Navigating shipping rates is a tricky game. From finding the best rates to determining how much to charge, this is one of the most challenging areas of eCommerce. There are two main issues business owners face when it comes to shipping costs: charging too much, and not charging enough. Charging too little cuts into your profit margin, and if you charge too much, your customers will abandon their purchase altogether. The key is finding a happy medium that works for both your business and your customers. Luckily, XPS Ship is here to help. We have compiled this helpful guide with everything you need to know about shipping rates for your business and how it can help you take your company to the next level.
The Basics of Small Business Shipping
Before you can determine the shipping costs and develop a strategy you must understand the basics of small business shipping. First things first, you need to compile a list of the most basic shipping information. Let’s start with the top three questions to evaluate your business needs:
1. What are you shipping?
This may seem oversimplified, but it’s actually an excellent starting point that answers many other questions. Are you shipping clothes, books, perishable goods, or fragile items? If you have a specialty eCommerce store, this is probably an easy question to answer and makes determining your shipping needs simple. However, if you sell a wide variety of items, this gets a little more complicated. Everything ships differently. You need to figure out what type of packing and shipping materials you need to successfully send out your items. Choosing shipping materials can be difficult, so it’s important to take stock of everything you would need to ship before purchasing boxes and other shipping materials. eCommerce merchants frequently and mistakenly believe that the weights of their shipments is the only component to determining the the shipping cost; this is not true though, dimensions play a significant roll. You should try to keep the size of your packages as small as possible, as it will cut down on dimensional weights, and may make some discounts available to you if the package size is small enough.
2. How much are you shipping?
If you’re just starting out, this may be difficult to answer. However, if you’ve been in the eCommerce game for a while, you probably have a good idea of how much you’re shipping and how often. Your shipping volume is a very important factor when it comes to shipping rates, and negotiating carrier discounts. This is critical information for developing an eCommerce shipping strategy. XPS Ship is able to help you obtain discounts regardless of your shipping volume.
3. Where are you shipping to?
The destination of your packages determines how much you’ll be paying (and charging) for shipping. If you’re shipping primarily near your customers, you’ll have a fairly steady and predictable shipping cost. On the other hand, if you ship internationally or aren’t seeing a consistent shipping area, this will influence your shipping rates greatly. You also need to consider how quickly your customers expect to receive their order. If you offer two-day shipping, that’s something you need to deliver on.
Once you’ve successfully evaluated these areas, you can begin to develop a shipping strategy. So, how do you go about doing this?
Evaluating Shipping Rates and Choosing Your Shipping Option
To keep your business running successfully, you need to create a strategy for shipping. The first step to doing this is by evaluating your current shipping plan. This can be done through a shipping cost report. If you have an account with XPS Ship, you can generate this report easily. This gives you a breakdown of how much each product costs to ship, and your profit for each item. With a user-friendly spreadsheet, it’s easy to see where there is room for improvement and what is working well for you. From there, you can evaluate what shipping option would work best for your company and your customers. As we discussed earlier, charging too much or too little can present different problems for business owners. Under this umbrella, there are four shipping options to offer your customers and each comes with both pros and cons, as well as influences your business shipping rates.
Free Shipping
Thanks to Amazon, free shipping is expected more and more by customers. Offering free shipping is a fine line and generally only works for some items. This shipping option is ideal for small items that have a high-profit margin, which usually means that the shipping rate is actually already included in the price. If you’re shipping unique items that are difficult to find elsewhere, a higher price point with free shipping can work well.
Free Shipping With a Stipulation
This method is very common among many eCommerce businesses and is great for increasing brand loyalty. For example, if your customer spends over $30 they get free shipping. You set whatever price makes sense for your business and is profitable to you. This can be done by finding the average total of customer orders and determining how much you need them to spend to absorb the cost of shipping.
Overcharging for Shipping
The number one problem with this option is cart abandonment. To determine if you’re charging too much for shipping, you need to look at the cart abandonment rate and the price of your items. If business is slow, you may need to rework your pricing for the time being to find the right product price and shipping cost for your customers and profit margin.
Not Charging Enough for Shipping
Last but not least, another shipping option is charging too little for shipping. This narrows your profit margins and is not a great tactic for your business in the long run. It’s important to keep customers happy, but it’s also critical to keep your company running smoothly.
By evaluating how much you’re paying for shipping, you can choose the best option for your customers and your business.
Finding Competitive Business Shipping Rates
Once you have successfully evaluated your business and determined what you need from shipping, it’s time to find competitive rates. XPS Ship is proud to offer discounted shipping rates that will help your business succeed. Our shipping software gives you access to the best rates from preferred carriers such as USPS, UPS, and FedEx. Conveniently integrated into your online store, XPS makes the shipping process smooth and simple. Sign up for free today and take your business to the next level!