How to Determine Shipping Costs


Shipping costs can be hidden fees that you don’t see coming. No one ever really thinks about the shipping costs involved until it comes time to pay the bill.

When the cost of shipping hits you harder than you thought, you step back and say, “Whoa!”. Because if you don’t plan and prepare, shipping can be a big bill that will eat into your profits as a retailer.

Retailers must determine what their shipping cost is going to be. This will, in turn, help you decide how much you should end up charging your customers overall, especially if you plan to offer free shipping. If you overcharge them, customers won’t be too happy, and they’ll take their business elsewhere. Charge them too little, and you’ll hardly make a profit.

Here is a guide on how to determine shipping costs:

What’s the Shipping Cost?

Shipping costs are incurred for moving your products from the warehouse directly to your customer’s front door. The total costs of your shipping will cover several areas. This includes the cost of the boxes, the cost of the tape, and the packaging material. Those will be part of the costs if you use specially customized stickers representing your company.

The shipping costs will also involve the workers who have to pack and dispatch your products, including the courier delivering them. Another factor that will influence how much you end up paying in shipping is whether you ship internationally or not.

Businesses that offer worldwide shipping can expect to pay more than the businesses shipping locally. Several additional factors come into play when international shipping is concerned. One example would be the handling and insurance fees that are incurred.

How to Calculate Shipping Costs

As a retailer, you are all about the profits. After all, profits are how your business stays afloat. To maximize your profits, you need to look for ways to save costs. This includes when it comes to shipping. To maximize your shipping savings, you can reduce expenses by using affordable packaging supplies from companies like The Packaging Company. They offer quality shipping supplies at competitive prices.

You also need to know your shipping costs. Here are several key factors to consider that will determine how much you end up paying in shipping fees:

Calculate shipping costs by weight

The weight and dimensions of your parcel will determine your shipping cost. This is known as calculated shipping. The cost of your shipping fees will be based on what your package measurements are and where your customer is located.

The upside to this shipping method is that your customers will know how much they can expect to pay for the shipping based on what they order. The drawback with using calculated shipping will be if you’re shipping in bulk. If you’re sending several different packages of different sizes to varying locations, you’ll have to spend time calculating each one.

Free shipping

Free shipping can be a powerful two-letter word that will entice your customers to buy from you because you offer free shipping when your competitors are not. Many retailers offer this option because it is a fantastic way to boost your sales numbers.

If you plan to offer free shipping, here are two ways to decide your shipping costs. The first option you have is to build the cost of your shipping into the price of the products. The second option you have is to absorb the shipping cost, which would mean your profit margins would be lower. The approach you want to go with is entirely up to you, depending on what works best for your business.

Flat rate shipping

Another way to determine your shipping cost would be to look at flat rate shipping fees. You would only charge your customers a single rate across your website. It doesn’t matter what products they order, big or small, and the shipping price would be the same.

The flat rate shipping option works best if you’re shipping locally. That is because shipping internationally would make the costs of your shipping vary, depending on the region and country it is going to. Smaller businesses that only ship locally favours this option because it is reliable and convenient. They don’t have to deal with all the logistical challenges of international shipping.

However, if you are considering flat rate shipping, you will need to calculate the average shipping cost for your entire company. This should be reviewed regularly whenever the business costs go up.