Are You Charging Too Much for Shipping?

May 6, 2013
One of your primary concerns, as a business owner, should be, “How much should I charge for shipping?” If your shipping charge is too much, you can price yourself out of sales. But if you undercharge, you can end up with less profit than you anticipated. Unless you learn some tricks and tips that can tip the scales in your favor, deciding what to charge for shipping can be a serious challenge. Shipping costs, Fishbowl Inventory BlogBut it doesn’t have to be that difficult. In fact, there are really two standard shipping options: calculated shipping and flat-rate shipping. As explained below, each shipping option has certain merits.

Calculated Shipping

One of the first steps in the process of determining shipping costs is: Use calculations. You should carefully measure and weigh items before you list them. Another tip is to always round the figure up, if needed. Also, be mindful of the shipping rate of each shipping carrier. Whether you will be shipping via UPS, USPS, FedEx, or another method, the shipping charges will likely be determined by the size and weight of the item(s). Calculated shipping is a more precise way of charging per item being shipped. (Note: To make calculating more convenient, you can also turn to an online shipping calculator to get a more accurate figure.)

Flat-rate Shipping

Flat-rate shipping takes into account the most-expensive and least-expensive shipping costs to come up with an average cost. If the average goes up, but you stick with the same flat rate, you are stuck with the extra cost. If it winds up being much less, your business may appear to be price gouging your customers. That can result in unhappy customers, which means they are more likely to leave negative comments and online reviews. That type of feedback can have a negative impact on the reputation of your business. However, if all works out as planned, flat-rate shipping is a good thing. It is convenient because it’s simple and doesn’t hold any surprises for customers. Compared to calculated shipping, flat-rate shipping doesn’t take into account package weight and dimensional weight. And if you deal with small, lightweight items, a flat rate will probably be a good choice for you. Discover our advanced inventory management tools. Learn more!

Precision or Profits?

In order to stay in business and grow, every company has to earn a profit. Shipping can be approached in the same way other business aspects are. For instance, when products are purchased from suppliers at wholesale prices for resale, the prices are marked up. The same thing can happen with shipping. In other words, you can make a profit on the fees you are charged for shipping. Just because you only pay $5 to ship an item doesn’t mean you can’t charge customers $8 for shipping. Other considerations for shipping charges: International shipping – You can probably get away with a reasonably high shipping charge if the customer is overseas. Domestic shipping – For customers within the same country, this is where you can be more flexible with the shipping price. Shipping expenses – These are applicable fees and charges by the carrier.

Offer Free Shipping

One way to make your business more appealing to customers is to offer free shipping. You can do this by building the cost of shipping into the price of products. For example, if you have a pair of shoes that retails for $50 and the shipping for those shoes is $12, why not make the retail price of the shoes $62 and offer free shipping? The point is, you don’t have to offer customers separate pricing for shipping. When you combine shipping with the price of the product, it makes things a little less complicated, and most customers like the concept of “free” shipping. How much, if anything, that you charge customers for shipping is really up to you. What are your thoughts about shipping charges? Do you think free shipping is a good option, or do you believe adding separate charges is a better choice? Share your comments below.