Determining Shipping Costs: The Basics

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In a highly competitive retail environment, it’s crucial to offer your customers the best shipping rates possible. The last thing you would want is for customers to go through the entire purchasing journey but abandoning their cart due to high shipping rates.

You might notice many of your competitors offering free shipping or extreme shipping deals. While you may feel the need to do the same, it’s important to keep in mind that they’ve likely been through a thorough shipping cost calculation process to be able to offer such deals. As soon as you know your shipping costs, you can provide the shipping price at the checkout which is now expected from every online store. So how can you effectively calculate the best shipping rates for your business?

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Calculated Shipping vs. Flat Rate Shipping vs. Free Shipping

Calculated shipping is the most basic way of calculating shipping costs that involve measuring the weight and dimensions of your package. The shipping charge is calculated based on these measurements and the customer’s location. The tedious part with this type of calculation is that if you have over 500 different products, you’ll need to calculate the price for each product individually. Though it could take up a lot of time, it is necessary to do this as your customers will have a shipping quote based on the actual product they purchase.

Flat-rate shipping is charging one price for shipping for all products, regardless of their dimensions – though the price may fluctuate according to the location the item is being delivered. This allows customers to buy many products while only paying one fee. This type of shipping method is popular among small businesses because it’s simple, convenient, and reliable. For large businesses, it may not be as effective as you must calculate the average shipping cost for the whole company to precisely calculate the final cost. You can then increase or decrease your shipping fees as your costs rise and fall.

Free shipping is the most popular among large retailers – though small companies also prefer this option. Consumers love free shipping and it’s a great way to increase sales. This cost of shipping is usually added to the product price, therefore, causing an illusion of free shipping – making the product more expensive. If you advertise free shipping on your website or social media ads, customers won’t think twice about purchasing from your store. This also help simplify the checkout process.

What if I'm Shipping Globally?

The further a package is traveling, the higher the shipping cost will be. This is why international shipping rates often cost much more than domestic shipping. How can you best calculate costs for international shipping?

Package weight calculation is basic and effective. To do this, weigh the package and use a shipping cost calculator to get a shipping price. If the item is too heavy, you can find the shipping cost based on dimensional volume. Be sure to calculate the total weight of the package and not just the weight of the product itself as you will end up with the wrong cost. Additional packaging results in extra weight – therefore an increase in the shipping cost.

Package dimensions are calculated by length x width x height. This is usually used for uniquely shaped parcels. Couriers will often use dimensional weight and product weight together to calculate final shipping costs. Using this method of shipping weight can end up being cheaper for certain packages.

Delivery times are correlated to the service you use – meaning if you offer same-day shipping, you need to use an overnight service. Of course, this will be one of many options as it depends how quickly your customer needs the item and how long it takes for delivery.