How to Determine and Optimize Shipping Costs When Selling Online?
Knowing how to determine and optimize shipping costs is a major factor in the success of an ecommerce business. Many factors contribute to your online store’s profitability and the right shipping strategy is one of them! Customers pay attention to shipping options and prices. You need to be able to keep them happy while still making a profit.
In this article, we’ll take a look at how to determine international shipping costs when selling online. You’ll read:
- Key facts & FAQs on what constitutes a shipping price and whether there’s any room to decrease it.
- Expert advice to give you ideas on effectively optimizing your ecommerce store’s shipping strategy and thus selling more.
Dive in to understand the anatomy of shipping prices!
Let’s unpack ecommerce shipping costs
When you’re selling online, shipping costs are one of the most important factors to consider. They can determine whether or not a potential customer will purchase your product, so it’s crucial to get them right. A well-optimized shipping strategy can significantly boost your sales, and the ecommerce sellers who don’t have one are missing out on a huge opportunity. But before we jump into the topic of optimizing shipping, let’s first understand the components of its price. And why it can be expensive.
The anatomy of shipping prices
What are the main factors required to calculate the price of each shipment?
Thanks to handy shipping calculators that assess the price based on all the above, it usually doesn’t seem that complicated. However it’s the size and weight where it gets tricky. This is the metric that is most often misassessed and exceeds the initial assumption.
Therefore the price is often miscalculated too and might end up being much higher than expected. And on top of that, shipping costs have recently spiked overall as a result of a combination of factors.
Why are shipping costs high in 2022 – and will they go down in 2023?
Why are shipment prices higher than they used to be a couple of years ago? The short answer is: because of the pandemic. What Covid-19 did was disrupt the entirety of the global supply chains. Add the rising costs of fuel and labor (wages), excess demand, and lack of workforce on top of that and you got yourself an answer. This goes both for domestic and international transportation rates.
So how much did the prices go up in this short period? When DAT Freight & Analytics investigated a recent (January 2022) peak of the USA’s trucking rates, it was discovered that the rates rose by more than 100% from May 2020.
Shipping prices are not expected to drop significantly anytime soon which might make planning shipping strategy for 2023 challenging for a lot of sellers. That’s why it’s important to put careful thought and consideration into it.
Match shipping costs to your expenses
Determining the true cost of your shipping should also consider other things than just parcel dimensions.
Think about your product:
- What are you selling?
- What is the price of your product?
- Does your product have markup or manufacturing cost? How big is it?
- How expensive is the product handling?
- How expensive is the product packaging?
Learn 7 ecommerce shipping practices! Download our FREE practical checklist & tips for easier reading and sharing with coworkers.
Is free shipping really free, and for everyone?
Everyone in ecommerce will recommend offering free shipping to lure the client in. And we do too. But not at all cost.
When you think about all those factors it might turn out that offering free shipping is simply not for you. If NOT charging for shipping means hemorrhaging money on each sale, do not do it. You want your shipping strategy to increase your sales, but not drive you out of business!
What to do instead? Compare the total true cost of your product and its shipping against the price. You might learn that your profit margin may not be enough to cover all expenses. Does that mean you should close your online store? No, it just means you should rethink your shipping strategy. One option is to consider using a third-party tool that will allow you to automate your shipping rates while still having full control of the process.
Impeccable customer service is everything in this highly competitive economy. And it might be key to retaining your buyers. If you can’t offer them free shipping offer them something else instead: reliability, trust, and dependability.
You can achieve it in a couple of ways. Some ideas could be:
- Making sure they stay informed about the details of their shipment: expected delivery date, tracking number, and delivery details.
- Clear and immediate communication in case of any delays.
Keep in mind that with recent supply chain disruptions it’s always possible that delays might occur. If there’s an issue with a client’s order – inform them immediately. Delayed parcels can cause a lot of stress so be sympathetic and professional. And when things are really bad, consider offering something to make up for the delay. Maybe a discount for their next purchase? It’s worth it if it earns back your client’s loyalty.
Optimize shipping to optimize profit
You’re wondering how to achieve that perfect balance between your ecommerce business’ profitability and customer satisfaction? How to determine the best shipping cost and know when it’s time to optimize it?
One of the answers is: leave it to the pros. As we mentioned before, shipping prices are often miscalculated based on wrong assessments. Most of the time, the real package dimensions are not available before the item is supposed to be shipped out. Estimating the size and weight of an item can be really tricky! But free online calculators can be quite basic or even faulty. And feeding inaccurate data to an imperfect tool can result in shipping costs exceeding the initial assumption. Most of the time, you end up with bad quality assessment.
How can we help with that?
At Webinterpret we strive to make all necessary processes fully automated. Our Managed Shipping Program (mS, previously known as the Sell More Program) was recently updated with a lot of new features and improvements. One of them is our weight estimator: an AI-driven algorithm that estimates the most accurate weight of the parcel. The tool can predict the weight of the item based on information such as price and category, by combining machine learning with historical data.
If you’re looking for a simple solution to improve your shipment strategy in general, the Managed Shipping Program might be the answer. Combining the power of AI with shipping operations can help you achieve a higher sales conversion for your international listings.
Webinterpret’s intelligent mS tool will automatically set the most optimal shipping preferences on your listings and take care of routing, shipping label generation, and updating tracking information.
So not only does it help with the weight and cost estimation, but it also sets the best shipping method for your listings and updates the cost in real-time. Some other small, but equally useful features are:
- Printing automatically pre-filles shipping labels in one click.
- Importing orders directly from eBay and Amazon.
- Enabling to edit the delivery address after an order has been placed.
Any many more! With Webinterpret, you can ensure your customers will have their packages shipped in the best way possible. And just in case, orders shipped with the mS program are insured from damages or losses.
The global rise in inflation is touching not just merchants, but also consumers directly. Which forces them to re-think their shopping habits and purchase choices. When a customer buys something online they want their purchase to be delivered quickly and efficiently with as little hassle as possible. And you want to ship it the same way!
Figuring out the perfect shipping strategy is an essential part of running a successful online store. We hope this article has shed some light on how to determine which shipping options are best for your business.
Here at Webinterpret, we are always ready to help optimize your online store’s shipping strategy so that it drives sales without taking too much of your time and costing too much money.
Test our Managed Shipping Program for FREE and increase your conversion today!