While budgeting for your eCommerce business, there are many factors you need to consider. Most entrepreneurs first plan for expenses such as product manufacturing and marketing, which comprise a significant portion of the startup budget.
However, one major cost that often surprises new online business owners is shipping and fulfillment, which can ultimately decide the success or failure of your venture. When creating your budget, allocate enough funds to cover your shipping and fulfillment needs to get your products to your customers without breaking the bank.
In this guide, we will go over how to calculate shipping costs for your online store so that you can develop an accurate budget and avoid any nasty surprises down the road.
What are Shipping Costs?
Shipping costs are the fees charged by carriers such as UPS, FedEx, or DHL to transport your goods from your manufacturing or storage facility to your customer’s doorsteps. These costs can vary significantly depending on your shipment’s size, weight, and distance. In addition, different carriers offer different services and features, which can also affect the price.
To get an accurate estimate of your shipping costs, you will need to consider all of the following factors:
- The size and weight of your products
- The distance the shipment will travel
- The shipping method (air, ground, or ocean)
- The type of packaging you will use
- The number of units being shipped
- The insurance and tracking options you select
Why Is It Important to Know How to Calculate Shipping Costs?
If you’re selling products online, it’s essential to know how to calculate your shipping costs so that you can factor them into the price of your goods. Many customers are willing to pay for shipping, but only if the cost is reasonable. If your shipping costs are too high, you may find competing with other businesses in your niche difficult. In addition, if you’re not factoring shipping costs into the price of your goods, you may lose money on each sale.
Other than making sure your prices are competitive, there are a few different reasons why it’s essential to calculate your shipping costs accurately:
To develop an accurate budget for your business
If you do not include shipping costs in your budget, you may be short on cash when it comes time to pay the bills. Knowing your shipping costs cannot be overstated—it’s essential for keeping your business afloat. Budgeting for shipping costs will also help you to understand your margins and profitability better.
To avoid overcharging or undercharging your customers
If you need help determining how much to charge for shipping, you may end up overcharging or undercharging your customers. Overcharging will make your prices uncompetitive, while undercharging could put your business in the red. In either case, getting your shipping costs right is vital to price your products correctly.
To choose the suitable shipping carrier.
There are many shipping carriers to choose from, each offering unique services and features. You need to learn how to calculate your shipping costs to determine the suitable carrier for your needs. As a result, you could end up overpaying for shipping or choosing a carrier that doesn’t offer the services you need.
How to Calculate Shipping Costs
Now that we’ve gone over why it’s essential to know how to calculate your shipping costs, let’s look at a few key factors you’ll need to consider.
The Size and Weight of Your Products
The size and weight of your products are the first things you’ll need to consider when calculating shipping costs. Most carriers base their rates on the dimensions of your shipment, so it’s important to know the dimensions of your products before you get started.
To find the dimensions of your products, you will need to measure each item’s length, width, and height. Once you have the measurements, you can use a shipping calculator to estimate the shipping costs. Size and weight will also affect the type of packaging you need to use. For example, if you’re shipping a heavy or large item, you may need to use a different type of packaging than you would for a smaller item.
The Distance the Shipment Will Travel
Another important factor to consider is the distance your shipment will travel. The further the distance, the higher the shipping costs will be. When calculating shipping costs, you will need to consider both the origin and destination of your shipment.
The shipping carrier you choose may also have different rates for different areas of the country. For example, UPS has different rates for shipments going to and from Alaska and Hawaii. If you need help calculating the distance your shipment will travel, you can use an online tool like Google Maps.
The Type of Packaging You Use
The type of packaging you use will also affect your shipping costs. When choosing to package, you will need to consider the size and weight of your products and the distance the shipment will travel.
For example, if you’re shipping a large and heavy item, you may need to use a different type of packaging than you would for a smaller item. The type of packaging you use will also affect the size and weight of your shipment, which will impact the shipping costs.
The Shipping Carrier You Choose
There are many different shipping carriers, each with unique services and features. The carrier you choose will affect your shipping costs and the time it takes to deliver your shipment.
Some shipping carriers, such as USPS, offer flat-rate shipping, which means you can ship your package for a fixed price no matter the weight or distance. Other carriers, such as UPS and FedEx, base their rates on the weight and distance of your shipment.
How fast you’d like the package to get to the destination
The time it takes for your shipment to arrive will also affect your shipping costs. If your shipment needs to be delivered quickly, you may have to pay more for shipping. For example, USPS offers expedited shipping options faster than their standard shipping.
The Services You Need
The services you need will also affect your shipping costs. Some carriers offer basic shipping services, while others provide additional services such as tracking, insurance, and signature confirmation.
If you’re shipping a high-value item, you may choose a carrier that offers insurance if the item is lost or damaged during shipping. If you need to track your shipment, you’ll need to select a carrier that provides tracking services.
Your shipping costs will also be affected by your chosen service. For example, USPS offers first-class, standard, and expedited shipping services. Each service has different rates and transit times.
How Valuable the Contents Are
The value of your shipment will also affect your shipping costs. If you’re shipping a high-value item, you may choose a carrier that offers insurance if the item is lost or damaged during shipping.
For example, if you’re shipping a $500 piece of jewelry, you may want to insure the shipment for the total value of the item. Shipping insurance typically costs about 1% of the item’s value.
Extra costs for unexpected issues and shipping fees
You may also incur extra costs for unexpected issues, such as weather delays or missed pick-ups. You may also be charged additional fees for special services like Saturday or re-delivery.
The best way to avoid unexpected charges is to plan and factor in all possible costs. This will help you budget for your shipping costs and avoid any surprises.
Using Shipping Cost Calculators
One of the best ways to estimate your shipping costs is to use a shipping cost calculator. Shipping cost calculators allow you to enter the details of your shipment, such as the size, weight, and distance, and compare the rates of different carriers.
This can be a helpful way to compare the cost of shipping with different carriers and find the best option for your needs.
There are several shipping cost calculators available online.
Shopify Shipping Calculator
One great thing about Shopify is that it has a built-in shipping function. With Shopify Shipping, you can save time on your order fulfillment process because it’s all in the same place as your inventory management, invoicing, customer details, and product management. Everything in one spot makes things much more efficient and easier to keep track of.
The Shopify Shipping Calculator is an excellent option if you use Shopify as your ecommerce platform. To use the Shopify Shipping Calculator, add weight and dimensions to your product’s page. The shipping calculator will then automatically generate shipping rates for different carriers.
You can also add multiple products to your cart and use the shipping calculator to compare the rates of different carriers. With Shopify, you get discounted best rates (up to 88%) with USPS, UPS, and DHL.
USPS Shipping Cost Calculator
USPS’s shipping calculator is one of the most straightforward calculators to use. This is especially true since it only requires a ZIP code. Although you can select preset rates, you also have the option to figure out shipping by inputting exact dimensions. With this calculator, you can find out the cost of shipping for different services, such as Priority Mail, First-Class Package Service, and Parcel Select.
UPS Shipping Cost Calculator
This calculator makes it easy to compare different shipping options for your packages and freight. Just type in some basic information about what you’re sending, and the calculator will show you results for various services, like next-day air or UPS Ground. And with UPS Small Business, you can get even more discounts on shipping rates.
FedEx Shipping Cost Calculator
This international shipping calculator from FedEx gives you a few different options for calculating your rates. You can use either the “quick quote” or the “advanced quote” function. With the quick quote function, you must input your shipment’s origin ZIP code, destination ZIP code, and package weight. FedEx is useful for online stores worldwide, especially when sending products to overseas countries.
DHL Shipping Cost Calculator
DHL is an industry leader in shipping and logistics, so it’s on this list. However, DHL needs an interactive shipping calculator like the others on this list. You must request a quote for shipping fees through its website. That being said, the process works similarly to the other calculators regarding questions asked and results given; you can easily proceed with your quote after requesting details from DHL.
Shipping Options To Offer Customers
Offer Free Shipping
One popular shipping option is free shipping. Customers love free shipping because it saves them money on their purchases. And when customers feel like they’re getting a good deal, they’re more likely to purchase.
To offer free shipping, you’ll need to calculate the average cost of shipping your products and build that cost into the price of your product. This means that your shipping costs become a part of your product’s margin.
Shipping calculations that are determined by the weight, size of the package, and location of the customer is called Calculated or Bespoke shipping. It’s a straightforward system, especially if you have a small product catalog. The downside is that it’ll take some time to calculate shipping costs for each product. Your customers will know how much they’ll be paying once they reach the checkout page– which might cause some cart abandonments due to frustration over not knowing prices.
Flat Rate Shipping
Flat rate shipping is when you charge a single price for shipping, no matter the weight or size of the product. This is a good option if you want to ensure your customers know the total cost of their purchase upfront– which can help reduce cart abandonments. The downside is that you might lose money on some orders if the shipping cost exceeds what you charged.
Offer Local Delivery
If you’re a small business wanting to provide fast, dependable next-day delivery to your customers in the same town or city, then think about local shipping. You can outline your delivery area using a mileage radius or a list of zip/postal codes. Customers who live within this predefined area can pick “local shipping” as their go-to method during checkout. Local delivery is a great way to build relationships with your customers and offer stellar customer service.
Methods for Reducing Your Ecommerce Shipping Costs
Reducing your shipping costs can be simple. You can use a few different methods to reduce the amount you spend on shipping each month.
Decreasing the shipping distance by distributing inventory near your customers
Consider distributing your inventory to multiple locations if most customers are in the same country or region. This way, you can ship items to customers from a location closer to them, reducing shipping costs.
Use packaging that’s the right size
When it comes to shipping costs, size matters—literally. That’s why it’s important to use packaging that’s the right size for your products. Not only will this save you money on shipping, but it will also reduce the amount of wasted space in transit.
Getting discounted shipping rates from carriers
One of the best ways to reduce shipping costs is to get discounts from carriers. Carriers like UPS, FedEx, and DHL offer discounts to online stores that ship a specific volume of packages each month. These discounts can range from a few percentage points to over 50%! You’ll need to sign up for a business account with the carrier to get these discounts and reach the required shipping volume.
How to Easily Ship Products to Customers
Now that you know the different shipping options available to ecommerce businesses, it’s time to learn how to ship products to customers. Shipping products doesn’t have to be complicated; you can follow a few easy steps to get started.
Design your packaging materials
The first step is to design your packaging materials. This includes everything from boxes and envelopes to labels and packing slips. When designing your packaging, consider the size and weight of your products and the type of shipping you’ll use.
Package your order
Once you have your packaging materials, it’s time to package up your order. Be sure to use plenty of padding and support to protect your products in transit.
Print your shipping label
After your products are packaged and ready, printing your shipping label is next. You can purchase shipping labels from a carrier like UPS, FedEx, or DHL. Or, if you’re using USPS, you can print labels directly from their website.
Schedule a pickup or drop off of your package
Once your label is printed, the final step is to schedule a pickup or drop off of your package. You can schedule a pickup directly from their website if you’re using a carrier like UPS or FedEx. Or, if you’re using USPS, you can drop off your package at your local post office.
The Bottom Line!
Shipping costs are an important part of running an online store. By understanding the different shipping options available and how to reduce your shipping costs, you can keep more of your hard-earned profits. Do you have any tips for reducing shipping costs? Please share them in the comments below!