How to Calculate Shipping Costs for Online Store

person calculating shipping cost - how to calculate shipping costs for online store - how to determine shipping costs when selling online

No part of e-commerce is more important than shipping rates. A customer that gets through the purchase process only to find the shipping too expensive will shop elsewhere. How to calculate the shipping costs for online store is vital to the success of an online business.

Numerous surveys tell us that 79.3 percent of online customers consider shipping costs, and more importantly free shipping, to be the most important factor of online shopping. This is driven by Amazon’s two-day delivery as well as their two-hour delivery of groceries.

Now we see that shipping prices are important. Come along while we show those new to e-commerce the ins and outs of how to determine shipping costs when selling online.

What Are Shipping Costs?

Many shoppers see “shipping and handling” on their screens without knowing what this phrase covers. Shipping costs are the accumulated costs of moving an item from your shelves to the customer’s mailbox. It includes transporting the package, paying the truck driver, fuel, postage, and any other charges related to shipping.

How To Calculate Shipping Costs For Online Store

You should compare shipping companies for the best rates. Go to the page of the shipping company you’ve chosen. It will have a shipping cost estimator:

  • Type in the dimensions of your package
  • Type in the destination of the package
  • Add ten percent to your shipping charges to cover admin costs as well as unforeseen circumstances

How To Calculate Shipping Cost Per Item

Those e-commerce owners with employees follow a different formula for how to calculate shipping cost per item than their solo brethren. Their formula takes the percentage of time it takes to pull and package the item out of an hour, and multiplies it by the employee’s hourly pay rate to arrive at the cost per item. For example, it takes Sharon 15 minutes to pull and package an item. She makes $10 per hour. That means a 0.25 percentage times $10 per hour comes out to $2.50 shipping cost per item.

How to calculate shipping cost per item when you’re the sole owner of the business is a little different, because you’re placing a value on your own time. You must decide how much it’s worth to you to place a listing for customers to order, or to pull an item from existing stock, package it, and send it out.

Time yourself on pulling and packaging an imaginary order. Then calculate how much money you want to earn per hour. That will be your hourly rate. Follow the above formula, with the per item rate being your shipping cost. Keep in mind that this time spent packaging items could have been used in another area that would have made money for you. Use that as your “handling” charge.

How Much Is Standard Shipping?

As of 2021, standard shipping for UPS and FedEx was $14.39. The estimated delivery time is five business days. The post office charges somewhat differently:

  • If a package weighs less than one pound, the charge is approximately $2.74
  • For a package weighing more than one pound, shipping begins at $7.
  • Shipping charges, if you’re wondering how much is standard shipping, increases by ten to twenty-five cents per extra pound

Do your research and choose a carrier based on the size, weight, and measurements of the package being shipped. The post office estimates a one to six business days delivery. Some customers will pay for expedited shipping via UPS or FedEx, if the item ordered is a time-sensitive thing such as birthdays, anniversaries, Christmas, or a special occasion.

What Is Handling?

Part of how to calculate shipping costs for online store is handling. Handling is what happens in your warehouse or storage area when a customer puts in an order. You’ll pull the item, wrap it, put it in a box, add a shipping label, and help the postman or shipping service load it on the truck. That’s handling. From there, shipping takes over.

How To Calculate Shipping Costs For Online Store - Why Is It Important?

We’re Americans: we want what we want, and we want it right now. However, it can’t cost too much. Amazon has taught consumers that low cost to free shipping is vastly to be desired, so all e-commerce store owners must offer the same to remain in business.

You would think that consumers care more about speed due to Amazon’s two-day delivery spoiling them. You wouldn’t be correct. Customers still care about their checkbook to the point that in one study, 97 percent of shoppers said that free shipping influenced their decision to buy.

Multiple studies tell us that varying percentages of consumers prefer free shipping to pay for it. The same studies show that free to low shipping costs win out over the speed of delivery every day of the week.

How To Determine Shipping Costs When Selling Online: What Things Affect Them?

Wondering how much to charge for shipping and handling? It’s an important part of your business, so it’s wise to do it right the first time. Quite a few things affect shipping costs, so let’s take a look at them.

Shipping Insurance

Everything, at some period in time, breaks. Moreover, everything sometimes takes longer to arrive at a customer’s home. Shipping insurance covers these and a multitude of other sins. E-commerce owners shipping expensive items are highly encouraged to use shipping insurance to cover re-shipping expensive inventory items. Most shipping companies will charge the e-commerce owner a percentage of the item’s value as well.

Shipping Charges

How to calculate shipping costs for online store means actual shipping. Items shipped have to go through several post offices, airports, bus stations, or trucking companies as a regular part of doing business. For instance, an item shipped from Florida goes through Savannah, GA to Richmond, VA to Washington, D. C. and through Philadelphia, PA on its way to a New York destination. Shipping charges cover all these stops. They also cover mistakes such as the wrong delivery address or sitting in the dead file if the address is unreadable.

Handling Charges

Workers in all those cities handle the package, so “handling” is charged.

Customs And Taxes

Many e-commerce owners only ship in the continental U. S. However, part of how to calculate shipping costs for online store must include shipping overseas. If an e-commerce owner is shipping across the pond, you’ll pay a fee based on the value of the item. You’ll pay a fee based on the destination of the item. You’ll pay a fee on the duties, which is called Deliver Duty Paid. There will be disbursement fees attached to the duty fees. The owner might be required to gin up a new invoice if the declared value and the actual value differ.

Accessorial Charges

These are a little more difficult to understand because the phrase covers a lot of territory. Broken down, the phrase means:

  • Covering LTL or less-than-truckload items when the truck isn’t full. It also covers items moved from this truck to another for further processing or delivery
  • Covering pickups from farms, trade shows, hazardous items, after-hours pickups, and crossing borders charges

Tips And Hacks For Covering The Cost Of Offering Free Shipping

As we mentioned above, shoppers expect free shipping and actively seek it. The pertinent question is, can the e-commerce owner afford to offer free shipping? Newbies can’t along with online store owners with fewer years of experience in e-commerce. What can they do?

Transparency is vital in the best practices involved in how to calculate shipping costs for online store. When customers get to their checkout page, they need to know you can’t cover free shipping. If you can offer a flat rate shipping charge, tell them so. If costs differ, install a calculator, which allows the customer to enter their zip code in a shipping cost estimator.

If your profit margin allows for free shipping, here are a few tips and hacks for covering it:

  • Raise item prices. If you can raise your prices but still remain competitive, you can cover the cost of free shipping
  • Offer free shipping with a minimum order amount. E-commerce owners selling items at lower prices might offer free shipping if the customer spends a specified amount of money. For example, your customer buys $50 in merchandise. Offer free shipping at $75.
  • Use cheaper shipping companies. Customers need to know how their merchandise is shipped. The post office is generally more economical than FedEx or UPS. Each shipper, however, has its own economical shipping rates, even though these take longer for delivery. Do your research and compare prices.

How To Calculate Shipping Costs For Online Store – Offering Free Shipping Tips

New e-commerce as well as somewhat less seasoned owners don’t have to offer free shipping every time someone hits “go to checkout.” Here are some tips on how much to charge for shipping and handling if it’s free:

  • Obtain repeat business by offering free shipping on a customer’s second order instead of their first order
  • Offer a discounted shipping fee for a customer’s first order
  • Devise a special free shipping program for the holidays or a customer’s anniversary or birthday
  • Establish a club, of sorts, whose members get free shipping when they order perhaps twice a week or four times per month. If customers spend a specified amount of money, offer them free shipping. Free shipping could also be part of a rewards program
  • Free shipping could be offered to customers buying multiples of the same item

Tools For Calculating The Best Shipping Costs For Your Online Store

E-commerce is an exciting business, especially when you fulfill your first order. The excitement wanes somewhat, though, when your shipping information is contained in a spreadsheet or on a scratchpad. You need help figuring out how to calculate shipping costs for online store. Allow us to help:

The ShipBob app

This app works with any e-commerce platform, any shipping company including the post office, in addition to any fulfillment station near the delivery address. It offers two-day delivery nationwide, passing on to the owner the savings from shopping the best shipping companies.

ShipBob’s inventory tracking manager allows the owner to see inventory levels, historical sales information for reordering specific items, track orders and shipments, and all in real-time.

E-commerce owners syncing their platform with ShipBob can expect a seamless experience. ShipBob partners with fulfillment programs and shipping companies to process orders automatically. Owners will enjoy a streamlined experience so they can work on growing their brand.

FedEx tools

The FedEx website offers e-commerce owners two methods regarding how to calculate shipping costs for online store. The first is a chart detailing the shipping zones. The owner must know the zip code of the destination, the originating zip code, along with the weight and number of units to be shipped. Delivery times can also be viewed.

The second method is a rate calculator. The owner will input the same information. You’ll receive the rate, delivery date, and other service information. Estimated rates might vary between the estimate and actual rate, but the rate will reflect any fees as well.

There are really only two methods of calculating shipping rates. Any shipping company offers its e-commerce visitors these two methods, so it’s basically a matter of comparison. Choose the method that gets you closest to the best shipping rate, and go with it.

Shipping calculator plug-ins

E-commerce owners can add a browser plug-in if they don’t have one included in their website builder. Many plug-ins work with Chrome, Firefox, Opera, and Safari. You just go to extensions, choose your plug-in, and you’re good to go. Alternatively, they can just skip all the hoop-la and use the WooCommerce plug-in.

WooCommerce is a free plug-in that turns any WordPress website into an e-commerce store. It helps to create and manage such a store and is particularly geared toward the newbie e-commerce owner as well as those unacquainted with tech. Inventory management, tax management, shipping, and secure payments are only a few of WooCommerce’s features.

WooCommerce isn’t just your ordinary WordPress application. It brings functionality and flexibility in its themes and plug-ins to the already functional and flexible themes and plug-ins of WordPress. Talk about a double whammy!

New e-commerce owners wishing to grow their brand can use WooCommerce with the security that it will grow with you. Its analytics and other integrations will show you when and where to upgrade, add new products or services, as well as dozens of methods of shipping integration.

Final Thoughts

There are over 20 million e-commerce sites online, with every one of them competing for the greatest edge over the competition. The delicate line between pricing and customers’ buying impulse is the only line the e-commerce owner can’t cross. That includes shipping rates.

Also figured into the equation is a buying public tired to pieces of being stuck at home, sometimes without work, and longing for a return to normal life. Prices are understandably the biggest thing over which this buying public can bargain, so the e-commerce owner is further constrained to walk that delicate line.

Amazon has a lot to answer for due to their short delivery times, but most of all for their free shipping. Not all of those 20 million e-commerce owners can match that kind of thing, try though they might. It’s those owners we want to help with this tutorial on how to calculate shipping costs for online store. There are ways to beat the game, and we’ve listed the ways that zero in on the fundamental aspects of shipping such as using standard shipping and figuring out how to offer free shipping.

If successfully walking that delicate line means adjusting prices somewhat in order to facilitate affordable or free shipping, then the owner needs to ask himself if that’s something with which he can live. If his profit margin is healthy enough, then gaining a loyal return customer makes walking that line a little easier.

The above article may contain affiliate links, which help support Clever Sequence

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