How To Determine Shipping Costs When Selling Online

Wondering how to determine shipping costs when selling online? Brace yourself for the often-overlooked challenge that can make or break your success.

In this article, we delve into the nitty-gritty of what shipping costs entail and why they’re pivotal for your online business. From meeting customer expectations to ensuring profitability, we’ll unravel the intricacies of determining shipping costs. 

Discover the strategies of Free Shipping, Flat Rate Shipping, Variable Rate Shipping, and Real-Time Shipping. Join me as I guide you through the maze, providing the most valuable insights, top five shipping providers, & more. Let’s start!

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What Is A Shipping Cost?

Shipping costs are It’s basically the money you pay to get your online orders delivered to your doorstep. 

This includes things like the box or packaging, the actual transportation, and any other handling fees. 

Thus, knowing about shipping costs is important because it affects the prices you set and the profits you get. Thus, it’s like the hidden part of your online business that you need to be aware of.

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Why Is It Important To Determine Shipping Costs?

So, why does figuring out shipping costs matter for online sellers like me or you? 

👉  Learn How Long Does Standard Shipping Take For Ecommerce Stores?

✅ Customer Expectations

Customers appreciate transparency, and knowing the shipping costs upfront helps you manage your expectations. Also, unexpected or high shipping costs can lead to dissatisfaction and abandoned carts.

Thus, knowing the shipping costs also helps you build trust with your customers. Also, you can give your customers information about what they are paying for and make them feel good about their purchases.

✅ Competitive Pricing

Understanding shipping costs allows you to factor them into your product pricing strategy. This helps you remain competitive while still maintaining profitability.

Thus,  it’s a big deal for setting the right prices. So, by knowing how much it costs to ship, you can decide on fair and clear prices for your products. 

And, no one likes surprises, especially when it comes to extra fees at the checkout, right?

👉  READ: Sustainable Ecommerce Shipping in Dropshipping: How UK-China Freight Forwarders are Making a Difference.

✅ Accurate Pricing

Knowing shipping costs enables you to provide accurate pricing for your products. This helps in setting realistic and competitive prices that cover both the product and shipping expenses.

✅ Profitability

If shipping costs are not considered, it could result in selling products at a loss. Properly factoring in shipping costs ensures that each sale contributes to your overall profitability.

✅ Avoiding Surprises

High shipping costs that are revealed late in the purchasing process can lead to cart abandonment. 

Therefore, clearly communicating shipping costs upfront helps customers make informed decisions without surprises at checkout.

✅ Shipping Efficiency

Knowing your shipping costs allows you to optimize your shipping processes. 

Thus, this includes choosing the most cost-effective carriers, negotiating better shipping rates, and implementing efficient packaging practices.

Plus, it’s not just about the money – it’s about making sure your orders get to you in the best way possible. 

So, understanding shipping costs helps us determine the most efficient and cost-effective ways to get your goodies to your customers’ doorstep.

Shipping Costs Options When Selling Online

Now, when it comes to how to determine shipping costs when selling online, there are a few types to know about:

🔸 Free Shipping

This is when the shipping cost is included in the product price. In fact, in this model, the cost of shipping is absorbed by the seller and included in the product price. 

So, the customers do not pay any additional fee for the shipping of their orders.

Hence this way you can attract customers, as it simplifies the purchasing process and eliminates unexpected costs.

🔸 Flat Rate Shipping

Hence, here you charge the same fee for shipping, no matter how much you buy or where you live. So, with flat-rate shipping, a fixed fee is charged for shipping, regardless of the weight, size, or destination of the order. 

This creates a straightforward and predictable cost structure for customers. So, this simplicity and transparency, make it easy for customers to understand and budget for shipping costs.

🔸 Variable Rate Shipping

This one’s a bit trickier. It depends on things like how heavy your order is, how much it costs, and where it’s going. Thus, it’s like a customized shipping cost.

Also, it reflects more accurately the actual expenses incurred in shipping, providing a fairer representation of costs. 

🔸 Real-Time Shipping

Real-time shipping involves connecting with shipping carriers during the checkout process to retrieve the most current shipping rates based on the specific items and the delivery address.

Thus, this approach offers the most accurate and up-to-date shipping costs, considering real-time carrier rates. Also, it is especially useful when dealing with fluctuating shipping prices.

How To Determine Shipping Costs When Selling Online? 

Now, based on the shipping cost strategies you can use when selling online, I will show you how to determine shipping costs when selling online. Let’s start!

1. Free Shipping

First things first, many customers prefer not to pay for shipping, and many shipping providers provide free shipping. Thus, this makes the buying process simpler, and customers can see exactly how much they’re spending as they put stuff in their cart.

So, if you want to manage how much profit you make, incorporate your shipping expenses into your pricing and offer free delivery for all items. In fact, if you want to use this approach you can start by raising your product prices a bit and encouraging customers to buy more so you can keep up with this free shipping idea.

However, keep in mind that with this approach you may come out ahead on some transactions and fall behind on others, but it should balance out in the long run.

For example, if providing free shipping for all items isn’t good for you, consider offering it for orders above a certain total, like $200, to motivate customers to spend more. 

Moreover, a practical approach is to set the free shipping threshold slightly higher than your average order value. Also, if your typical order is $100, set the free shipping threshold at $115. This can help boost your AOV and counteract any margin loss. 

For example, AliExpress offers various shipping options, and free delivery is usually available through China Post Small Packet or Aliexpress Standard.

2. Flat Rate Shipping

An attractive substitute for free shipping is fixed-rate delivery, where you charge the same fee for all orders sent to the same location. Hence, lots of online stores like this approach because it tempts customers to add more to their shopping bags, knowing their shipping fee won’t go up.

Thus, charging a flat fee for shipping means you ask customers to pay the same amount, no matter how much stuff they order.

For example,  have you heard of USPS Priority Flat Rate Shipping? Hence,  it’s actually a famous flat-rate shipping choice. USPS charges sellers a fixed rate to send a certain-sized envelope or box, as long as it doesn’t go over their 70lb. weight limit. 

They promise delivery in 1-3 days, depending on where the package is headed in the U.S.

The advantage of fixed-rate shipping is its simplicity and clarity for customers; there shouldn’t be any unexpected surprises.

Also, for you as a dropshipper, this approach helps you keep things simple and saves time since you don’t have to measure and weigh every package. 

But, there’s a catch – it’s not great for adjusting prices, and if someone makes a big order, you might end up losing some extra cash.

3. Variable Rate Shipping

The third method when it comes to how to determine shipping costs when selling online is by using variable rate shipping. As I already mentioned above, the variable shipping rate is a bit intricate. It’s determined by considering shipping cost, weight, order value, and destination.

Here’s the formula: 👇

Hence, this approach is commonly used by stores with a broad product range or those selling high-value items like furniture, or print-on-demand companies. 

For instance, the print-on-demand company Printify figures out how much shipping costs by looking at the type of product you’re getting.

💡 Tip: Learn about AliExpress Premium Shipping: The Key to Get Your Orders on Time.

So, when you’re figuring out these shipping costs, here are five things to think about:

➡ Package Dimensions

Most of the larger shipping providers ship something called dimensional weight to decide how much it costs to ship a package. They look at the size of the package, and this helps determine the shipping cost.

To find out the dimensional weight of a package, you multiply its length, width, and height, then divide by a certain number (DIM factor) set by the shipping company. Here’s how to do it: 👇

The DIM factor is like a specific set of numbers that helps decide the dimensional weight of a package. It shows how much volume is allowed for each unit of weight. And, this set of numbers is chosen by the courier company.

Thus, carriers like USPS, FedEx, and UPS figure out the shipping charges based on the actual weight of the package or its dimensional weight – whichever is higher is what you get billed for.

➡ Package Weight

This is just how heavy the package is. So, there are no complicated calculations here when it comes to how to determine shipping costs when selling online.

Also, if the actual weight is more than the dimensional weight, they use the actual weight to calculate shipping costs. Simple enough – heavier and bigger packages cost more to ship.

➡ Shipping Destination

Carriers also use something called shipping zones to figure out shipping rates. These zones measure the distance between where the package starts and where it’s going.

Thus, the higher the zone, the more it costs to ship the package. For example, if you are shipping in the US, from Zone 1 to Zone 3, your shipping costs will be lower, than shipping to Zone 7.

And here’s the kicker – even if two packages are going to the same place, they might be in different zones if they started from different places. 

➡ Value of Items Shipped

If you’re shipping expensive stuff, you might want to get insurance. This covers you in case your package gets lost, stolen, or damaged during its journey. So, this is also a very important thing to consider when it comes to how to determine shipping costs when selling online.

While insurance is handy, it adds to the overall shipping cost. This is pretty common for valuable small items like jewelry or big things like industrial equipment.

➡ Delivery Times

Last but not least, keep in mind that if you want fast shipping, you will probably pay more for the service. So, the faster you want it, the more it costs.

👉 Read about How to Reduce AliExpress Shipping Times in 2024. 

Moreover, keep in mind that, no matter how good your shipping plan is, things can go wrong. Hence, packages might get delayed, or items could get lost or damaged. 

And, you can’t predict every hiccup, so it’s smart to have some extra money set aside in your shipping budget for emergencies. 

Therefore, I suggest you communicate this to customers before they add items to their carts.

Nevertheless, it’s crucial to attempt to convey shipping costs to the customer as early as possible. Thus, one workaround is to provide a shipping cost estimator on the product page. So, customers can input their location, and the calculator will estimate the shipping cost.

For example, FedEx provides its clients with a shipping rates calculator.👇

4. Real-Time Shipping

Certain eCommerce platforms link to courier services during checkout and calculate real-time shipping expenses based on product weight, volume, and destination.

However, while this may seem fair to everyone, it’s my least preferred shipping approach. Hence, customers dislike surprises, and this method often leads to unexpected costs.

So, if you want to use this approach, one way is to integrate with the courier API and offer a shipping calculator on the product page.

For example, If you are dropshipping with Shopify, and choose to go with Shopify Shipping, you can let your customers pay for the actual shipping rates in real time.

Also, the platform provides you with a Shipping calculator, so you can calculate your rates.

This happens through connections with e-commerce tools that directly talk to shipping companies like USPS, Canada Post, UPS, and more. They figure out the live shipping costs according to the specific service your customers pick.

Best 6 Shipping Providers For Online Stores

So, after you’ve learned how to determine shipping costs when selling online, now I will list you the top shipping providers to check on.

 1.  United Parcel Service (UPS)

UPS is a global package delivery and logistics company headquartered in the United States, known for its extensive network and range of shipping services, including ground, air, and international shipping.

Hence, they typically do not provide free shipping as a standard service. However, some online sellers that use UPS for their shipping may offer free shipping as part of promotions or special deals.

Additionally, it may also offer free shipping in specific circumstances, such as disaster relief efforts. Also, UPS shipping rates can vary from $10.20 up to $26.05.

Shipping Costs:

• UPS Ground: Typically calculated based on the package weight, dimensions, and the distance it needs to travel.
• UPS 2nd Day Air and UPS Next Day Air: These expedited services come with higher shipping costs compared to standard ground shipping.
• UPS Worldwide Express: International shipping costs are calculated based on factors such as destination, weight, and dimensions.

2. FedEx 

FedEx is a multinational shipping provider headquartered in the United States. Its comprehensive portfolio of shipping solutions, includes ground and air transportation, express services, international shipping, and logistics.

However, FedEx typically does not offer free shipping as a standard service. Also, you can calculate FedEx shipping rates using their calculator.

Shipping Costs:

• FedEx Ground: Determined by package weight, dimensions, and the destination. Residential delivery may incur additional fees.
• FedEx 2Day and FedEx Standard Overnight: Expedited services with higher shipping costs due to the faster delivery timelines.
• FedEx International Priority: International shipping costs are based on factors like destination, weight, and dimensions.

3. United States Postal Service (USPS)

USPS is the official postal service of the United States, providing a wide range of mail and shipping services. As a government agency, USPS plays a vital role in delivering mail and packages to addresses within the United States and internationally.

This shipping provider provides a service called Priority Mail, and in some cases, businesses or individuals may offer free shipping using USPS Priority Mail as part of their sales strategy. And, you can also find this service for free when there are some discounts provided by USPS.

Also, here you can check on USPS shipping rates.

Shipping Costs:

• Priority Mail: Calculated based on package weight and dimensions, with flat-rate options available for specific box sizes.
• First-Class Package Service: Cost varies based on weight and dimensions.
• Priority Mail Express: Higher shipping costs for guaranteed overnight delivery.
• USPS International Priority: International shipping costs based on destination, weight, and package dimensions.

4. DHL Express

DHL is an international courier and express mail service provider originating from Germany.

However, keep in mind that DHL Express is primarily an international express courier service, and it does not commonly offer free shipping as a standard option. Also, their international shipping rates can range from $21 to $89.

Shipping Costs:

• DHL Express Worldwide: International shipping costs are calculated based on destination, weight, and dimensions.
• DHL Express Domestic: Shipping costs within a specific country, are influenced by package weight and dimensions.
• DHL Economy Select: Cost-effective international shipping option with longer delivery times.
• DHL GlobalMail: International mail and parcel services with pricing based on destination and package characteristics.

5. Amazon Logistics

Amazon Logistics is the in-house logistics and delivery network of Amazon, a multinational e-commerce and technology company.

Established to enhance and control the end-to-end delivery process of Amazon orders, Amazon Logistics manages the transportation of packages from fulfillment centers to the final destination, aiming to optimize delivery speed and reliability.

Also, check on Amazon seller shipping rates.

Shipping Costs:

• Amazon Prime: Often includes free shipping as part of the subscription, but shipping costs are embedded in the overall Prime membership fee.
• Amazon Same-Day Delivery and Amazon Fresh: These services may have additional fees for expedited or grocery delivery options.
• Amazon Global: So, when it comes to how is shipping calculated, with Amazon Global international shipping is based on factors such as destination, weight, and dimensions.

 💡 LEARN: Dropshipping on Shopify vs Amazon FBA – The Ultimate Guide for Beginners

6. ShipBob

ShipBob is designed to strengthen your connection with customers by offering next-day and 2-day delivery services, enhancing your brand’s growth through exceptional customer service. You can seamlessly integrate this solution with your existing online stores, and it ensures a hassle-free setup, automatic updates, and secure data backup.

Operating in five major metropolitan areas—New York, Los Angeles, San Francisco, Chicago, and Dallas—ShipBob provides a convenient and accessible solution for businesses in these regions.

Check out some of the straightforward pricing details for ShipBob shipping rates and services:

• Receiving: $25 for the first two hours, $40 per man-hour thereafter, covering inbound stock receipt, unpacking, and check-in.
• Inventory Storage: $40 per pallet per month, $10 per shelf per month, and $5 per bin per month, including climate-controlled storage, security, and inventory management.
• Inbound Shipping: Enjoy discounted rates with ShipBob’s common carriers for inbound shipping.
• Pick and Pack: $0 for up to 4 picks, and 20 cents per additional item.
• Packaging Materials: $0 (included in the fulfillment fee), providing free standard boxes, bubble mailers, poly mailers, book folds, and dunnage.
• Shipping: $0 (included in the fulfillment fee), with discounted shipping costs based on the size, weight, and destination of your goods.
• Returns: $3 per order, covering return processing, quality check, and restocking.
• Special Projects: $45 per man-hour, offering versatile labor for additional needs like product labeling and supplier management.
• Promotional Inserts: 20 cents, allowing the inclusion of a card or flyer by the merchant in orders during packaging.

💡 Read my FULL ShipBob Review: The Best 3PL Fulfilment Company?

Conclusion

In this blog, you’ve unearthed the secrets of shipping costs when selling online. From the transparency customers crave to the profitability dance, I’ve explored Free, Flat Rate, Variable, and Real-Time Shipping strategies. 

Also, you’ve become versed in package dimensions, weights, and the top five shipping providers. So, this way, you can make informed decisions about the best type of shipping options, what best suit your needs, and how to determine shipping costs when selling online.

Thus, by determining shipping costs when selling online you can embrace transparency for customer trust, strategically integrate shipping costs for competitive pricing, and optimize efficiency in your shipping processes. 

Armed with this knowledge, you’re not just selling products online; you’re navigating the shipping seas like a seasoned captain. So, use it wisely & start!