Choosing Your Shipping Rates and Methods
Before we get into the nitty-gritty of shipping calculations, let’s explore your delivery options. None is necessarily better or best—each has its pros and cons.
The customer might not always realize it, but there’s no such thing as free shipping. Nothing is free, and someone has to pay the price: either you or your customer. Nonetheless, free shipping is still a powerful sales tactic that e-commerce giants and small businesses alike use to satisfy consumer preferences.
- 80% of people cite free shipping as the primary incentive for shopping online—people don’t want to leave the house to get what they want, but they don’t want to pay to have it delivered, either.
- The biggest reason digital shoppers abandon their cart: they discover the shipping costs are too high. Free shipping eliminates that cart-abandonment issue.
- Free shipping may drive down the profit of each purchase, but it can to increase your volume of orders. If your other logistics pan out, more sales with higher shipping costs may still yield a higher overall ROI. Plus, you’ll score more customers, and these customers have the potential to become repeat customers.
- Offering free shipping helps you either keep up with the competition or differentiate your brand from your rivals.
- You may have to slow down your delivery speed to decrease costs. 86% of shoppers stated they’d be willing to wait 4 to 7 days to receive free shipping.
- You will either have to eat the costs of free shipping yourself or boost the price of your products to compensate—and since low prices are the only other factor more important than delivery, bumping up prices isn’t always a great idea.
- Some customers will make the purchase regardless of free shipping, meaning you’re eating unnecessary expenses.
Tactics to make free shipping work:
- Increase the cost of products to cover shipping
- Eat the full price of shipping yourself
- Offer minimum order amounts to qualify for free shipping to offset shipping costs by increasing order size
- Charge shipping on low-value products and provide free shipping on high-value purchases
- Use low-cost economy shipping options to trade time for money
Flat-rate shipping is a popular delivery option that makes sure you don’t extremely overcharge or undercharge your customers. It’s simple and predictable, making it easy for you to estimate your expenses and plan your cash flow.
- Flat-rate shipping works well if you have a standard product line with items of similar sizes and weights.
- Customers will increase their average order size in order to purchase as much as they can within the lowest flat-rate fee.
- This shipping cost is easy for customers to understand, making the checkout process quick and simple.
- It becomes complicated and less cost-effective if your products come in a variety of weights and sizes.
- Customers don’t like paying a flat-rate fee for small items, and businesses don’t want to lose money shipping large single items.
Tactics to make flat-rate shipping work:
- Get creative with how you make items fit in boxes to reduce your shipping costs
- Let customers know the maximum they can order with a flat-rate fee: they’ll be encouraged to buy in bulk and fill their order
- Make simple adjustments to your flat-rate fee to balance out your desired profit margins without necessarily increasing product prices
Real-Time Carrier Shipping
Real-time carrier shipping is when customers can see up-to-date shipping rates that carriers charge live in their cart. These rates are automatically determined using weight, dimensions, and shipping destinations.
- Customers don’t get overcharged or undercharged—meaning you’re fair to your customers without losing money on some orders.
- This option allows you to eliminate confusion around the costs of international shipping prices.
- You’ll save time not having to calculate and recalculate your shipping costs to protect your margins.
- Most shipping calculations are done at checkout, and this new price shock can lead to cart abandonment.
Tactics to make real-time carrier shipping work:
- Automatically calculate real-time carrier rates when the customer adds items to their cart to avoid confusion and sticker shock on the checkout page
- Make shipping calculations transparent to the buyer so they know exactly what the shipping fee covers
How to Calculate Your Shipping Costs
Now that you have a few shipping options in mind, it’s time to break out that handy-dandy calculator. Get out your financial statements so that you can start creating a few informed financial scenarios and projections.
The following package determinants will all factor into your shipping costs:
To get actual estimates for your packages, you’ll need to use the shipping service’s calculators. Here are the most popular small business shipping couriers and their shipping calculators:
- United States Postal Service (USPS): The best overall value with competitive pricing, decent speed, free pickup options, and more.
- United Parcel Service (UPS): If speed is your top priority, UPS can get your packages delivered with lightning-quick efficiency.
- FedEx: Great for same-day shipping, pricing for packages over 3 pounds, and delivery all 7 days of the week.
Keep in mind that COVID-19 has had a huge impact on shipping carriers and what they’re able to accomplish. Make sure you check your carrier’s updated terms to see what they’re currently promising and capable of doing.
Packaging Like a Pro
Once, packaging could be a product enveloped in bubble wrap inside a drab brown box: simple and bland, but efficient.
However, today’s online shoppers have higher expectations. Packaging is no longer a vessel to get a product from Point A to Point B—it’s an extension of your brand and an opportunity to create an experience for your customer.
The Unboxing Experience
Consumers want an unboxing experience that validates their purchase. The process of opening your package is an opportunity to impress and earn repeat business—yes, before they’ve even encountered the product. A staggering 39% of US adults on social media agree that unboxing videos influenced them to buy certain products.
Here are some ideas to create a compelling unboxing:
- Tell your brand’s story: Make the packaging, copy, inserts, and product a cohesive part of your brand’s personality, origins, and mission.
- Make it personal: Add a thank-you card, handwritten note, or signature to personalize the purchase. A feeling of connection can create brand loyalty stronger than the product itself.
- Brand the boxes: Add your voice, style, colors, logos, and more to the inside and outside of the box. If branding your box turns out to be outside your budget range, consider cheaper (yet still powerful) alternatives like creative hand-stamps, branded stickers, and custom tape.
- Give freebies: Customers love free things, no matter how dinky or unnecessary they are. Throw in some brand stickers, pens, labels, and even discount coupons to earn that repeat business.
Yes, creating an unboxing experience is going to increase your shipping costs, but this is a powerful marketing opportunity. For a few minutes, you have the undivided attention of your customers—time to shine. Creative packaging might cost an extra few pennies on every box, but it’s oh-so-worth-it.
What packaging will you choose to safely transport your products: boxes, padded envelopes, poly mailers, or something else? And what will you use to protect the product inside: bubble wrap, packing peanuts, or inflatable airbags?
Even tiny decisions like these can have a big influence:
- Brand perception: cheap or classy
- Economy: lighter and smaller means cheaper
- Environmentally friendly: whether packaging is recyclable, compostable, or non-reusable
Strive to find packaging that fits your product’s unique shape. A nice snug fit is what you’re looking for—both for a customer unboxing experience and for your profit margins.
Check your carrier’s shipping options. Most offer free packaging for different types and sizes, so you may be able to save a no-hassle pretty penny.
At first, you may create your labels by hand. However, as you scale, this becomes an inefficient (and likely impossible) method.
If you’re fulfilling the shipping yourself, you can upgrade and print your labels using a plain-ol’ printer. Or, better yet, you can use a fancy thermal label printer to create self-adhesive labels.
Don’t Let Ship Hit the Fan
Insurance and tracking options are generally inexpensive, but every additional penny eats into your profit margins. You’ll need to decide (depending on your products’ value) if additional coverage is essential to your business.
If you ship a variety of products, you may choose to purchase insurance on high-value items instead of all your products. This strategy could help prevent big losses without requiring a significant ongoing investment.
Many carriers will provide complimentary coverage up to certain dollar limits. For example, UPS will cover packages up to $100 at no additional charge, but that’s only if UPS is responsible for the loss of product or damages.
Most carriers also provide free tracking to you and your customers, but remember that nothing is free. Seemingly complimentary features like insurance and tracking will likely be built into the price of shipping through that courier, so make sure you do your research and compare your options.
Self-Fulfillment vs. Fulfillment Services
In your business’s early days, your inventory probably sat in your closet or behind your desk. When a customer made a purchase, you found the item, packaged it up all nice and pretty, took it to your preferred courier, and shipped it from there. This process is manageable early on, but it becomes unrealistic as you scale.
When businesses grow their operations, they commonly begin outsourcing their fulfillment to third-party logistics (3PL) companies that handle all of the processing, packaging, and shipping. Besides 3PL partners, e-commerce giants like Amazon offer their own storage and shipping options—like Fulfilment by Amazon (FBA). Let’s explore the pros and cons of both self-fulfillment and professional fulfillment services.
- In-house fulfillment lets you maintain complete control of the details. For better or worse, you’re in charge of the minutiae of packing, shipping, and making sure the orders get to customers.
- You can guarantee the unboxing experience by using custom packaging and extreme attention to detail.
- For smaller order volumes, you can save money by doing it yourself.
- Scaling is a challenge. You can only package and ship so many products on your own, and it’s not always the most valuable use of your time.
- Tracking can be a pain in the you-know-what. Shipments get delayed, packages get stolen, and customers aren’t quick to forgive.
- Without the benefit of multiple facilities and bulk discounts, large volumes of shipping can be more costly to do on your own.
- You can hand over storing, packaging, and shipping responsibilities to the pros who do it best. They know the best methods to protect your products and make sure they get where they’re supposed to go on time.
- Fulfillment services make your scale limitless—well, until you grow so monolithically big that you need your own in-house warehouse, shipping, and the like. But conquer that challenge when it comes.
- You can focus less time on shipping details and more time on your business.
- You’ll save money on shipping when you receive high order volumes.
- Your fulfillment service will handle customer service and order returns, saving you valuable time and headaches.
- You can’t keep complete control over your packaging, meaning you’ll likely provide little-to-no unboxing experience for your customers.
- If you don’t have a high volume of orders yet, fulfillment services can be expensive.
- Your vendors will make mistakes from time to time, and it’ll reflect back on your brand. The wrong items will be shipped, products will arrive at the wrong location, and so on—but keep in mind you’d likely make the same mistakes on occasion, too.
There’s no right or wrong answer when it comes to how you fulfill your orders. You’ll just need to evaluate your time spent and crunch the numbers to see what’s more valuable to you.
Remember, neither decision is final. You may choose to experiment with self-fulfillment for a time and see how it goes, or you may try fulfillment services for 6–12 months to see how you like it. Month-to-month fulfillment contracts are more expensive, but they’ll give you an easy way to test out the waters before you lock into a more affordable annual or multi-year contract.
Nail Your Shipping Strategy
As you can see, a lot goes into creating a successful shipping strategy. Even the smallest details can have a huge impact on your customer experience, business operations, and bottom line.
Whether you’ve been shipping products for a while or are just dipping your toes into the world of delivery, don’t fret about perfection. Be willing to experiment and try new things. Mix it up with your packaging and track the impact. Experiment with using fulfillment services and see if they save you time and money. You’ll never know if there’s a better way unless you give it a try.
Research, experiment, measure, and make adjustments so you can eventually dial in your shipping strategy. With these often complicated logistics under your belt, you’ll be ready to take on any challenge thrown at your business.