How To Determine Shipping Costs When Selling Online?
By Sam Nguyen
Meta Description: This article will show you how to determine shipping costs when selling online to optimize your shipping strategy and save time on every shipment.
How to determine shipping costs when selling online
Shipping costs are essential for online sellers. This article will explain how to determine shipping costs when selling online, compare different shipping options, and optimize your shipping strategy to save money and increase sales.
Key Takeaways
- To calculate shipping costs, you must consider the package dimensions, weight, destination, value, delivery times, and unexpected circumstances.
- There are relevant fees, such as flat fees, free shipping, or other fees to consider with shipping costs.
- You can use online tools or consult with shipping carriers to get accurate estimates of your shipping costs.
Definition of shipping costs
Shipping costs refer to delivering a product from a warehouse or store to the customer’s specified location. These costs are additional charges that customers must pay in addition to their order.
Typically, shipping costs include postage, packaging, labor, and potential import/export fees. It is essential to account for all these factors when determining the shipping costs. The primary objective is to ensure that the product reaches the customer promptly, in excellent condition, and without complications.
Instructions to calculate shipping costs for your online store
The shipping cost can differ based on several factors, including package dimensions, type of shipment, weight, location, and others. After computing these factors, a shipping provider will assign a price to your shipment.
Here are six variables that can impact the shipping expenses for your online store.
Dimensional weight (DIM)
Shipping carriers employ a pricing method known as dimensional weight (DIM weight) to calculate shipping rates. DIM weight considers the size of a package as a factor in determining the shipping cost.
The package or box size’s length, width, and height are multiplied to calculate DIM weight, and the result is divided by a standard DIM divisor.
Shipping providers such as USPS, FedEx, and UPS determine shipping charges based on the higher value between the package’s actual weight and DIM weight. The higher value is the billable weight your business will be billed for.
Package weight
The package weight refers to the actual heaviness of the item, requiring no DIM divisor or calculation. As mentioned, if this weight exceeds the DIM weight, it will determine shipping expenses. It’s important to note that the shipping cost increases as the package becomes heavier and more prominent.
Shipping destination
Besides the two factors above, the next one is the shipping destination. Shipping carriers employ shipping zones to determine shipping rates, which are determined by measuring the distance between the package’s origin and its destination. In the United States, these zones are typically categorized from Zone 1 to Zone 8.
It’s important to note that shipping zones are calculated based on your package’s specific point of origin. Consequently, two different locations shipping to the same destination might be assigned to different shipping zones.
Value of products shipped
If you are sending high-value products, consider insuring your shipments. Shipping insurance compensates senders for loss, theft, or damage during transit. However, it’s important to note that this service can considerably increase your shipping expenses. This is particularly common for smaller items like jewelry, artwork, and medical supplies and larger items like industrial equipment.
Delivery times
With the influence of Amazon Prime, customers now anticipate fast shipping regardless of where they shop online. However, when shipping from a single location, the cost of premium shipping increases as the shipping zones become more distant. For instance, ground shipping can achieve 2-day delivery to customers in Zone 1, whereas reaching Zone 8 within the same timeframe would necessitate more costly expedited air shipping.
Unexpected circumstances
Even with a well-planned shipping strategy, unforeseen challenges can occasionally arise. These may include transit delays, lost or damaged items, or the need for split shipments. While it is impossible to predict the exact nature of such incidents, it is prudent to allocate some flexibility in your shipping budget to account for emergencies.
Relevant fees to shipping costs
When you wonder how to determine shipping costs when selling online, you cannot ignore the fees associated with shipping costs. Below are the relevant fees for shipping costs that you should pay attention to.
Calculated/Bespoke Shipping
Calculated or customized shipping involves determining shipping costs based on the package’s weight, size, and the customer’s location. While it is a relatively straightforward system, it requires time and effort to calculate shipping costs for each product, particularly for small catalogs.
One challenge is that customers often can only determine the exact total cost once they reach the checkout page, leading to potential instances of cart abandonment.
One solution to this issue is to provide a helpful shipping calculator on product pages. This lets customers estimate shipping costs in advance and avoid unexpected surprises. Despite the challenges involved, calculated shipping is particularly beneficial for businesses selling large or heavy items, making it worth considering if it aligns with your store’s needs.
Flat Fee
Flat fee shipping refers to charging a fixed fee for all shipments, regardless of the size of the customer’s order. This straightforward approach is easy for customers to understand and provides predictability for future purchases.
It is trendy among online stores since customers are often enticed to add more items to their cart, knowing the shipping charge will remain the same.
Implementing a flat fee shipping model streamlines your strategy and eliminates the need to weigh and measure each parcel, saving you valuable time. While it benefits customers and smaller businesses, it lacks pricing flexibility, and larger orders may result in missed opportunities for additional revenue.
Free Shipping
Free shipping is a straightforward concept — you absorb the shipping costs by incorporating them into your product prices or allocating them elsewhere in your business. Most customers prefer not to pay for shipping; many prominent companies already offer this perk. It simplifies the checkout process, letting customers know how much they spend as they add items to their shopping carts.
However, there are essential considerations to consider before implementing free shipping. It is only a viable option if you have a healthy profit margin since you will still be responsible for covering the shipping costs with your chosen carrier. Increasing product prices and boosting the average order value can help sustain this shipping method and offset expenses.
Other types of fees
In addition to the factors we’ve already discussed, other considerations can impact shipping costs. It is essential to take note of these factors when calculating your shipping fees to minimize customer frustration during checkout.
For instance, shipping specialized items such as high-value, fragile, or potentially dangerous products necessitates shipping insurance, which incurs additional costs. However, insurance expense is relatively minimal compared to the potential loss resulting from damaged goods.
When shipping internationally, mainly using express services for faster delivery, it is essential to account for fuel surcharges and potential charges for multiple delivery attempts if the initial one is unsuccessful. Additionally, don’t forget to consider import and export fees when shipping worldwide. Considering all these factors is crucial when calculating shipping costs for your online store.
Calculate Shipping Costs: FAQs
Bottom line
It is crucial to understand how to determine shipping costs when selling online. The key is to adopt a strategy that is easily understandable for your customers and consistently aligns with their expectations.
