In today’s competitive market, offering customers the best shipping rates is essential. It’s also necessary for a small business to know exactly how to calculate shipping costs for online businesses. You don’t want your customers to abandon their carts at the end of their shopping experience because your shipping fee is too high.
A recent survey of 2,500 consumers in the U.S. found that cost is the most crucial factor in shipping. It was mentioned by 64.3% of respondents, with speed following in second place. Shipping times and prices are becoming very competitive. Amazon is the pioneering company that has changed consumers’ standards regarding shipping by offering free next-day delivery on millions of products across its website.
What Are Shipping Costs?
For small businesses, shipping costs are the expenses associated with moving an item or product from a warehouse to a consumer’s doorstep. The average shipping costs for a small business include packaging materials such as boxes, tape, bubble wrap, and stickers for shipping labels, in addition to the cost of a courier to pick up and deliver the package.
Expenses can include import and export fees when shipping internationally and handling costs for paying workers to prepare and dispatch packages.
Why is Calculating Shipping Costs Important?
Calculating shipping costs is necessary because shipping inventory is integral to your business operation. You need to find the right balance between what works for your business and the customer. Knowing your shipping costs, such as FedEx estimate costs, enables you to set reasonable shipping costs for customers. The ideal shipping cost should be low enough to entice customers but not so low that it eats away at your profits.
Being transparent about shipping costs is also great for building brand loyalty and providing a good customer experience. Knowing your exact shipping costs allows you to provide the customer with a shipping cost in real-time when they’re ready to checkout online. You can also provide customers with multiple shipping options at different price ranges based on how quickly they want to receive the package.
Three Main Types of Shipping You Can Offer Customers
When determining how to price shipping for small businesses, there are essentially three types of shipping deals you can offer customers. Each shipping method has advantages and disadvantages, and you must decide which suits your business best. You can always try one shipping strategy and change tactics if you are trying to reduce shipping costs.
In this case, the shipping cost depends on the dimensions and weight of the package. The downside of this method is that you have to calculate the shipping price for every product. However, automating this process can be beneficial because your customers have a shipping cost specific to their product.
Flat Rate Shipping
USPS flat rate service is a popular choice for small business owners because it’s convenient. USPS flat rate boxes are available in various sizes and have predetermined rates regardless of weight for domestic shipping. USPS flat rate shipping for international priority mail has a weight limit of 20 lbs. for medium and large boxes and 4 lbs. for small flat rate boxes.
Predetermined rates can help you decide how much to charge for shipping for your small business.
Consumers love free shipping, and this can be a way to increase sales. There are two ways you can implement this. One is by including shipping costs in the product’s price. A second option is simply taking on the costs as a temporary way of offering a better deal than a competitor.
How to Figure Out Shipping Costs for Small Businesses
For shipping within the U.S., you can estimate shipping costs with four types of information. You need to know the shipping point and origin, the package weight, package dimensions, and expected delivery times. With this data, you can calculate shipping costs using a shipping cost calculator. Most shipping companies let you check shipping costs before sending a group of packages.
International shipping is a bit more complicated than domestic shipping. When shipping internationally, you need to include landed cost. In addition to transportation costs, landed cost takes into account currency conversion, duties, and taxes.
Shipping Point and Origin
Generally, the further you ship a package, the more expensive it will be. U.S. shipping rates are based on shipping zones. These are used by companies such as DHL, UPS, USPS, and FedEx to calculate domestic shipping costs.
Package Weight and Size
The cost of shipping a package depends on its size and weight. Couriers have different ways of calculating shipping costs, and sometimes they give you a couple of options. The most basic method of calculating shipping costs is based on weight. Simply weigh the package and use a shipping calculator to get the price. Some couriers give you the option of calculating shipping costs based on volume. This option is more affordable if you have a heavy but small package.
Large carriers usually use the dimensional weight of a package. This is calculated by multiplying length x width x height, giving the package’s total cubic size. This number is then divided by a specific rate that depends on your negotiated status with the carrier. This method accounts for very light packages that occupy a lot of space in trucks and containers.
Additional Factors That Can Influence Shipping Costs
There are several other factors to take into account that could increase your shipping costs. The first one is shipping insurance. If you are shipping delicate products such as jewelry or electronics, you might want to pay the extra cost of insurance to protect your business.
You can also run into additional shipping charges or accessorial fees. These fees can be for adding a signature requirement from the recipient or delivering packages on weekends. Fuel surcharges are also common when using overnight or same-day delivery services. There are also differences between regular mail and priority mail. Depending on your shipping needs, priority mail might be the better option.
Choosing a Shipping Carrier
Different carriers offer various prices and deals, so you should research before choosing one. Working with the correct carrier or shipping business for your company saves money in the long run. You can likely negotiate a better price if you have large shipping volumes.
For a small business, finding a shipping carrier that offers solutions with benefits for smaller order volumes is essential. Features like free package tracking, free Saturday deliveries, and high-speed deliveries at a low cost can all help a small company stay afloat financially while still meeting customer demands.
Learn More About Shipping Services With Asiana USA
At Asiana USA, we can help you find the best shipping, warehousing, and order fulfillment solutions for your small business. Whether you are looking for a more efficient shipping strategy or want to change to a fulfillment-based system, we have the experience and skill to help you take your business to the next level.