In today’s cutthroat retail market, providing your consumers with the most affordable shipping options is crucial. You don’t want to lead a consumer through the buying process to have them leave their cart because of the shipping costs. Moreover, shipping fees have a considerable impact on consumer behavior.
Convey recently surveyed 2,500 customers in the United States, and 64.3% of them ranked delivery cost as the single most significant consideration when purchasing. You and your customers must agree on shipping costs. You can only accomplish this if you are familiar with the components that determine shipping cost and how they affect product price.
But how do you calculate shipping costs?
Although 62% of online buyers anticipate receiving their purchases for free in less than three business days, consider whether or not this expectation is damaging your bottom line.
You should provide your online customers with as many shipping options as feasible. Nonetheless, it would be to your advantage to keep shipping costs low. Therefore, your online store’s success must understand and control your shipping costs.
How to calculate shipping costs? And much more is covered in this article to help you determine the optimal shipping costs for your company. Now is the time to jump in.
What is the Shipping Cost?
The cost of transporting an item from your store or warehouse to the customer’s home is known as the shipping cost. Shipping costs go into the following categories:
- Boxes, tape, print labels, and other packing costs
- The cost associated with hiring workers to do warehouse functions such as picking, packaging, and shipping.
- Price of having an item picked up and delivered by a courier
- Shipping costs that include import and export duties
We’ll get into other expenses like shipping insurance and handling fees later, but let’s focus on them. The goal of every excellent store is to get their product delivered to their consumer as quickly and cheaply and avoid damaged packages as possible.
How do You Calculate Shipping Costs?
We have broken down shipping costs into three distinct groups. Both approaches have pros and cons, and you need to package weighs them carefully to make the right choice for your company and its consumers. Because there is no “one size fits all” solution, figuring out how much shipping will cost is crucial. Let’s check a few shipping methods.
1. Free Shipping
These days, it seems like most stores offering free shipping, and that’s for a good reason. Giving out customers free shipping is a popular perk among customers and may boost business significantly. For online stores to provide free delivery, they may either:
- Include delivery costs in the retail rates of your goods, which may cause them to cost more than similar offerings from rivals.
- Take a hit on profits to cover freight.
If you shout, “Free shipping on everything!” Customers will gladly pay higher prices across your website. Furthermore, it simplifies the purchasing procedure when you offer free shipping.
2. Calculated Shipping
You can easily determine shipping costs using a shipping calculator. The shipping rates of your package to its destination may depend on its dimensions and weight. We can calculate the shipping cost for you if you provide us with the item’s measurements and your location.
Compared to the other two, the main disadvantage of this approach is that it requires you to determine the pricing model of each of your 1,000 goods separately. Time spent here is well worth it since it allows you to provide accurate shipping quotes to consumers depending on the different items they buy.
3. Flat-rate Shipping
By charging a single fee for all packages, regardless of their dimensions or weight, we refer to this practice as “flat-rate shipping.” Shipping costs may vary solely if the destination country is different. The service allows users to make as many purchases as they wish for a flat rate that you, the shipping service, choose.
Simply put, it is easy and trustworthy, making it a top pick among small businesses and ecommerce businesses. It’s not the best approach for most shipping companies that need to deal with more substantial unexpected issues. Providing a flat-rate shipping option requires determining the company-wide shipping average. If your shipping expenses go up, you may pass those increases on to your consumers, and if they go down, you can pass those savings along to them.
How Much Should You Charge for Shipping?
The delivery cost for online purchases in India is determined solely by the shipping methods available to customers. Famous Indian eCommerce shippers like FedEx, BlueDart, UPS, etc., often charge customers between Rs. 30 and Rs. 90 per 500g.
Additional fees for expedited shipping options, packing, labeling, manifestation, and delivery are included. After covering the overall shipping costs associated with delivery, retailers use a profit margin calculator to determine and add profit to the total amount charged to customers.
What Information Do You Need to Calculate Shipping Rates?
Package dimensions, shipping method, weight, destination, and other variables affect shipping costs. An estimate from the shipping firm will be determined when these considerations are taken into account.
Several variables may affect how much it costs to transport an item. If you want an accurate estimate of shipping charges, though, there are four pieces of information you’ll need every time. Here are the four most important considerations:
Delivery Times for Shipping
When a product or cargo is expected to arrive at its destination, it is called its delivery time. Depending on how far the shipment travels, this might be anywhere from the next day to more than a month.
Overnight delivery is more expensive than standard ground shipping, which takes between three and seven days to arrive. Before estimating shipping expenses, you should know how quickly you need your items delivered.
Destination and Origin of Shipments
The distance between the origin and ultimate destination has a substantial impact on the total cost of a shipment. The more away you are, the more you will have to pay. Couriers utilize shipping zones to measure the distance between the origin and destination of a shipment. The United States today has eight shipping zone, each comprising a sequence of zip codes.
The zones used by major carriers such as USPS, UPS, FedEx, and DHL may be seen on their websites.
It may seem apparent, but knowing an item’s origin and the final destination is crucial to determining how much it will cost to transport.
Package Dimensions
The length, breadth, and height indicate how the package will transport the items and the box sizes. Various package sizes might affect shipping costs. This online store must be aware of this. The dimensional (or volumetric) weight is another factor that couriers use to determine the price. This is about how much room a box needs in the delivery van.
Couriers calculate dimensional weight by multiplying the product of your package’s length, breadth, and height by a predetermined cubic divisor.
Learn about dimensional weight and optimize your packing to save shipping costs. Your eCommerce company’s bottom line will thank you for taking these seemingly little measures to save shipping costs and get a more accurate estimate.
The Weight of the Package
A package’s weight, or deadweight, is its actual mass. Get the weight by placing it on a scale. Greater money will need to be spent on shipping an item that weighs more. But there’s also the issue of dimensional mass. Intricacies arise here since they depend on the size of the box you’re using to send the items.
Example e-commerce Shipping Costs
You have finally located a reliable shipping company. How exciting! Now is the time to double-check if your profit margins can handle these costs. See an example of delivery expenses for online shopping with a 50% profit margin in the table below. Please note that international shipping costs will be completely different.
Cost
Type of amount
Cost of Product / Sale
$35.00
Shipping rates
$5.00
Packaging cost
$1.00
Credit card processing
$0.50
Total cost
$41.50
Optimal profit margin
50%
Price to sell at:
$93
How to Reduce Shipping Costs?
Cutting shipping costs is an excellent approach to boosting your bottom line. Smaller firms, unlike retail behemoths like Amazon, often can’t afford to provide free delivery, so they must find other methods to cut customers’ shipping costs and boost their profit margins. When it comes to shipping expenses, some of the easiest strategies to save money include:
- Lessen the time it takes for goods to reach consumers by storing more of them close to where they live.
- Bringing down the package size and weight
- Locating Low-Cost packaging materials
- Saving money on shipping costs
1. Choose The Correct Mode of Transport
Stress levels and the prices of delivering goods purchased online in India and elsewhere may be reduced by carefully considering whether products would be best served by delivery by air, mail, sea, land, or USPS priority mail. Additionally, you’ll need to choose delivery fleets/vehicles and assign drivers. Don’t forget to verify the maximum weight allowance for each freight category to fix the shipping cost.
2. Bundle Orders Together
The classic status of this one cannot be overstated while fixing shipping costs. Load up one vehicle with all the orders headed to the same place. This is a great option for lowering shipping costs for any online business owners in India. All that is needed for this pricing strategy is forward-thinking planning and order management to group orders bound for similar or adjacent locations.
3. Use A Logistics Software
In today’s fast-paced e-commerce business world, manual management of activities is more complex and error-prone than ever. Logistics software may connect with several options, including courier services and online stores, to ensure the smoothest and quickest delivery for online retailers and their clients.
4. Use Multiple Carrier Services
The prudent option is integrating with numerous courier partners to handle shipping operations and final shipping costs. In addition, online retailers may compare shipping options from several businesses before each shipment, allowing them to choose the best option for their business.
Conclusion
There are several advantages to determining the most cost-effective shipping cost for your company. As a result, you may be able to undercut the competition by offering lower prices or hedging transportation costs. To recap, this leads to an increase in sales and satisfied clients.
The first step to calculating shipping costs is to calculate the extra cost of transporting your shipment. When shipping overseas, there may be additional costs, such as taxes and duties.
Moon Invoice helps design accurate shipping estimates by offering readymade estimate templates. Create and send unlimited estimates online. Sign up for our invoicing app to send accurate estimates to your clients.
FAQs
Jayanti Katariya is the founder & CEO of Moon Invoice, with over a decade of experience in developing SaaS products and the fintech industry. He holds a degree in engineering. Since 2011, Jayanti's expertise has helped thousands of businesses, from small startups to large enterprises, streamline invoicing, estimation, and accounting operations. His vision is to deliver top-tier financial solutions globally, ensuring efficient financial management for all business owners.
