

Amazon sellers who were solely reliant on Amazon for fulfillment were unable to fulfill orders. Similarly, Amazon can make changes on the fly, whether it’s to eligibility requirements or fees associated with selling on their marketplace and shipping from their fulfillment centers.

Your performance can’t slip

Once you start shipping with Premium Shipping options, Amazon will determine your ongoing eligibility by your delivery performance. If your performance falls below the target requirements, your eligibility for Premium Shipping may be revoked. Premium Shipping options will be disabled on your offers, and your status will change to ‘not eligible’ in the Premium Shipping Eligibility dashboard.

This means being ‘on’ everyday. The order cutoff times for your Premium Shipping orders must be set to at or after 2:00 pm local time (in the time zone of your warehouse located farthest east).

What does premium shipping look like for non-Amazon sellers?

Premium shipping is not exclusive to Amazon. Brands of all sizes can replicate it on their own ecommerce store and offer premium shipping options to customers. Most often, this is made possible by partnering with a third-party logistics (3PL) provider that has the retail fulfillment services, network, and scale to pull it off.

Two-day shipping has become commonplace in ecommerce, but a premium shipping experience isn’t just about fast delivery speeds — it’s about consistently delivering a great unboxing experience for your customers. It exceeds product delivery expectations, provides the best possible in-person exposure to your brand, and reinforces the value to your customers so they are more likely to order from you again.

“We’ve been doubling our growth year over year, and a major contributor has been fantastic delivery that increases satisfaction with the post-purchase experience. We’ve seen a spike in conversions since applying ShipBob’s 2-Day Express shipping, which lets us to stay ahead of the competition that offers similar products and is seen by our customers. Our job is to drive traffic to our website and ShipBob’s 2-Day Express shipping is certainly an option that a lot of our customers have taken advantage of and are very happy with.”

Matt Dryfhout, Founder & CEO of BAKblade.

The 4 elements of premium shipping for your ecommerce site

If you sell premium products, every part of the customer experience should feel exceptional. To create a premium shipping experience, you’ll want to think through the following considerations.

Packaging

Packaging is the first thing the customer sees when your product arrives at their door. If you’re selling on Amazon and letting them handle fulfillment, customers will receive your products in Amazon-branded boxes. Your only hope for customers connecting with your brand is reliant on them interacting with your product’s protective packaging or product tags.

Even outside of Amazon, custom packaging has become a key way to help your brand stand out. If you want your customers to experience more than plain shipments and dunnage, consider branded boxes or poly mailers. If your brand is built on an environmental mission, consider using eco-friendly packaging. Other aspects of packaging can help provide a premium shipping experience, such as the addition of marketing inserts and stickers.

“We use eco-friendly mailers that are 100% compostable, and ShipBob ships orders out for us in our custom branded packaging. Our subscription option has become popular among customers, where they subscribe and save money. We rely on a great post-purchase experience for this. ShipBob knows our account, has real-time follow through, and a great customer delivery experience. They are a fulfillment partner that is truly an extension of our brand.”

Manuel de la Cruz, CEO at Boie.

Shipping speed

Premium shipping options are offered by every carrier. The two most common premium shipping methods are overnight shipping and two-day shipping.

Next-day or overnight shipping

Next-day shipping is a premium shipping option that tends to — pardon the pun — come at a premium. It costs significantly more than standard shipping because it’s a form of expedited shipping that often requires air transportation rather than less expensive ground shipping.

To offer next-day delivery, you likely won’t be able to offer free shipping unless you are able to dramatically increase your average order value (AOV). Amazon is working on making one-day shipping a more regular offer for Prime customers to further position themselves as the market leader.

Two-day shipping

Thanks to Amazon Prime, two-day shipping has come to be expected by consumers and a great way to reduce cart abandonment. If your brand doesn’t offer two-day shipping, there’s a chance customers will look elsewhere.

While most ecommerce businesses don’t have the capital to invest in the technology, warehousing, and infrastructure required to offer affordable two-day shipping, they can partner with a 3PL like ShipBob who does. With ShipBob, ecommerce brands can offer inexpensive two-day shipping to help compete with shipping options like Amazon Premium Shipping while maintaining more control of their business.

“After a thorough search of 3PLs that could give us something akin to Amazon and its delivery capabilities, we chose ShipBob. We place considerable expectations and pressure on shipping so we can get close to what Amazon does. With ShipBob, 100% of our orders go out via 2-day shipping. We see that people are far more likely to order and keep ordering from us when 2-Day Express shipping is an option.”

Andrew Hardy, COO of Nature’s Ultra.

Mode of transportation

The shipping method you select goes hand-in-hand with the mode of transportation required to get the order to its destination. Here are the most common delivery options:

Sea

Premium shipping is rarely done by sea as it is a very prolonged process. Sea travel is used primarily for international ecommerce if air shipments are too cost-prohibitive. Working with an international fulfillment provider can help improve the process of selling across borders.

Air

Air shipments are the fastest way to ship orders long distances (e.g., UPS Next Day Air Saver). You can get premium shipping overnight from coast to coast. Air travel is a standard shipping option and used by major carriers like USPS, UPS, FedEx, and DHL. It’s also the only way to offer fast international shipping.

Ground

Ground shipping is simple, affordable, and fast (when local or regional). If you’re shipping mainly within a region of the United States or split your inventory across the United States, ground shipping may be as fast as air but much cheaper. If you work with local last-mile delivery carriers, they can work with you to offer one-day or two-day shipping within specific regions.

“Using ShipBob’s 2-Day Express Shipping program, we are able to offer 2-day shipping via ground to 80% of our customer base, which is much cheaper than expedited air. With Amazon Prime and shoppers expecting 2-day shipping at this point, it’s definitely being chosen when it’s offered on our store.”

Lindsay Louise, Fulfillment & Retail Manager at Synchro.

Order tracking

More than ever, customers want ecommerce order tracking for premium shipping options. Tracking options should include updates when packages leave fulfillment centers, estimated delivery dates, information on delays, and real-time location tracking.

Some ‘track my order’ options even allow customers to view the delivery vehicle’s location as it approaches their home. Modern tracking options include taking a picture once the package is delivered to see where it is on a doorstep, locker, etc.

How to offer premium shipping for your customers

To offer premium shipping to your customers, you have a few options:

  • Use Amazon Premium Shipping options after meeting their eligibility requirements.
  • Spend months and millions of dollars leasing or building an ecommerce warehouse and implementing technology required to deliver orders within premium shipping options.
  • Outsource fulfillment to a 3PL that has a growing fulfillment network and the technology required to help you deliver orders within two days.

Building a premium shipping infrastructure is typically an option only reserved for larger enterprises and retailers. Brands like Nike, Macy’s, and Adidas spend millions of dollars each year trying to catch up to Amazon and improve delivery speeds.

For smaller ecommerce businesses, 3PLs are the way to go. 3PLs already have the ecommerce fulfillment infrastructure required to help with premium shipping. They let you compete with Amazon while letting you maintain control of your branding. When you ship with a 3PL, they can use your packaging and work with you to represent your brand.

“We want the customer experience of purchasing on our website to be similar to Amazon Prime. This is possible with ShipBob, without inflating the shipping cost to an insane level. To do this, we strategically place products around the country. We are storing inventory in three of ShipBob’s fulfillment centers that map out nicely with our customer base.”

Tim Fink, Co-Founder of EnduroSport.

Here are a few other considerations for offering premium shipping:

Calculate your shipping rates

When deciding how much to charge for shipping, you’ll want to calculate your shipping costs. Factors like product weights and dimensions, shipping zones, AOV, and more will come into play.

Calculating your cost per order when using premium shipping options is vital to making faster delivery profitable and sustainable. Unless you have volume discounts with carriers, you can expect to pay a premium for these faster shipping options.

Get custom packaging

Simple cardboard boxes don’t always provide the premium shipping experience expected by some customers. A handful of custom packaging providers can make custom boxes, bags, mailers, and more to help your brand stand out.

“ShipBob offers the option to customize packaging and tell a story through our products when shipping to our customers, giving us more control over our business and brand.”

Matt Dryfhout, Founder & CEO of BAKblade.

3PLs make premium shipping a breeze

Many ecommerce businesses choose a tech-enabled 3PL as an alternative to FBA. 3PLs like ShipBob offer premium shipping methods, flexible packaging options, and are experts at delivering on customer expectations. By working with ShipBob, you can offer an Amazon-like experience on your website while owning more of the brand experience.

“From expanding into a second ShipBob fulfillment center, we gain a 13% savings to our bottom line. Speed is important to our customers, but it is difficult to have remarketing capabilities with Amazon and everything has to be pre-packaged and pre-kitted. The flexibility to offer various combinations of products to our customers that we don’t get on Amazon has been really beneficial through ShipBob, and they use our variously sized custom branded boxes.”

Pablo Gabatto, Business Operations Manager at Ample Foods.

Conclusion

Offering premium shipping at checkout isn’t just for luxury items. Today’s customers want an end-to-end ecommerce experience. With the right premium shipping strategy, certain customers are more likely to order from your brand again because they’ll receive packages on time and have a frictionless experience.

Want to offer premium shipping to your customers? Contact ShipBob below to learn how we can help.