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How Much to Charge for Shipping?

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How Much to Charge for Shipping?

published on 25.07.2013 in Blog by

How to Charge for Shipping & HandlingAs a leading order fulfillment company, we’re often asked by online sellers how much they should charge for shipping and handling.

The short answer….it depends….on a variety of factors. And while it’s a complex question, it’s certainly good one, especially given that shipping costs can play a key role when it comes to online sales and shopping cart abandonment.

So, why don’t we start off with an easier topic…..

How NOT to Charge for Shipping

Occasionally online sellers want to charge their customers the same exact amount for shipping and handling as they pay. This is often difficult to do.

While shipping carriers like FedEx and UPS have APIs that connect with shopping carts to show buyers the shipping cost based on their particular order and ship destination, those APIs don’t always pick up each of the surcharges that may apply, such as delivery area surcharges.

Additionally, if sellers outsource their order fulfillment or have a negotiated discounts, the API shipping rates may not line up with what those sellers are paying.

Lastly, when you try to charge your customers exactly what you pay for shipping, that means your customers won’t know their shipping costs until the last stage of checkout, and that can lead to cart abandonment.

As an online seller, don’t feel like you have to charge the same amount for shipping as you pay. It’s much more important to simply ensure you’re earning a net profit after all revenue and expenses are considered. It’s also generally not a good idea to make shipping and handling a profit center for your online business, as that will likely hurt your sales in the long run.

Factors to Consider

There are a number of ways that you can charge for shipping to ensure you don’t lose money, and at the same time, better market your total offer to your customers. Let’s discuss some of the factors to consider to help you determine how much to charge for shipping and handling.

Your Products

The first thing to consider is your product line. Do you sell cheap items or expensive items? Heavy or lightweight items? What’s your average order value? What’s the margin on your average order value? How much, on average, do you pay for shipping?

Answers to these questions will help you determine how best to charge your customers for shipping. Here are a few examples.

Let’s say you sell t-shirts and your average margin is $5/order. If that’s the case, free shipping likely isn’t doable. In this case, however, your average order weight is just 11 ounces and shipping, on average, costs you about $4 per order. So in this example, offering a flat rate shipping option may be ideal.

Now let’s say you sell high end jewelry with an average order margin of $200. In this case, losing some of that margin in order to offer free shipping is not only doable, it will likely be expected by your customers given the high cost of your products.

In both the case of free shipping and flat rate shipping, a significant benefit is that it allows you to market those offers in your advertising and up front on your website, ensuring there are no surprises for your customers during the checkout process.

Your Customers

Where are your customers located? In the U.S., international, or both? Are they in rural areas that often trigger delivery areas surcharges? Are they price sensitive? And what is the average lifetime value of a customer?

Your customers, their location and their buying habits also need to be taken into consideration as you determine how to charge for shipping. Let’s quickly look at a couple of other examples.

Let’s say, for instance, that your order fulfillment center is in the U.S. Let’s also say that 80% of your customer base is located in the contiguous U.S. and the remaining 20% is scattered throughout the world. In this case, your free or flat rate shipping offer may only be feasible for those in the contiguous U.S., with an added fee for customers in Alaska, Hawaii or abroad. Regardless of what major online retailers charge for shipping, it is not uncommon for them to charge more for customers outside of the contiguous U.S.

As another example, let’s say you sell women’s footwear. And while your average order value is $80, the average lifetime value of a customer is over $400. Repeat purchases should be factored into your equation when determining how you will charge for shipping. Zappos was the first to offer free shipping and free returns with no minimums. And you can bet that lifetime customer value (and the potential to increase that lifetime value) was a major consideration with this offer, which was unprecedented at the time.

Your Competition

Are you in a hyper-competitive industry? Or do you sell items that have virtually no competition?

The competitiveness of your niche needs to also be a factor. If, for example, you sell handmade items that people can’t find anywhere else, how you charge for shipping may be of less importance to your sales than if you were selling digital cameras that people can find in 100 different online stores. Make sure to constantly monitor your competition, their product price, and their shipping offers.

Ways to Charge for Shipping

Every merchant’s situation is different, so as you think about your products, your margins, your customers and your competition, here are six ways to charge for shipping…

  • Free Shipping on Everything
  • Free Shipping on Certain Items
  • Free Shipping with a Minimum
  • Free Shipping to Your Best Customers
  • Flat Rate Shipping
  • Calculated Per Order

Free Shipping on Everything

This one can be tough to pull off, especially if you have a diverse catalog of products and you’re truly offering free shipping, meaning that you’re not making up for it somewhere else. Free shipping tends to apply only to standard ground delivery methods, or perhaps even a cheaper shipping method, such as FedEx SmartPost or UPS SurePost. It’s also a good idea to offer customers faster ship methods, but for those they have to pay for.

There are a couple of major considerations with a free shipping offer. One is your competition. If your competitors are offering free shipping, you better find a way to at least test a free shipping offer in order to determine the sales impact. While your products may be cheaper, free shipping, to some extent, is a psychological thing, meaning consumers have it in their mind they don’t want to pay for shipping, and their comparison shopping won’t go as far as comparing total costs.

As you consider free shipping, lifetime customer value is also important to factor in. You may eat some cost with the initial purchase, but the important thing is you got that initial purchase….now you can make up for it down the road.

Free Shipping on Certain Items

For retailers with a wide selection of products, this option can still allow you to market a free shipping offer while helping to ensure you don’t go broke.

All online sellers should have a shipping policy page that outlines the details of their shipping offers. In this case, sellers would be able to market free shipping on their homepage with a link to learn more about the offer. When it comes to free shipping on certain items, the most user-friendly option I’ve seen is when retailers have a special icon next to products that qualify for free shipping.

Free Shipping with a Minimum

Free shipping that corresponds with a minimum order value is fairly common. For instance, if your customers spend at least $50, they get free shipping.

What’s nice about this offer is that it encourages larger orders. Let’s say, for example, that your average order value is currently $40. In this case, you may test a free shipping offer with a $50 minimum purchase, and see how it affects your order value.

Free Shipping to Your Best Customers

Why not reward your most loyal customers? Member/loyalty programs are becoming increasingly popular among retailers. The most widely-known is Amazon’s Prime program, in which consumers pay an annual fee in exchange for free two-day shipping and a few other perks.

You don’t have to be a behemoth like Amazon, however, to create a member or loyalty program. You also don’t need to necessarily charge a fee to join the program. If your goal is to reward repeat buyers, you could simply market the program as such…. “Sign up for our free loyalty program and get free shipping on all future purchases!”

By marketing it this way, you’re not only able to present the offer up front before the purchase (so as to give prospective customers something to think about for the future), you’re also able to ensure people don’t just sign up for the free shipping for that initial purchase (so as to truly reward your repeat customers).

Flat Rate Shipping

Flat rate shipping is one of my personal favorites for a couple reason. First, it’s ridiculously easy to understand from a consumer standpoint, which always helps. Second, just like with free shipping, you’re able to market the price of shipping up front on your website, as opposed to customers not knowing what they’re paying until the final step of a potentially long and gruelling checkout process, which often leads to shopping cart abandonment.

For some online sellers, flat rate shipping doesn’t work all that well, particularly if they have a large assortment of products and a wide range of order weights, values and shipping costs. Some sellers have tried free or flat rate shipping by order weight, but not only does that add complexity from a technology standpoint, it takes away from one of the best parts of flat rate shipping, which is the simplicity. One alternative option, which is somewhat of a hybrid approach, is to have fixed shipping rates based on tiers, such as $10 shipping for 1-3 items, and $15 shipping for over 3 items.

With flat rate shipping, it’s all about averaging your costs…sometimes you come out ahead, sometimes you come out behind, but in the end, it should even out. And, just like with free shipping offers that come with a minimum, an added benefit of flat rate shipping is that it can encourage larger orders and discourage the itty bitty ones.

Calculated Per Order

After analyzing your margins, shipping expenses and competition, you may find that either free or flat rate shipping just doesn’t work, or it’s not necessary. In either case, you can simply decide to calculate shipping costs on a per order basis, as many eCommerce retailers do.

As mentioned above, the major shipping carriers each have APIs that allow sellers to calculate shipping rates on the fly during checkout based on the customer’s location and the size and weight of their order. Also as mentioned above, the carrier APIs generally pick up any surcharges that apply, but not always, so this is one of the reasons not to obsess over trying to exactly match what you as the seller wind up paying in the end for shipping.

When you calculate shipping on a per order basis, your costs are generally covered; however, it leaves you little to work with from a marketing standpoint. And when it comes to online selling, there’s a lot to be said for being able to market an appealing shipping offer.

So, with this all said, I’m a huge proponent of trial and error, which means, regardless of how you decide to charge for shipping, I recommend A:B testing multiple offers to see what works best for your business. You may find, as I often do with my testing, that you’re quite surprised by the results!

If you’re an online seller with shipping or order fulfillment questions, give us a shout, we’d love to talk.

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How Much to Charge for Shipping?
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As an online seller, how should you charge for shipping and handling? Learn what factors to consider and the different options you have as you try to answer this tough but important question.
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Comments

31 Responses to “How Much to Charge for Shipping?”
  1. Lars Wenas says:

    Great post. Our product is a natural testosterone booster, it doesnt weight so much, so we got free shipping in the US and a flat rate shipping of $9. On International orders. Also international orders over $100 applies for free shopping. Any inputs on this?

    • Steve Bulger says:

      Hi Lars, thanks for your comment! I think your policy of free international shipping on $100 orders is a good one. It encourages larger purchases, which I believe makes sense not only for your type of product, but also with international orders in general. As you mentioned, with your product being lightweight, shipping cost should be relatively low, and the larger orders should also equate to larger margins. Ultimately, the most ideal shipping offer varies a bit from seller to seller, as it’s largely dependent on the product mix, margins, and your customer base. Thanks again for your comment!

  2. Amanda says:

    Great article, Thanks!

    We are a small family operated company called Exotic Essentials, manufacturing and selling HIJAU Aromatherapy car air fresheners, made from pre-scented essential oil blends. Our main channel has been amazon but we have recently launched our own site. We have been very transparent in our shipping in that we charge very little, just enough to cover our obvious hard costs with practically no margin. While our average order ranges between $12-16, offering free shipping is just not feasible. In that purchase range, we charge around $2.25, which seems FAR less than most other sellers are charging in the air freshener or aromatherapy categories. Regardless, we have a VERY unique niche considering we are 100% natural and pre-scented. The key is to really get customers to see the tremendous value in spending those extra few $ with us. However, not necessarily in the shipping cost… correct?

    • Steve Bulger says:

      Hi Amanda, thanks for your comment!

      I certainly understand your situation. We work with a number of sellers that have fairly low margin and cannot afford to offer free shipping. You bring up a good point about your niche. As I mentioned in the article, the level of competition and their offerings should be a factor when determining how you’ll charge for shipping, and it sounds like your shipping price is quite reasonable.

      That said, it’s always a good idea to test. Some consumers are in a mindset in which they refuse to pay for shipping. So you may increase product prices slightly and still find that your sales go up because you’re able to market “free shipping” and there are no surprises during the final stage of checkout. You could also implement a flat rate option. For example, “$3 flat rate shipping” is certainly reasonable, and the trick is to average your costs. And again, one of the benefits with this type of shipping offer is the marketing aspect, and ensuring that there are no surprises for your prospective buyers once they begin the checkout process.

      Also, regardless of the items you sell, but with low margin items especially, the greater the number of items per basket, the better. For example, if you want to test a free shipping offer, given that your current basket averages between $12-16, free shipping may apply when the basket is at least $20 or $25. In doing so, hopefully the items per order and average basket value increases, and the increased cost to you relative to order processing and shipping should be outweighed by the added margin.

      Hope this helps. Thanks again!

  3. Jenny and Jason says:

    Hello! My husband and I are a small soap company. We are creating a wholesale website and are at a loss when it comes to setting up our shipping costs. Our soaps come in a variety of odd shapes and sizes/weights, and we know most customers will be ordering a variety of these shapes. Normally we would use a flat rate box, however the different shapes make it confusing…for example, normally we can fit 48 “Leaf Shapes” into a large USPS flate rate. We know we can fit 50 “Bones Shapes” into a large FR. However, a customer may order 12 Leafs and 36 Bones…and this combination will not fit in a large FR box. What carrier would be the easiest to use in this situation? Thank you!

    • Steve Bulger says:

      Hi Jenny, thank you for the comment! And that is an excellent question. You actually bring up a very valid and important point, which is that package size and weight can play a significant role in both sales and margins. In fact, shipping cost should even play a role in determining which products a retailer chooses to sell online, as well as quantities offered to retailers/wholesalers.

      Regarding your particular situation, as you say, there are a variety of combinations of sizes and weights, which makes it a bit tricky, and even the shipping zone can impact which carrier and ship method will be the cheapest. You also don’t want to overcomplicate things, so one option is to integrate the USPS price calculator API into your wholesale website. The API works by automatically calculating shipping costs based on the items in your customer’s cart. During setup, you confirm the box sizes you have available, which can include flat rate boxes, and the API will determine the best option and present that to your customer.

      Without knowing more about your products, order variations and weights, this is what I would probably recommend. Hope it helps!

  4. Zee says:

    Hi guys,

    Was really hoping someone could help with the following:

    I do not live in the US and I’m not a US citizen.

    I own a jewelery manufacturing company and I’m looking to sell on ebay.com and amazon.com. My avg order size per item is around the $500 – $700 range. I’ve done alot of research and my model will be shipping from one of my factories once an order has been placed onto a fulfilment centre (TBD), from where it needs to be packed and then shipped onto my customers in the US.

    Questions:
    1) what would be my most viable, cost effective and quickest options as it will be shipped in by DHL/Fedex.
    2) what happens to the import duties/customs etc when it arrives in the US? How do I pay for it etc? Is the fulfilment centre the recipient?
    3)My items will be very small and extremely light as you can imaging (being jewelery)

    Looking forward to your advice.

    Thanks
    Zee

    • Steve Bulger says:

      Hi Zee, thank you for the comment. If you’re looking to ship from your manufacturing facilities overseas, if possible, it’d be most cost effective for you to consolidate multiple orders together. Then you could deliver a bulk shipment containing multiple orders to a fulfillment center like ours, have that bulk shipment broken into individual parcels, and then shipped right back out. This type of service is commonly referred to as cross docking.

      One issue to consider with this is delivery speed. Consolidating shipments and then sending overseas to be cross docked will mean a slower delivery time than if you carried stock here in the U.S. Therefore, it will be important to set delivery time expectations with your customers. We actually just released an infographic showing whether U.S. consumers prefer fast or free delivery…..

      http://www.efulfillmentservice.com/fast-free-shipping-infographic/

      The good news is, if the price for shipping is right, most consumers are willing to wait for their purchases. What you’ll be missing, however, is the ability to get someone their order the next day if that is what they would prefer.

      I am happy to further discuss, including putting you in touch with a customs broker who can help you with the duties and taxes. Please feel free to reach out at sales@efulfillmentservice.com. Thank you!

  5. Valerie says:

    Hi Steve,

    You are a world of information. Thank you.

    I’m starting to sell lightweight dresses on my website. The average cost per dress is $80. I’ve decided to charge a flat rate of $5 or $6 and put the remaining costs into my margin. Wanting my customer to buy more than one dress, would it seem odd to offer together: “$5 flat rate shipping” and “free shipping on orders over $150” . Is it acceptable? How could I word it properly? Thank you.

    • Steve Bulger says:

      Hi Valerie,

      Thank you for the comment!

      Yes, it is absolutely acceptable to offer flat rate shipping for orders under a certain value, and then offer free shipping once your customers reach $150. I think it’s a great idea, as you’re able to market those offers up front, you’re charging a very reasonable price for order fulfillment and shipping on orders under $150, and you’re also encouraging and rewarding for multiple items per order, which is what you want.

      Good question regarding how to word it properly, as you want to make sure the offer is prominent throughout the website, including on the homepage. I would recommend doing something like you see at the top of this website….

      http://www.rowdygentleman.com/

      You can see they advertise, “$5 Flat Rate Shipping. Free Shipping on Orders Over $50.”

      You can also see that this offer is part of their website header so it is included at the top of every web page.

      I would also recommend creating a Shipping Policy page on your website, on which you can go into more details, such as delivery timeframes, tracking, where you ship from, etc. You can have one page for both your shipping and returns policies, or make them separate pages.

      It would also be a good idea to allow for expedited shipping. For example, your flat rate and free shipping offers would correspond with regular ground delivery, or maybe even a more economical ship option that averages 5-7 days. But if customers want or need their orders delivered faster, you also give them that option at checkout, and simply charge more.

      I hope this helps!

  6. Brent says:

    Steve, how do fulfillment companies charge for shipping? I know they get great discounted incentive rates from UPS/FedEx/Etc.. but they don’t pass on the full cost of their incentive to the customer. Why is that? What prevents a customer from just opening their own account and getting a minimum 8% or so off that the websites offer small businesses? Thanks!

    • Steve Bulger says:

      Hi Brent,

      Thank you for your comment, and good question.

      You’re right, order fulfillment companies do get discounts on shipping and may not pass along the full discount to the client. The reason is that this is how fulfillment companies make a profit.

      An ecommerce seller could equate this to the way their business model works….they purchase inventory in bulk from a supplier at a discount, but they don’t pass along that full discount to their end customer, as they need to earn a margin. Order fulfillment companies get deals on shipping given the volume they do, just as ecommerce merchants get deals based on the volume of merchandise they buy.

      Order fulfillment companies do charge other fees, such as storage and pick/pack. However, the margin may be very low on those, or the fulfillment company may even break even on certain services, similar to how an ecommerce seller may break even on shipping, meaning the margin is simply the difference between their purchase price from their manufacturer and what they sell it for.

      Regarding your question on merchants simply opening their own account with carriers and handling the order fulfillment themselves, you’re absolutely right, they could do that. The issue is that, by outsourcing order fulfillment, the merchant would benefit in other ways, such as with speed, reliability, and expertise. By choosing the right fulfillment company, the merchant could also move to more of a variable cost model, meaning their total cost per order remains more constant and predictable, whereas handling order fulfillment in-house comes with fixed costs that remain regardless of order volume, such as rent and labor. Lastly, one of the things ecommerce sellers value most is their time, and by outsourcing fulfillment, they’re able to focus on other aspects of their business, such as marketing, product sourcing, and business development.

      Hope this helps! Thanks again.

      Steve

  7. Jacqueline says:

    Dear Sir/Madam,

    I hope you are well.

    My company is looking for a logistics partner who can:
    1) Receive parcels from our EU and US fashion merchant partners to your EU and US warehouses.
    2) Bulk ship all parcels to our Shanghai Free Trade Zone office.
    3) Or ship directly to our customer in China
    4) Allow us to deduct EU VAT
    5) Deliver fast and cost effectively

    Please could you let me know if you can offer such services? If so, I would like to arrange a meeting to discuss the partnership.

    Best,
    Jacqueline

  8. Desiree Fleck says:

    Hi there!

    Thank you for writing this extremely helpful article. I am looking to start selling handcrafts online, I have a website set up but my last hurdle is shipping. My products range from small, heavy objects like squishy stress balls to large, light objects like artwork (unframed). I am really stuck on how to charge for shipping, although I would really like to be able to offer some sort of flate rate/free shipping over $ type offer. Thank you so much for your help!

    Sincerely,
    Desiree

    • Steve Bulger says:

      Hi Desiree!

      Thank you for your comment. And congrats on setting up your ecommerce handcrafts store….that’s exciting!

      You pose a very good question regarding how to charge for shipping with your products. With flat rate shipping, creating that offer is all about averaging your shipping costs. As a startup, you would of course have little to no actual ship data to go off; however, you can still make some assumptions by confirming the actual weight, dimensional weight, and average ship zone, which, if you’re shipping from one location, you should average a zone 4 or 5. For example, if your average product weight is 2 lbs, and your average ship zone is a 4 or 5, then your average shipping cost should be about $8 via Priority Mail from the U.S. Postal Service (which will likely be the best ship option for lower-weight packages). I think an $8 flat rate for shipping within the U.S. is very reasonable. This, however, is just an example, and can visit the USPS, FedEx and UPS websites to confirm what your actual rates will be based on your product mix.

      I mentioned dimensional weight above, as that may also play a role with some of your products. UPS and FedEx changed their dimensional weight shipping rules this year, and so if the dimensional weight of the package is greater than the actual weight, you are billed at the dimensional weight. This may specifically be a factor with your artwork. You can read more about this in our Online Seller’s Guide to Dimensional Weight.

      The other option you mentioned is free shipping. If you were to go that route, I would recommend setting a threshold to qualify for free shipping, such as $40 or $50. This will encourage consumers to add more items to their baskets. And from an order fulfillment and shipping standpoint, the added cost you incur as a seller when adding more units to the order is generally less than the added margin you make for selling additional units, so being able to sell multiple units per order is often a big part of being successful in ecommerce.

      The threshold you set to qualify for free shipping should also be strategic. For example, if you are charging flat rate shipping and after a few months you analyze your data and see your average basket size is $45, then you may want to set the free shipping threshold to $50 (as long as the numbers work with your profit margins), which should make your average basket size go up.

      I hope this all helps. Please let me know if you have any other questions!

      Thanks,
      Steve Bulger

      • Desiree Fleck says:

        Thanks, Steve!

        You bring up some very good points, some which I hadn’t even thought of yet. Thank you for your insight!

        With this information, I think an $8 flat rate will be the best way to go. Like you said, it will help discourage very small orders, but will cover what I perceive will be an average order.

        Shipping art was something I hadn’t really though through yet, but researching it a little now, most of the prints are small enough to make the flate rate work. There are only a few where the shipping cost would exceed the $8, but not by very much.

        I might wait on the free shipping or save it for a special offer for now, until I know more what my actual margin will be.

        Do you suggest offering international shipping at a flat rate? Or is there a better option?

        Thank you!

        Desiree

        • Steve Bulger says:

          Thanks, Desiree, glad I could help out!

          Regarding flat rate international shipping, yes, as with the U.S. shipments, offering flat rates is a nice option if you can make it work. There are a couple of additional challenges on the international side, one being that there is typically a larger discrepancy between rates. For example, depending on your ship method, the ship cost for a 2 lb. package may vary $10 or more based on where you’re shipping to. Ultimately it’s the same as on the U.S. side…it’s about averaging costs…but the sweet spot may be a little more difficult to find. The other thing to consider is where your international customers are located. For instance, will you be selling to foreign consumers around the world, or starting with a particular market or two, such as Canada and the UK, as this will also have an impact on your shipping costs and where that sweet spot may be.

          Hope this helps!

          Steve Bulger

  9. terri says:

    Right now I sell on ebay and I’m getting ready to move over to 3dcart. My average order is about $27-$30.

    I’m having issues trying to figure out shipping on large and small items . I sell berry baskets from 25 baskets to 500- 600 berry baskets at a time. The shipping is a real killer when shipping to California for 500 baskets it is 42.17 for 500 and shipping did not come out right. I charged the customer around 29.70 so I lost some on the shipping . I’m using real time rates at this time with USPS. I would like to offer free shipping but I’m not sure how when something like this comes up. I’m presently testing 3dcart and I really like them with all the shipping offers they have

    • Steve Bulger says:

      Hi Terri –

      Thank you for your comment!

      You’re right, 3dcart does offer nice flexibility when it comes to how you charge for order fulfillment and shipping. If you’re looking to offer free shipping, there are a couple of things you can do. The first thing is to determine the order value threshold to receive free shipping. For example, you may decide to only offer free shipping when the customer order is greater than $40. This incentivizes larger purchases from your customers, and, generally speaking, it makes free shipping more viable for the seller given that the added margin with those larger orders typically outweighs the added order fulfillment and shipping expense.

      The other thing you can do is to look at alternative shipping options. For example, when shipping heavier orders….especially if they’re going to a higher shipping zone….USPS may not be the most cost-effective option. It is nice to give your customers different options, so what many sellers do is use a more economical ship method as their “free shipping” option (i.e. FedEx SmartPost), and at the same time, also present the customer with faster shipping options in case they need their order more quickly (which comes with a surcharge).

      It can get somewhat complicated when you have multiple ship options, which is why, here at eFulfillment Service, we offer our clients a rate shop option to make it very easy for them. They can submit their order to us with one ship code, and we will then pack the order, confirm the actual weight, the dimensional weight, and the shipping zone, and we will then evaluate all of the available ship options and automatically bill our clients at the lowest-available rate.

      Lastly, you had mentioned that you lost some on shipping the larger order to California. My guess is that the shipping rate presented to the customer was not correct as a result of dimensional weight. This basically means that your customer was billed based on the actual weight, and you were billed by USPS based on the dimensional weight (which was greater than the actual weight). DIM weight can be somewhat difficult to account for when using live carrier rates on your website, and each shopping cart / marketplace calculates DIM weight a bit differently. With 3dcart, you should be able to put in either your product and/or package dimensions. It is not a perfect science, but it does help to mitigate potential shipping losses. You may find this guide handy: Online Seller’s Guide to Dimensional Weight.

      Hope this helps!

      Steve Bulger

  10. Diana says:

    You just saved my life! Thank you! This post is so valuable.

  11. Dave Smith says:

    Hello, we sell healthy snack bars…kind of like a cliff bar or power bar. We are also trying to figure out the best way to charge shipping on our site. Flat rate will not work because of the weight, and some people order multiple cases which can weigh over 25 lbs while others buy just a box which weighs 1 lb. I was thinking we could do something like this: Orders $1-$99, $6 shipping….$100-$199, $12 shipping……$200-$299, $18 shipping, and so on. Thoughts on this method?

    • Steve Bulger says:

      Hi Dave –

      Thanks for the comment. You bring up a good point regarding the order weights, which is an issue many sellers contend with. The solution you proposed sounds viable, and coming up with flat rate shipping amounts based on order value is often the solution I recommend to sellers in similar circumstances.

      Another thing to account for is your product margin. As order sizes increase, the added product margin is typically greater than the added order fulfillment and shipping expense. For example, let’s say one 5 lb. package costs you, on average, $13.00 to ship, and your product margin is $10.00. Now, to ship two of them, it costs just $1.50 more, so your margin has nearly doubled. The effect of multi-unit sales is something I just wrote about in this article…

      4 Ways to Increase Multi-Unit Sales

      Given that the order fulfillment and shipping expenses associated with multi-unit sales is generally outweighed by the additional margin, this should play a role in your shipping offers, including when you may be able to get away with free shipping.

      Hope this helps!

      Steve Bulger

  12. Lilly Dima says:

    Hello! really helpful article. I am looking to start selling clothing and accessories online. I source my products from a Chinese wholesale site, but because it’s hard to communicate with the suppliers cause of language barrier I found an agent that would handle orders, QC, packing and sending the items. The problem is their shipping is based on weight and I don’t know the weight of the products. I also don’t want my costumers to have to pay more for shipping if they want to order more items. I would love to offer my customers flat rate shipping. I plan on shipping worldwide

    I do not live in the US

    • Steve Bulger says:

      Hi Lilly –

      Thank you for your comment! You bring up some good points. The shipping expense that online sellers pay is often based on the weight of the order. So, if you could, it would be helpful to try to confirm the weight of the products from your Chinese supplier(s). You can always adjust the shipping rate that you charge to your customers, and I would recommend analyzing your order fulfillment and shipping expenses on an ongoing basis. However, when you are starting out, you do not have sales data, so it’s important to estimate your shipping costs, and to do so, you will need to confirm the weight of your products.

      With regard to not wanting to charge your customers more for shipping when they make larger purchases, that is a good point. In fact, in that case, it is often a good idea to do the opposite and charge your customers less for shipping. While your shipping expenses will go up with larger orders, those shipping expenses are generally outweighed by the increased margin you will make on those additional products, meaning your overall profit will increase. I recently wrote an article on this very topic, which you can read here:

      4 Ways to Increase Multi-Unit Sales

      The point of my article is that multi-unit sales are often the name of the game with ecommerce selling, and there are ways to incentivize customers to order more products, including free or reduced shipping costs. And if you offer a flat rate option, the goal with that is to try to break even, meaning sometimes you may lose a little on the shipping, and sometimes you make a little, and the flat rate amount should be based, at least partially, on your order fulfillment and shipping expense data.

      Hope this helps!

      Steve Bulger

  13. Robyn Belsvik says:

    Dear Steve,
    My husband and I are getting ready to start an ecommerce business in addition to our manufacturing business. We handcraft toboggans, snowshoes, sleds, folding chairs, deck chairs, small tables, large bookshelves, lamps and other items made from wood. We are so confused as to what kind of shipping costs to pass on to our customers as you can imagine the cost to ship a wooden 8ft. toboggan to Maine. We are based in MN and we are a very small company so we can’t afford to absorb a whole lot of shipping costs. The website plan we are using is just a basic one so we don’t have the option of a real time calculator. What advice can you give us?
    Thank you so much for any help you can send our way!

    • Steve Bulger says:

      Hi Robyn –

      Thank you for your comment. You pose a great question here!

      When it comes to order fulfillment and shipping for large items like a toboggan, rather than using a home delivery service, such as FedEx Home Delivery, you will often find that it’s more cost-effective to use a freight company. There are a wide range of freight providers and freight forwarders out there. One that we commonly use is Echo Logistics.

      The reason for the cost savings with freight companies is that they’re well-suited for larger merchandise, and you’re also typically eliminating the final mile of delivery, for which there is generally a big surcharge, especially when shipping large items like you mentioned. What this means, of course, is that, in order to pay a reduced shipping rate, your customers may have to go pick up their order from a hub.

      One of the challenges with shipping freight is that it is often quoted on a per order basis. However, when shopping online, consumers will want to see the shipping charges. I have seen some companies provide “example” shipping costs based on quotes they’ve received to various cities across the U.S. However, my recommendation, especially if your shopping cart doesn’t provide the ability to serve different shipping rates based on the consumer’s location, would be to offer a flat rate shipping option, which hopefully can be assigned in your cart on a per product basis. To make this viable, you would average your shipping costs, meaning that, in some cases, you may lose a bit of money if it’s shipping a greater distance than normal, and, in other cases, you should make a bit of money on the shipping.

      If you’re shipping freight, the other challenge you’ll have is that you’ll need to communicate to your customers that they’ll need to pick up their toboggan at a hub, and convey where that is. Some shopping carts offer features and add-ons that make this easier than others.

      Shipping to a warehouse is cheaper, and this is why you’ll find that the larger retailers, which have retail locations and distribution points scattered throughout the country, often offer a lower shipping rate when customers pick up in store. Ultimately, as an ecommerce seller, shipping large items like this can be challenging, as the shipping cost will inevitably be high. However, given that you manufacture the products yourselves, I am guessing they are high-quality items, ones that consumers cannot find elsewhere. That is a big advantage for your company and certainly something I would promote throughout the website. If consumers can’t find the product elsewhere, they’re generally willing to pay a higher price.

      I hope this helps. Please let me know if you have other questions!

      Thank you,
      Steve Bulger

      • Steve, thank you so much for your sound advice. We have thought of just having a Flat Rate shipping and incorporating some of the cost of shipping into the product price but my fear is if someone buys more than one sled or chair, etc. and the shipping would still be a Flat Rate and we would have to absorb two-thirds of the shipping cost for that second item. We never really planned on being a retail company, just a manufacturer but we still needed a website and we figured we might as well try to sell some of our more “shippable” products on our site. We are finding out the hard way how difficult ecommerce can be when you have larger items and the cost to ship them is so high. I guess we will just have to experiment to see what our customers will pay for shipping but as of today, I think we will be absorbing at least half of the shipping costs.
        Is it better to have “a bird in the hand than two in the bush”?
        Thank you again….what a blessing it is to be able to get free sound advice. It is a wonderful thing you are doing!

  14. Ramize says:

    Greetings! I’m from Jamaica I’ve set up an online store using Shopify, and I’m currently using Printful to print and ship my order. I’m at a loss when it comes to setting a flat rate for shipping overseas. I did tons of reading and still I’m at a loss. My store consists of t-shirts and Tote bag. Do you have any suggestions on a flat rate I could use so that I don’t over charge or under charge my customers?

    • Steve Bulger says:

      Hi Ramize –

      Thank you for the comment. You pose a great question here regarding international order fulfillment and shipping.

      When online sellers make the leap into selling their products internationally, it is common for them to do so slowly, and in stages. For example, I would recommend targeting one or two international markets to begin with. By doing so, you become accustomed to the process, requirements, and costs of international shipping, which do vary by country. Additionally, you will become familiar with the level of service associated with different ship methods from various shipping carriers, you’ll become accustomed to the customs documentation, and you’ll get a good handle on the duties and taxes associated with different product types, order values, and destination countries.

      Flat rate shipping is certainly a nice thing to offer, as it allows you to market that throughout your website and make sure there are no unwanted surprises during the checkout process. However, confirming the ideal flat rate shipping offer becomes a bit more complicated when shipping across the border, especially if your goal is to work in duties and taxes into that flat rate offer. My recommendation would be to identify the primary shipping carrier and shipping method(s) you would like to use for your international orders, and then identify the duties and taxes associated with your product and the international markets you’re targeting. Rather than having the duties and taxes be a part of that flat rate offer, I would suggest offering a flat rate on only the shipping cost (and that flat rate can vary by country).

      As your customers are checking out, you should clearly state that duties and taxes will apply. In some cases, sellers have parcels delivered duties unpaid (DDU), meaning the customer owes the duties when the package arrives (again, this should be verified to the customer as they check out on your website). In other cases, sellers will identify the estimated duties and clearance fees based on the product type and destination country, and charge their customers at check out, meaning the parcels are delivered duties paid (DDP).

      I hope this helps!

      Thanks again,
      Steve Bulger

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