It can be difficult enough to nail down what your shipping expenses will be as an ecommerce company. Deciding what to charge your customers for shipping can be even more difficult. Ideally, you could just charge your customers the same shipping costs that you pay – but that poses lots of potential problems. For one, there are many variables that determine your shipping costs as an ecommerce company. There are various surcharges that may apply depending on package size and delivery location. Plus, if you outsource your order fulfillment and/or have negotiated shipping discounts, you won’t really be able to give customers an accurate shipping quote until the very end of the checkout process – which can lead to cart abandonment.
Determining the shipping costs for your customers really boils down to one question: what’s the margin on your average order value? That, compared to your company’s shipping costs, is a great place to start when determining the costs for your customers. For example, if your products are lightweight and low margin, you probably have a consistent, average shipping cost. In this case, giving your customers a flat-rate shipping offer for all orders may make the most sense. However, if your items are expensive and net you a high margin, free shipping might be the better offer – not only do you get enough margin to cover shipping costs, but free shipping is a great way to differentiate yourself from your competition.
If your margins and shipping costs aren’t always so consistent, you’ll have to consider other factors: do your customers tend to place multiple orders? Will some shipping deals work better than others? What are your competitors doing? It may require some trial and error, but you’ll eventually find the shipping price that’s right for your customers.