This article was provided by our partners at ShipperHQ.
The way you approach shipping costs for your business is, like life, all about balance.
When it comes to determining shipping costs for your ecommerce store, you have to find the right balance. While that balance has always been crucial, the recent boom in the ecommerce industry has underscored the need for efficiency and accuracy in rate quoting. Simply put, rate quoting is the process of pulling shipping rates for a specific shipment, a vital step of the checkout process.
So, how do you keep a pulse on those factors without dedicating all-day every day to shipping? The first step is to understand the process – then get ahead of it.
Before we break down the pieces of the ecommerce shipping puzzle, let’s talk basics. The most basic rule of ecommerce shipping is that your options have to be appealing to your customers.
While any customer would prefer the fastest and best delivery option, those are often cost-prohibitive and time-consuming. While you of course want to provide for your customers, undercharging on shipping is a fast-track to serious revenue loss. On the other hand, overcharging is a surefire way to lose customers.
To help you figure out how to calculate shipping costs, let’s outline some of the major factors.
8 Elements of Shipping Rate Calculation
1. Distance from You To The Customer
This is somewhat intuitive: the farther the item has to travel, the more expensive shipping will generally be, especially if your item has to cross an international border.
2. The Delivery’s Physical Location
If the delivery location is an office or commercial space, you might be in luck without any further issues to consider. This type of delivery is cheaper and easier for carriers because they can group deliveries in one location. Many ecommerce businesses, though, rarely deliver to these addresses.
Home deliveries, or residential ones, often carry extra fees. Because individual homes are often spread apart, these deliveries take more time and elbow grease. Some other locations like military bases, schools, or hospitals can carry similar fees because they require more time than commercial deliveries.
3. Speed of Transit
Pretty much every customer wants their item fast thanks to expectations set by Amazon. But not every customer wants to pay extra for it. As a merchant, it’s on you to either find a happy medium between speed and cost, or to offer enough options that each customer gets the shipping experience they want.
Whatever the case, you need to know what options are feasible to offer, and how each price point affects your shipping margins. Finding a good balance between price and speed is key here.
4. Item Size
A crystal vase isn’t going to cost the same to ship as a guitar. Even small differences can be an issue. For example, is the item a weird shape, or does it require a unique-shaped custom box? Does that crystal vase require extra space for packing peanuts?
An item’s dimensions will affect how much you charge for shipping.
5. Package Quantity
If a customer orders multiple items or shipments, packaging them together typically makes more sense and saves both you and the customer money. Sometimes, though, items need to be packaged separately.
For example, you probably don’t want to ship perishables that require special packaging along with non-perishables. Or maybe one of the items is delivered to you already boxed, and it saves time and money to just ship as is. Accounting for these details will save you and your customer's money in the long run.
6. Prohibited Items
In the US, there are restrictions surrounding shipping items like ammunition, gasoline and airbags. On the state level, too, there are regulations that may change as a shipment crosses state borders.
Do you sell food? Then be careful about shipping to California, as they have severely strict quarantine laws. Shipping a custom gift box of fruit to a customer in that state without going through the proper channels could end up with some big trouble on your end. Of course, there are virtually endless regulations and scenarios that might affect your shipment, so being on top of the requirements for your specific products is crucial.
7. Rural Addresses
While this is somewhat rare, a truly rural address can have an additional “rural delivery fee” attached to it. The customer has to really be out of the way, but it certainly happens. These days, nearly everybody has the Internet, and they all want stuff, even if they live alone on the top of a mountain or way out in the middle of the desert. If you’re the lucky merchant making those sales, you need to take these fees into account.
8. Other Hidden Fees
If you think you’ve got shipping under control, take a pause to consider the slew of additional fees that could potentially crop up. While these fees are generally avoidable or at least predictable, they are an important part of the overall cost of the shipments they affect.
Calculating Shipping Costs
When determining how you calculate shipping costs, you need to have a plan in place that marries your shipping requirements with the type of checkout experience you want to offer online.
In the process of figuring this out, you’ve got resources and allies. All rates are publicized by major carriers, so you can theoretically know exactly what you’ll pay on any given shipment.
UPS and FedEx are legally required to keep up-to-date Retail Rate Cards available to the general public. These help you choose the right service, prepare shipments, determine rates, and assist with tracking and payment options.
Shipping Technology To The Rescue
If you want automated and customized rates in your checkout, we encourage you to try out ShipperHQ with a free trial. Our smart shipping solutions let you craft tailored, real-time shipping rates based on rules or restrictions you set.
For example, if you sell items that have tight restrictions to certain regions (say CBD oil) you can prevent shipping from even being available to a customer located in that area.
You can also specify the shipping methods and carriers associated with a product, or set up promotions, discounts and surcharges for shipping. Our convenient and easy to use Test Your Rates tool also helps you determine if your shipping price and options are working smoothly.
Better yet, our tools even allow you to show customers the specific date and time of their delivery, for more transparency than ever. It’s the kind of checkout experience your customers expect, and the kind you’ve always hoped you could offer them.
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