Written by David Renwick
Shipping costs are an integral part of running an ecommerce business. They will also be one of your biggest expenses!
Balancing shipping costs with your customer expectations is one of your first hurdles in ecommerce. For around 70% of consumers, convenience and free shipping are the biggest online shopping incentives.
In this article you’ll learn what shipping costs are, why it is important to calculate accurate shipping costs, hidden costs to look out for, and three steps you can take to calculate shipping and handling in your ecommerce business.
Shipping costs cover every step between someone placing an order and getting it to their door.
Your shipping costs don’t just cover the price of postage. You also need to budget:
This is why it is so important for ecommerce businesses to 1) estimate accurate shipping costs and 2) balance affordable shipping for customers versus making a profit.
98% of shoppers say that the delivery experience impacts their loyalty to a brand.
That means that if shipping is:
Then nearly 100% of online shoppers will shift their loyalty.
Calculating the cost of shipping in a way that is simple for the customer means you will convert and reconvert a lot more customers over time.
It also means that you will not lose money by undercharging on postage. Everybody wins when you estimate shipping costs accurately!
To start off your shipping calculations, you’ll need a plan. Without one, you run the risk of disappointing customers and losing a lot of money over time. Ask yourself the questions below to come up with your ecommerce shipping and handling strategy.
When you start your ecommerce business, you are probably fulfilling orders yourself. You need to ask yourself how much you are actually capable of shipping in a single day or week. Otherwise you could end up disappointing customers! For example, if you are packing orders at night, you probably can’t offer same day shipping. You will need to ask how much you can realistically ship by yourself, especially if you are organizing shipping manually.
Where you are and how much you are shipping will determine a lot of your shipping costs. For example, if you are only shipping domestically, you can probably do flat rate shipping without losing too much money over time. If you are shipping overseas, you will need to start looking at international courier partners.
This complicates your shipping quite a bit because each courier will have their own rates and rules. Automation will be your best friend if you are shipping to multiple countries!
You also need to consider what it is you are shipping. Products like perishables and delicates may increase shipping costs through packaging materials, customs documents, taxes, and shipping insurance.
If you have varied product orders, this will also change the weight and dimensions of parcels instead of having default packages.
Finally, the technology or software you use to plan your shipping costs will make a big difference. Doing everything manually is OK if you only ship a couple of parcels a week, but you should make a plan with the intention of growing.
Starshipit automates all of your shipping costs and helps you send more parcels with less errors. In other words, you’ll have the most satisfied customers on the market!
When you estimate your shipping costs, there are a few hidden costs that could drive up the price. When you are calculating any shipping charges, you will need to balance your customer experience with your overall profit and expenses.
A recent study showed that 5-15% of all orders get lost or damaged in transit. Giving customers the choice of shipping insurance and signed delivery can save you money on replacing items or organizing returns.
In general, customers are responsible for paying shipping taxes on international orders. This is usually included in the cost of shipping, however you may wish to subsidize the price of this for better customer shipping prices. For example, if you ship to Europe, you can pay VAT taxes on behalf of customers on orders up to $150. Make sure you know what your obligations are before you start shipping internationally!
Domestic and international parcels will have very different pricing. The easiest way to estimate this without losing money is to automatically calculate shipping at checkout.
With Starshiptit for example, you can offer your customers a range of shipping options at checkout such as table rates, instead of charging blanket shipping rates that might be perceived as steep by your customers.
The price is determined by your courier partners (e.g. DHL for international, Aramex for domestic) and is connected with API technology. That way you know shipping will always be accurate for both you and your customer.
You may want to consider any surcharges when you price your shipping. Couriers charge more for things like rural delivery, undelivered parcels, customer signatures, fuel surcharges and international taxes.
You should especially consider these when you charge a flat rate on all orders.
You will of course need to consider how much your couriers charge for different weights and dimensions. Most carriers will have default prices and package sizes, so you will need to figure out if your orders fit inside the regular sizes or not.
For Shopify shipping prices, you can update your “default” package size to reflect the average cost of shipping. The weight is usually more important than the dimensions for shipping prices.
Ready to start shipping? Here’s 3 steps to calculate how much it will actually cost to ship a package. Remember that ultimately the price will be determined by your individual carriers so it’s important to research the best ones for your locations!
How fast do you want customers to get their orders? Does your ecommerce store sell essential everyday items that people need quickly? Login in to your courier partner accounts and see how much they charge for same day, overnight and two day delivery. You can play around with offering customers the choice at the checkout and how much they are willing to pay to get it there quickly.
You might think that it is cheaper to have all shipping with one aggregated courier service. In general, it is actually cheaper to use different services for different locations and distances.
Add up the secondary costs of shipping (e.g. packing materials, paying your workers, return shipping) and estimate what your average flat rate is. If you don’t have a shipping calculation at checkout, you can at least give customers an estimate before they hit purchase.
If you are worried about having too many accounts to login to, consider getting shipping software like Starshipit where you can do everything in one dashboard once your API keys are integrated.
You might not have enough orders to offer free shipping. However, people expect free shipping these days! If you want to subsidize costs for customers, you could add some of the cost into the product itself or have a “free shipping spend threshold”.
As you grow, you may absorb some of the costs of handling (e.g. warehouse management, software upgrades) into the cost of the product itself rather than the shipping costs.
Want simple shipping calculations for your ecommerce store? Starshipit is the answer! With Starshipit, customers can get accurate shipping prices as they checkout so there are no hidden costs or surprises for either of you. Our plug-and-play system lets you use your existing couriers and do everything in one dashboard. Easy!
Ready for the simplest ecommerce shipping solution ever? Book a call with our Success Team to help you ship the smart way, so you can grow faster.