The Internet has enabled someone in the Maldives to buy a product from a company anywhere in the World. Geographical distances are irrelevant when it comes to services.
However, when dealing with physical things, your business must find a means to get the item to the online consumer swiftly, effectively, and precisely. Controlling your company’s shipping expenses is thus critical to ensuring that it stays competitive and profitable.
When calculating shipping prices, you must consider cost strategies and cost considerations.
Delivery fee rates strategies
Shipping cost techniques are divided into three groups.
Free shipping is an ideal that many online stores aim to meet. Yet there’s always some hidden fee associated with “free” shipping. There are often two meanings to the phrase “free delivery” when used by a retailer.
One, the business has decided to take a temporary financial blow to acquire enough new consumers to ensure its continued existence once the promotional period ends. Second, the company indirectly charges the customer for it by including it in the product’s retail price.
Calculating your sales volume (which may be used to negotiate attractive discounts with carriers), profit margins, competitor pricing, and the minimum purchase that would allow you to give free delivery sustainably can help you decide whether free shipping is a viable approach for you.
Calculated Rate Shipping
Calculated shipping is when the cost of delivery is calculated by the weight and size of the product, as well as the location of the consumer. It’s a simple technique, particularly if you have a small catalog, but you’ll have to spend some time calculating shipping charges for each product.
Customers sometimes don’t know how much they’ll spend in total until they reach the checkout page, which may lead to some painful cart abandonment.
One solution is to provide a shipping calculation on product pages to assist buyers avoid unpleasant surprises. Despite its challenges, calculated shipping is advantageous if you offer big or heavy products, so assess if it is appropriate for your shop.
Fixed Cost Rate Shipping
In most cases, offering free shipping isn’t feasible or sustainable, even for a company like Amazon with a profitable subsidiary like Amazon Web Services. If you go with a flat-rate shipping plan, you’ll pick a single rate that applies to all packages, no matter their dimensions or destination.
Predictability is a clear advantage of this approach. The price you charge will be transparent to your customers. On the downside, shipping costs aren’t usually paid for. Because taxes, tariffs, surcharges, and other landing expenditures are more difficult to handle, international orders are particularly at risk.
As the foreign landing charges are billed to the customer after the shipment has been delivered, this practice suggests that the client may pay some additional, unanticipated expenses.
Consistency may be achieved by installing or integrating a trustworthy shipping calculator on your website that shows estimated international shipping costs through FedEx, UPS, DHL, and USPS.
Factors determining your delivery fees
When you add a cost to delivery, the aim is frequently to break even rather than earn a profit. The tricky element is determining the cost of shipping. Suppose you want to get it right and guarantee that the price is acceptable to both you and your clients. In that case, you must balance the component factors that constitute your total freight expenses (since, for example, international freight costs are much higher).
1. Distribution and Warehouse Center
Assembling packing boxes, adding dividers and stuffing materials and sealing packing boxes are all time-consuming warehouse activities.
Even if you plan to employ robots and other mechanical equipment, the expense of purchasing and maintaining such gear will ultimately affect your total shipping costs.
2. Shipping Insurance
Insurance is another significant cost component in shipping. For example, if you own an online jewelry business and send items of substantial value, your products must be insured.
Shipping insurance will pay the sender if the items are lost or damaged in transit. It’s a pricey service. This is a significant consideration when calculating shipping costs.
3. Dimensional Weight
Shipping companies will charge you for shipment based on the item’s weight or dimensional weight. The concept of weight-based pricing is straightforward: the heavier the package, the higher the delivery fee. The dimensional weight pricing is determined by the length, height, and weight of the box. It realizes that, despite its modest weight, the box will very certainly take up a large amount of truck floor and wall space.
This is why, as a retailer, you should choose your packaging boxes with care. Finding the smallest allowable packaging material for your items will help you save money on packing materials and shipping.
4. Origin or Destination
There are different ways you can employ to deliver your products from the warehouse to your customers.
Costs are associated with moving goods by water, air, or road. The pricing will vary depending on the carrier, such as lalamove rates, which offer same-day delivery services in the Philippines.
5. Delivery Time
Speed is a constant source of worry for small and medium-sized eCommerce businesses. This is primarily owing to the low shipping fees imposed by eCommerce heavyweights like Amazon. Customers used to Amazon’s ever-increasingly fast shipping will demand a same level of service from smaller merchants.
Customers demand same-day or 2-day delivery, but 3-4 days are acceptable. The ongoing effort to stay up with Amazon’s excellent price and speed means that even if an online store’s sales improve, the cost of delivery may eat into the gain in profit.
6. Packing Supplies
The cost of packing materials is added to the total cost of shipment. Compared to the product’s cost, retailers spend just under 10% on the packaging. Your packaging must serve a purpose. Some retailers make the mistake of ordering oversized boxes under the guise of getting a bulk packaging discount and having something that can fit most of their products. If you use a carrier that charges by dimensional weight, this is an unnecessary expense.
However, your packaging selection must go beyond size. Quality is also essential. Poor quality packing materials increase the likelihood of product damage and, as a result, product returns. You lose money due to shipping costs, a lost sale, and a damaged reputation that limits future sales.
Managing your delivery expenses effectively is critical to operating a successful eCommerce company. You may better address your logistics and save money by assessing the many components that go into shipping costs.