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If you’re just starting your retail business, you may have noticed navigating the shipping specifics can be challenging. In particular, shipping costs can sometimes represent a significant expense, significantly affecting customer satisfaction.
Before we cover how you should price your shipping costs, consider these points:
- Calculating your shipping expenses helps you make an informed decision.
- Use the right packaging and shipping containers, avoid excessive sizes or unnecessary filler.
- Online retailers use premium packaging to create a better customer experience.
- Adapt your shipping strategy to the size of your business.
With the right shipping strategy and planning, shipping does not have to be costly or complicated. You can learn how to price your shipping costs in a way that allows you to gain a competitive edge in your industry.
Managing the Shipping Costs
Before deciding the best shipping cost strategy for your business, it is essential to know exactly how much you spend for each package sent.
Shipping couriers typically break down their rates based on four main criteria:
- Package dimensions
- Package weight
- Costs of shipping options, such as package tracking or insurance
- International shipping fees
You must also factor in the costs of your shipping materials, including boxes, tape, labels, packaging and presentation. These can all influence customer satisfaction.
Custom Size Cardboard Boxes Can Perfectly Fit Your Product and Sport Your LogoMost shipping couriers base their rates on the overall dimensions and weight of the packages. Avoid using boxes with excessive size and keep the filler as light as possible, or eliminate it, keeping your items light and compact. Not only does it make it less expensive for you, but customers will appreciate it. According to a 2014 study, evaluating the effects of speed reduces shipping costs and CO₂ emissions and is better for the environment.
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As a general rule, the farther a package has to travel, the more it costs to ship. In the United States, there is a system of shipping zones categorizing packages by distance, ranging from Zone 1 (0 to 50 miles from the sender) to Zone 8 (over 1,800 miles).
Shipping carriers use this zone system to determine base pricing. Every carrier has different rates, so check which offers the best rates for your needs.
International shipping costs may vary significantly, depending on the destination, currency conversion fees, taxes and customs charges. Check the destination country’s customs duties and taxes and ensure you meet any of their legal requirements, such as customs clearance documentation.
Many retailers use eCommerce packaging techniques, such as premium-quality branded packaging or custom size cardboard boxes to enhance the customer experience, potentially attracting more customers.
Choosing the Right Shipping Strategy
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There are three main strategies for pricing your shipping costs: calculated shipping, flat-rate and free shipping.
Calculated shipping is the easiest method but potentially one of the most time-consuming as well. This method requires you to measure each packaged item’s size and weight, know the price of sending it to its intended destination and then set your shipping charge based on that figure.
With calculated shipping, you get the most accurate shipping quote, and customers get the fairest price possible. However, if you have a large selection of items of different dimensions, committing to this method may represent a significant time investment.
Flat-rate shipping imposes a single price for shipping any item in your inventory, regardless of size, weight or shape, with the only variable being international shipping fees. The best way to calculate flat-rate shipping costs is to determine the average shipping costs for all your products, and then select a rate close to that value.
If you run a relatively small business or if all the items you sell are equivalent in size and dimensions, flat-rate shipping may be the most advantageous for you. This method saves you a lot of time, and your customers appreciate it because the shipping costs remain the same for each order.
If your business is larger and sells a wider variety of products, this may not be as suitable because flat-rate does not allow you to scale shipping costs according to your logistical needs.
Our Shipping Materials Are Affordable So You Can Turn a Profit
The most popular option is to offer free shipping. Customers prefer this option; after all, it means they have to pay less to get the same product, and they may even be tempted to shop more often or buy more items for each order. However, it means you will have to absorb all the shipping costs.
There are two ways to offer free shipping: increasing product pricing or absorbing the costs entirely. Each has pros and cons.
Increasing pricing allows you to cover shipping expenses but risks making your items seem more expensive than the competition. Absorbing the costs is the most advantageous for your customers and can build significant loyalty and goodwill, at the risk of reducing your profit margins.
The Last Word
Choosing the right shipping strategy constitutes a core element of good business management. It allows you to save money, gain a competitive advantage and even build a loyal customer base.
To get the best prices on shipping materials and save money on your shipping expenses, call Air Sea Containers at (866) 596-9448 or explore our online store.
