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In the age of same-day and next-day shipping, it’s easy to overlook the number of processes involved in getting a product from the shelf of a warehouse to the doorstep of a home.
This creates a unique challenge for businesses as they try to determine the best way to approach setting their shipping prices. When customers ask “How much do you charge for shipping?”, your answer must be satisfactory in order to avoid online cart abandonment and loss of business.
Before we get into what to charge for shipping, consider these factors:
- Offer competitive shipping prices, especially for eCommerce businesses.
- Determine how much to charge, dependent on your shipping and handling costs.
- Aim to reduce costs to facilitate more competitive pricing.
- Choose a suitable fulfillment strategy to benefit from the most cost-effective shipping.
- Establish distribution centers in strategic locations.
While the speed of delivery holds weight, its cost is a priority for customers. Therefore, when determining how much to charge for shipping, it’s essential to focus on keeping the price as low as possible. Here are some factors you should consider.
How Are Shipping Costs Calculated?
Two main factors contribute to pricing: shipping and handling. Shipping refers to the postal price plus the cost of transporting a product from the carrier to the end consumer. Additional fees include various surcharges, fuel, duties, taxes and any other expenses incurred as a result of the destination and chosen delivery time.
Handling covers the cost of labor involved in the shipping process. It includes paying for order collection, product packaging, packaging materials, labeling, loading and unloading and any other labor-based activities that occurred in the warehouse.
By finding ways to reduce shipping and handling costs, you are better positioned to offer more competitive pricing, internationally and domestically.
Local or Overseas, You’ll Need a Fiberboard Box
Determining How Much to Charge
It’s important to put significant thought into your pricing strategies. Here are some useful considerations.
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Your Fulfillment Capabilities
The size of your company and its available resources influence your capabilities for carrying out order fulfillment. Depending on your volume of orders, number of SKUs and growth potential, you may opt for self-fulfillment or outsource to a third-party logistics (3PL) provider.
With low order volumes and minimal growth projection, you may be able to offer more competitive pricing by shipping from your home. The need for extensive handling or warehouse management is likely very low.
Another popular approach for small businesses is blind drop shipping, as it effectively bypasses the traditional supply chain. But, what is blind drop shipping? When a customer purchases from an eCommerce site, the business pays a wholesaler directly to send the goods to the customer from their warehouse. A special drop-shipping label is attached to the package to make it look as if the retailer, rather than the wholesaler, sent the product.
If you’ve reached your capacity in terms of order volume and inventory levels, you may need to change your fulfillment strategy. 3PLs are specialist services often offering reduced shipping prices and cheaper packing materials for shipping due to economies of scale. This could be a practical approach to achieving your targeted shipping costs.
Alternatively, you could opt to arrange domestic shipments yourself but let a 3PL handle international distribution. If you can be cost-effective in order fulfillment, you’ll have more leeway regarding what to charge for shipping.
Use Packing Materials for Shipping to Protect What’s Inside
Geographic Location
In general, the farther a package has to travel, the more expensive it will be to ship. If you handle shipping in-house, it may cost too much to ship far beyond your location. Once you expand your business, it becomes vital to decrease the average cost of shipping and handling.
Shipping from multiple locations can be an effective way to reduce costs. While it might seem cheaper to operate from a central hub, paying additional fees for longer-distance shipments can quickly increase overall costs. Utilizing truck freight rather than more costly air cargo is far more cost-effective and can be fast over short distances.
With strategically located distribution centers, you can offer free or flat-rate shipping to certain locations without experiencing any major surprises.
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Product Type
The product will have a major impact on how much you charge for shipping. Shipping chemicals internationally or domestically requires specific packaging. Additional costs for fiberboard box packaging, temperature-resistant drums or other protective coverings must be considered when calculating shipping costs.
For cheap, lightweight goods, you must establish your margins per product and align them with the average shipping cost per order.
Incentivize customers to buy more by offering free shipping once they spend a certain amount. Offset the cost of shipping by increasing the average order value (AOV).
Reduce Costs by Investing in Quality Packaging
If you have ever wondered “How much do you charge for shipping?”, the key to reducing costs is to ensure your products are protected by quality packaging. By lowering the annual losses incurred from damaged goods, you may be able to offer more competitive shipping prices, leading to increased sales.
Air Sea Containers offers premium-grade packaging materials, boxes, labels and containers to fit your business’s exact needs.
