How to calculate shipping costs for your small business
For small businesses, calculating shipping rates is a key consideration when setting up a website or online shop. Whilst you don't want to charge customers too much, equally you don't want to be left out of pocket, so charging the correct amount is important.
Getting the balance right can affect your bottom line in more ways than one. With online sales on the rise it is only natural that shopping cart abandonment is also increasing. One of the key factors preventing shoppers from completing their sales is high shipping costs, with 44 per cent of shoppers stating them as the reason for leaving a cart.
Additionally it can be off-putting for potential return customers if a package arrives and the amount of postage on the label is significantly less than what they paid. These reasons all underline the careful planning which must go into to this process. However, it needn't be the mountainous task it seems.
Where to start
Begin by defining the destinations to which you'll deliver. This may be automatically limited, depending on your stock; some may be items which you cannot ship internationally. For help with restricted and prohibited items, check out the ipostparcels' country guides.
Remember, some destinations cost more than others; you may want to consider setting up different profiles for Europe and Rest of the World. The cost will also be affected by whether you choose air or sea for your delivery method.
Decide how you'll manage the delivery of your parcels; if you're shipping a large quantity of orders then a dedicated door to door delivery service such as ours can save you time and money, compared with the regular postal service.
Breaking down shipping prices
Will you provide a standard shipping price or will it depend on the overall weight of the order? Or will you offer free shipping for orders over a certain amount - or even on all orders?
Offering a standard shipping price is a fair way to do things; plus it simplifies it for you and for the customer. Of course there will be some orders where you will lose money, but there will also be plenty where you make a profit - aiming to break even is a good plan.
Another option that could prove fruitful is offering a choice. By providing a range of services (eg. second class, next day) you give people more options to be free to choose from, which can be a positive for your business. Having the option for next working day delivery is a real benefit for customers in a rush and may help them choose between your online shop and a competitor's.
Free shipping or offering a very low standard rate of shipping is a great way to encourage shoppers. You don't have to give it away for completely free, unless the lure will bring in enough customers that it makes it worthwhile. Instead you can consolidate at least some of the shipping costs into the price of your goods. You'll need to weigh up of course if you can remain competitive in price; or whether the draw of free shipping will be enough to give you the edge over your competition.
Measure your products
Whichever option you choose, you're going to need to measure your items; taking into account your packaging as this will be the size on which you will be charged. So if you sell small items, packaging them in excessively large boxes is going to do you no favours.
Remember to consider both size and weight of the packaged item. Many parcel companies like ipostparcels use volumetric weight for pricing international parcels. This is the parcel's length x width x height in centimetres (cm), divided by 5000. The ipostparcels booking system will help you calculate this automatically and if the volumetric weight exceeds the actual weight of your parcel, then the former will be used to calculate shipping cost.
If you don't already have a set of scales but know you will be sending lots of parcels then it is well worth investing in a simple set to assist with your calculations.
If your inventory consists of any particularly large or heavy items then make sure that your delivery company is able to accommodate your package. Maximum weight limits apply, as do maximum sizes. With ipostparcels you can send packages weighing up to 25kg, an XXL solution that's ideal for furniture. Be sure to check the maximum dimensions allowed on the parcel option you have chosen and be aware that irregularly shaped items may end up costing you more than square or rectangular ones.
Finding the right price
Once you've thought through all of these considerations you can begin to price up your shipping. Your shipping provider's website can really help you when it comes to calculating costs. Once you have the measurements you'll be able to see which size categories your parcels fit into.
Now you have all the information, you can decide if you want to take an average price fix. Equally you may wish to split your shipping as discussed above. It will be impossible to get it exact every time, but the tools available from your carrier will be able to help you estimate. Generally a 10 per cent overestimate is advisable, and remember to regularly readjust. Revisiting your pricing structure periodically will help you ensure you are offering the best prices for both you and your customers, and will keep you on top of any price fluctuations from your supplier.
Rules for eBay sellers
If you sell on eBay then it's important to keep yourself abreast with the platform's own rules and regulations for charging postage. Even if you're not a member and sell through your own website then you may find it useful to consider these as a best practice guideline.
eBay has stipulations that penalise sellers who charge unreasonable fees for postage and related services. This is to prevent sellers from offering super cheap items and making up their profit by stinging buyers with astronomically high postage and packaging rates.
The site offers plenty of specific guides to help with setting up postage rules, promotions and more, all of which can help bolster the appeal your store in consumers' eyes. Offering promotions such free shipping can be a great enticement for a shopper. As a reward for being customer friendly and simplifying the eBay shopping experience, the platform automatically awards five stars in the postage charges section of a detailed review for those stores that fulfil free shipping.
One final rule of note to be aware of is those categories that carry maximum P&P charges. These are listed in detail on the eBay policies pages and more info on all of eBay's rules can be found here.
Calculating the correct postage costs needn't be complicated. Sites such as eBay and other online marketplaces make shipping options simple. Even website systems such as WordPress include specialised ecommerce templates and plug-ins which offer a simplified shipping set up.
Be sure to make it easy for your customers to understand your shipping fees. List them clearly on your website, stating the destinations to which you ship.
Here at ipostparcels we do everything we can to help make calculating costs easy. Our quick quote tool can assist with an estimate price in seconds, which is ideal for quickly calculating shipping costs. Make the most of additional discounts offered by depot drop offs and bulk collections, to keep your outlay down and your customers happy. For help keeping costs low then take a read of our guide 'What is the cheapest way to send a parcel?'
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