Shippers Guide is the learning page of MMS Plus. Here we answer the five W’s and H of several issues in the industry. This week’s edition focuses on calculating shipping costs estimates and also making a profit.
E-commerce store owners often face an uphill battle when they have to calculate shipping costs and keep them low. Most shoppers now expect fast and affordable deliveries. Many even believe that shipping should be free, especially if they are making a large purchase from your store. But, as a store owner, you need to create a balance. Will these options affect your profitability?
To stay competitive in an increasingly cutthroat industry, you will want to make sure that you provide the best possible shipping options and accurately calculate shipping costs. But that’s only possible if you evaluate your margins carefully. If you can manage your logistics and shipping costs properly, you won’t have any difficulties.
The Importance of Calculating Shipping Costs
An e-commerce business owner needs to know exactly how much they are going to incur as shipping costs on every sale, for a multitude of reasons. For starters, it’s going to have a direct impact on your profitability. If you don’t know how much you are paying for shipping to a customer, you won’t be able to get a firm handle on your profits.
The second, and more important reason, is so that you can provide your customers with an accurate estimate. Depending upon the size of the package and the type of goods being shipped, the costs are likely to vary. You need to make sure that accurate information is provided to a customer on the checkout page. If customers find out that they were quoted another amount and charged another, it could wreak havoc on your company’s goodwill.
The third reason is so that you can calculate the threshold at which a customer qualifies for free shipping. If you don’t know your margins and shipping costs, you won’t be able to come up with an accurate figure.
Why You Need Accurate Estimations
There are quite a few reasons why you need accurate estimations for shipping. If the goods that you are selling do not conform to a particular size, the customer should know just how much they are going to have to pay. This cost can then be passed onto the customer, allowing you to maintain your profits.
Not only that, providing a degree of transparency to your customer when they shop online is important. It is going to bring down your rate of shopping cart abandonment, and allow you to focus more on growing your store. But, you can’t provide accurate estimations unless you calculate shipping costs yourself.
Apart from that, providing accurate estimations to your customers is a great way to boost sales. When you know just how much shipping is going to set you back, you will have the metrics that you need to work on your e-commerce packaging. You won’t have to ship small things in large boxes and incur exorbitant shipping costs in the process! It’s one of the best shipping practices that you can follow as a business owner.
Factors that Affect Shipping Costs
1. Dimensions of the Package
The bigger the package, the more it’s going to cost to ship. Most shipping carriers use a pricing method known as a dimensional weight to calculate the rates they offer. This is calculated by multiplying the length, height, and width of the package.
2. Weight of the Package
Then you have the package weight. If the weight of the package is higher than the dimensional weight, you will be charged this amount. No further calculations are required.
3. Destination
Where does the package need to be shipped? Now, this might seem like a broad topic to most, but major shipping carriers don’t complicate matters. Instead, they create what is known as shipping zones. These simply measure the distance between the point of origin and the destination.
4. Shipping Insurance
Another important factor that adds to your shipping cost is insurance. For instance, if you are running an online jewellery store and shipping goods of considerably high value, your goods need to be insured. The shipping insurance will reimburse the sender in case the goods are lost in transit or if they are damaged. It’s an expensive service, to say the least. This is an important factor to consider when you calculate shipping costs.
5. Delivery Timings
Most shipping companies offer a wide range of shipping options. Companies like Amazon have revolutionized the shipping process, by now offering fast shipping anywhere in the country. But Amazon does it by having multiple fulfilment centres. Most e-commerce store owners can only ship products from a single location.
So, you need to decide what kind of shipping you are going to offer to your clients. Quicker shipping is going to increase costs as well.
Adding a Shipping Cost Estimator
You can reap a world of advantages by creating a shipping cost estimator on your website. They’re a good way of letting the average potential client know just how much they will have to pay. You can add in all the variables and the fixed costs incurred during the shipping.
All a person has to do is to add those details in, and they will get an actual amount that they will be charged. If you have found a shipping partner to work with, you can simply use the shipping cost estimator that they have provided on your website, after adding your profit margins. This will allow a potential customer to calculate shipping costs with considerable ease.
Keeping your shipping costs low is important because it increases sales and attracts new customers. More importantly, if you want your business to thrive, you need to keep your shipping costs low.
Another thing that you need to focus on is your web store hosting speed. If your pages take an eternity to load, customers will run away. Make sure you choose reliable hosting for your online stores!
