Understanding how to price your shipping model can be confusing. Using a fulfillment center like Shipfusion frees you from navigating the shipping and receiving landscape with zero stress. Below are some tips and insights on when its time to take your business to the next level.
You’ve set up a visually appealing online store and have stocked it with some amazing products. Everything is in place except the shipping rates.
You have yet to decide which type of shipping pricing model you should opt for so that your profits do not suffer, nor do your customers find it overwhelming.
Free shipment, flat rate shipment, matrix rate shipment, dynamic rate shipment or a combination of multiple shipping rate types – confused? It’s the final piece of your eCommerce puzzle that still needs solving.
eCommerce Product Shipping
We suggest that you start from the bottom, that is, first find out how much an average shipment will cost you and then decide what to offer to your customers.
Because let’s be honest, every customer wants zero shipping, but can you afford to offer free shipment to your customer? If you can, then good, but of course it’s hard to tell at this stage whether you can or you cannot until you’ve worked out the actual shipping cost.
To calculate your shipping costs, you’ll need to factor in all the overheads. This includes:
- Handling costs, which are the wages you pay to your packaging staff to process a single item. Simply, take the average number of minutes it takes your employee to package one item, divide it by 60 and multiply the result with the minimum hourly income you pay to your employee.
- Packaging material cost, which includes the cost of boxes, tape, filling material etc. Of course, you need to work with averages since it’s impossible to track material costs for each order.
- Postage, for which you’ll need to calculate how much your carrier will charge for shipping an order to its destination. To establish a baseline for reference, work with average weight and packaging dimensions and test out different destinations to reach an estimated figure. Every carrier provides a shipping calculator on its website so you don’t have to worry about how you’ll get the postage price from your carrier.
Add all three, and you’ve got your average shipping cost. Now you can proceed with choosing a shipping rate type for your online store!
eCommerce Product Shipping Options
Free Product Shipping
As the name suggests, your customers don’t have to pay anything in shipping charges. If your previously calculated average shipping cost is too low and you feel your profit margins will be healthy enough to accommodate the cost of shipment, this the best option to go with.
If you think you can’t afford a free shipment model for every order, you can offer it over a certain cart value. As a suggestion, set the threshold a bit higher than your average cart value.
Flat Rate Product Shipping
In a flat rate shipping model, you offer a fixed shipment price on all your orders – big or small. The good thing about this model is that your customers know what to expect in shipping rates. Just make sure that you don’t set your flat rate shipment too high. A good strategy would be to set it at break-even; you aren’t here to earn a profit on your shipping costs.
Matrix Rate Product Shipping
Determined by calculating: Product weight x Cart value x Shipping cost x Destination. If you sell big-ticket items, this could be the pricing model for you. However, it also carries a disadvantage – your customers don’t know what to expect in shipping rates until they’ve entered their address.
The final price can take them by surprise and may force them to abandon their carts. To get your way around this problem, you can try incorporating a shipping calculator on the product page. This way, your customers will know about the expected shipping rates in advance.
Dynamic Rate Product Shipping
Last but not the least the dynamic rate shipment, also known as real-time shipping rate model. In this, you connect your customers directly to a carrier by integrating a redirect link on your checkout page. All the calculations are performed by the carrier.
While this certainly helps establish transparency in your shipping pricing model, it’s also one of the least liked among consumers. Again, the reason is, that your customers don’t like surprises when it comes to calculation of shipping rates. You can provide a redirect link on the checkout page but still, it’s a model that you should try to avoid.
You can also try a combination of the above pricing models, just be sure that whichever model you choose is convenient for your business and super convenient for your customers.
Shipfusion sets your business on autopilot and combines flexible, reliable fulfillment with powerful, real-time technology. Shipfusion has multiple fulfillment centers across the US and Canada— making it easy to manage your eCommerce business. For more information on how to set your business on autopilot, Kontakt one of our fulfillment specialists today.
When starting an online store, determining how to charge your customers for shipping can be a difficult decision. We’ll show you some important considerations for determining how to come up with shipping prices for your store.
by Dan Allard Aug 21, 2017
Discount Shipping
It’s like Groupon for shipping. but the deal is always on!
When starting an online store, determining how to charge your customers for shipping can be a difficult decision. There doesn’t seem to be much consistency between the many ecommerce stores out there. Should you offer free shipping? Should your shipping rates be based on weight or total price of the order? And how will you ensure you’re keeping a healthy profit margin?
These are all questions you may be asking yourself. In this article, we’ll cover the common ways online retailers handle shipping rates and what seems to work best based on testing. However, it’s important to note that there is no one size fits all solution. However you decide to set your shipping rates will depend on your industry, what you’re offering, estimated sales volume, weight and size of your items, and much more.
Before we look at the common ways online businesses set shipping prices, let’s look at how to determine your actual costs.
Determine Your Shipping Costs
You should calculate what your shipping costs will be before determining the shipping prices you’ll charge your customers. Here’s how to calculate your shipping costs:
Zacházení
First, you’ll want to figure out the average time it takes you to package an item you sell. This will be easier to figure out if you only offer a small handful of items. Take the average number of minutes it takes you to package a single item and divide that by 60, then multiply that number by an hourly rate you would pay an employee to perform that job. If you do not have any employees, use the minimum hourly income you would accept.
Obal
Next, you’ll want to determine the average cost for packaging materials such as boxes, tape, cushioning, etc. It is recommended that you determine the actual cost, however, if you’re only shipping small packages you can use $1.00 to make it easy.
Poštovné
For this step, you’ll want to measure the average package dimensions and weight and plug those numbers into an online shipping calculator and test out different destinations that you would normally ship to. If most of your customers will be based in the United States, use different destinations within the United States to determine an average cost.
Finally, add up all three of those numbers to get your final cost before taxes and fees. You’ll then have your average shipping cost per order and can move on to setting your shipping rates.
Common Shipping Solutions
There are four common ways to handle shipping rates for your ecommerce store. They are:
Doprava zdarma: You pay for shipping and do not charge your customers.
Paušální cena dopravy: A single set rate for all orders, regardless of quantity, size, or weight.
Price based shipping: The shipping rate is based on the total shopping cart price. This is usually done with a tiered system- for example for every $100 in items the shipping price goes up by eight dollars.
Doprava podle hmotnosti: The shipping price is based on the weight of the items ordered.
Flat Rate Vs. Calculated
Flat rate shipping is charging a set rate- whether that be free shipping or charging the same shipping rate for all orders. Calculated shipping, on the other hand, takes other variables into accounts such as weight, destination, or the total price of the order.
There are advantages and disadvantages to each type. There has been much testing on this topic, and what many have found is that offering calculated shipping can actually increase cart abandonment.
When your customers are shopping in your online store they will always make two decisions- do they want the product you’re selling and are they willing to pay the price you’re charging. Those are the two essential decisions you can’t avoid. For every additional decision you ask your customers to make, you will lose a percentage of those customers. For example, when your customer gets to the checkout page and sees a calculated shipping rate, they will then ask themselves “am I willing to pay this much for shipping?” and “will other stores charge me this much for shipping?”
Many of the big online retailers do not charge what it actually costs to ship their items; therefore most customers don’t realize how much shipping really costs. Too many online retailers offer free and discount shipping rates and many consumers have come to expect it. This doesn’t mean those retailers are losing money though, they are simply recouping the cost elsewhere.
They may be increasing their margins on the sale price of each item. Or they have found that by charging free shipping has increased sales and they are making the profit up in the additional sales volume.
The Closest Thing To A One-Size-Fits-All Solution?
Again it’s important to mention that there really is no such thing as a one-size-fits-all solution when it comes to setting shipping rates for your online store. If you are in a small niche it is recommended to look at what your largest competitors are doing and test out different shipping rates to see what works best for you.
But for the majority of online retailers, a $5 shipping rate seems to be the sweet spot. Anything less will not award you enough additional sales to make it worth it. And anything more will cause the customer to search elsewhere for cheaper shipping rates.
Proč investovat do čističky vzduchu?
The most successful online retailers have tested out different pricing structures for their shipping rates and have found what works best for them. If you want an easy place to start, offering a flat rate of $5 shipping per order may work well for you as it has for so many other online stores. But don’t set it and forget it- use your built-in split testing features that your ecommerce platform most likely comes with to test out different pricing structures and find what works best to both increase sales and profit margins.
Dan Allard is a marketing specialist, guitar player, and father living in The Upper Peninsula of Michigan. In his free time he’s usually reading business and marketing blogs, watching Shark Tank, or pretending he’s Iron Man because he has an Amazon Echo. He also enjoys finding great deals online and finding ways to reduce shipping costs.
Secureship® offers an online service that helps businesses and organizations ship more efficiently and affordably.
Providing instant price shopping across multiple carriers, Secureship is the best choice for reduced rate shipping. In addition, Secureship offers benefits such as a consolidated shipping system regardless of the carrier you choose, built-in address book, convenient invoicing and shipment management.
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