Should You Update Your Shipping Service Level To Reduce Chargebacks?

As an e-commerce merchant, you are always looking for ways to reduce chargebacks and improve your customer's experience. One area that you may want to consider is your shipping service level.

Shipping service level options typically include standard shipping, expedited shipping, and express shipping. Each option has its own benefits and drawbacks. The question is, which one is right for your business?

To help you decide which one to pick, let's take a closer look at each shipping service level.

Most Common Shipping Service Levels

Standard Shipping

Standard shipping is the most basic and least expensive shipping option. Packages are typically delivered within 5-7 business days.

Benefits:

• Low cost - Standard shipping is the least expensive option, which can help you save money on shipping costs.
• Easy to track - Tracking information is readily available for standard shipping, so you can easily keep tabs on your packages.

Drawbacks:

• Long delivery times - The main downside of standard shipping is the long delivery time. If you need your package delivered sooner, you'll need to choose a different shipping option. According to Justt’s own consumer survey, 49% of Americans will file for chargebacks if they don’t receive their item within five days.
• Limited tracking options - While standard shipping does come with tracking information, the level of detail is usually limited. This can make it difficult to track down lost or delayed packages.

Expedited Shipping

Expedited shipping is a step up from standard shipping in terms of speed and price. Packages are typically delivered within 2-3 business days.

Benefits:

• Faster delivery times - The biggest benefit of expedited shipping is speedy delivery. If you need your package delivered quickly, this is the best option.
• More tracking options - Expedited shipping usually comes with more detailed tracking information than standard shipping. This can be helpful if you need to track down a lost or delayed package. It can also be used as compelling evidence to win in the chargeback dispute process.
• Guaranteed delivery - In some cases, expedited shipping comes with a guarantee of delivery. If your package is delayed, you may be entitled to a refund.

Trivia: Do you know the difference between a chargeback and a refund?

A chargeback is when the customer requests their money back from their card issuing bank which takes it directly from the merchant’s bank account due to a problem with the product or service. A refund is when the merchant voluntarily gives the customer their money back, no questions asked.

Drawbacks:

• Higher cost - The biggest downside of expedited shipping is the cost. It is typically more expensive than standard shipping, which can add to your shipping costs.
• Limited availability - Expedited shipping may not be available in all areas. If you need this service, be sure to check that it is available in your area before placing your order.

Express Shipping

Express shipping is the fastest and most expensive shipping option. Packages are typically delivered within 1-2 business days.

Benefits:

• Fastest delivery times -  The biggest benefit of express shipping is the speed. If you need your package delivered ASAP, this is the best option.
• Guaranteed delivery - In most cases, express shipping comes with a guarantee of delivery. If your package is delayed, you may be entitled to a refund.
• Detailed tracking information - Express shipping typically comes with detailed tracking information. This can be helpful if you need to track down a lost or delayed package. It also helps prove receipt of goods in cases of chargeback fraud.

Drawbacks:

• Higher cost - The biggest downside of express shipping is the cost. It is typically more expensive than standard or expedited shipping, which can add to your shipping costs.
• Limited availability - Express shipping may not be available in all areas. If you need this service, be sure to check that it is available in your area before placing your order.
• Requires special packaging - In some cases, express shipping requires special packaging. This can add to the cost of shipping and make it more difficult to package your items.

Choosing the Best Shipping Service Level

Some merchants believe that by offering a faster shipping option, they will reduce chargebacks because customers will receive their items more quickly. However, this is not always the case. In fact, offering a faster shipping option can sometimes lead to more chargebacks.

Here's why:

When you offer a faster shipping option, you are essentially guaranteeing that the customer will receive their items within a certain time frame. If the customer does not receive their items within that time frame, they may be more likely to file a chargeback.

On the other hand, if you offer a slower shipping option, the customer may not receive their items as quickly as they would like but they are less likely to file a chargeback because they understand that it may take longer for their items to arrive.

Managing customer expectations through clear estimated shipping dates and communicative customer service is key to ensuring your shipments don’t lead to unnecessary chargebacks.

Of course, there are other factors to consider when deciding which shipping option to offer your customers. These include the following:

Shipping costs

Offering a faster shipping option will usually cost more than offering a slower shipping option. This is because it costs more to ship items quickly. If your margins are tight, you may not be able to afford to offer a fast shipping option.

Delivery timeframes

The delivery timeframes for each shipping option should be clearly stated on your website. If you do not state the delivery timeframes upfront, customers may be unhappy with the shipping option they choose and file a chargeback.

Chargeback rate

You should always monitor your chargeback rate. If you notice that you are receiving a lot of chargebacks for orders you may want to experiment with the shipping options you use and/or offer to customers. It’s possible that expedited shipping will be your sweet spot meeting customer anticipations for their newly purchased items and managing the logistical demands that guaranteed speedy delivery entails. It’s also possible it will be another shipping option. Keep track of the data to find out.

Bottom-line

Updating service levels regularly would help you with your business' CQI and give your customers a better experience with shopping from you which would, in turn, reduce the number of chargebacks.

Whatever decision you make, always remember to keep your customers updated on the changes. This way, there would be no misunderstandings, especially payment disputes , and your customers will be happy with their purchases.

To learn more about how your operational choices affect your dispute volume and chargeback ratio, contact us.