Implementing the Right Shipping Strategy

May 20, 2013 6:50 PM  By

Are you charging your customers too much for shipping or not enough or is free shipping right for you?  These are the questions being asked by merchants, according to an article on Forbes.com.  

A recent survey done of consumers by Jupiter Media Matrix Inc., reports that 63% of customers cite excessive shipping costs as the reason they cancelled a purchase.

According to the article, it can be burdensome for the customer when of there is a high shipment charge and then the shipment arrive with a shipping label attached makes it obvious the actual cost to the supplier is much less.

The retailers hoping to make a big profit on shipping stand to lose business. The flip-side is if you don’t charge enough for shipping, you may actually lose money.  According to the article, the same report said that 45% of companies it surveyed make money on shipping fees, 45% lose money and 10% break even. 

Here are some tips about will help retailers know which direction to take when it comes to shipping charges.  Calculating shipping isn’t as challenging as it may seem, there are two main options retailers have for how to price shipped products:  calculated shipping and flat-rate shipping. 

Calculated Shipping:  In order to figure out your shipping costs you need to calculate them.  Before you start selling products, measure their weight, dimensions, and other factors that could impact how much it costs to ship them, according to the article. Round these numbers up to the nearest whole number.  Calculated shipping is the most exact method of making sure products are priced correctly. 

Flat-Rate Shipping:  This involves averaging out all the costs of a company’s shipments.  You can lose money on half your shipments and make money on the other half, so it all evens out.  Pay close attention to the average, as it changes over time, according to the article.  If you let overall costs rise without adjusting your average, you’ll start losing money. Retailers will want to allow the flat rate to fall if your average cost falls, as well.  Be responsive, flat-rate shipping is a good idea for many businesses that want to be keep things simple for their customers. It works best for products that are fairly small and not too heavy.

Potential Profit Source:  Your shipping price strategy is part of your overall effort to be profitable.  Treat it like any other part of the business. Shipping can be a source profit as long as you don’t go overboard and drive customers away by charging too much, according to the article.

Offer Free Shipping?:  Rather than having separate prices for products and shipping, you simply combine the two.  If can be a good selling tactic to offer free shipping, even if the final price customers pay doesn’t change noticeably, according to the article. It will make the checkout process a little less complex, which could lead to more people completing transactions.  Every business model is different and so you are the only one who can decide which shipping price structure is right for your business, as long as what you choose balance’s your company’s needs with your customers’ you should be fine.