How to Calculate Shipping Costs for Your Online Store

To accurately calculate your shipping costs, it’s important to be aware of every factor that goes into the decision, from the package’s dimensions to its shipping distance.

Factors Determining Shipping Cost

There are a number of factors that will affect how much you spend on shipping:

• Package weight and size – the larger and heavier your package, the more expensive it will be to ship
• Expected delivery time – if you want to your package to arrive quickly, premium services like overnight shipping will bump up your fees
• Shipping distance – packages travelling far will be transported between different vehicles like vans, ships, and planes, all of which need to be paid for. Plus, international sales will often come with additional import and export charges
• Package contents – high value and fragile items require more premium protective packaging and shipping insurance
• Labor involved – this could be anyone you may to manufacture your products, including valuing your own time
• Materials – what did the materials you used to make your products cost?
• Import and export fees – these are additional taxes for sending abroad and receiving returns

If you charge too much, you’ll drive customers away, but if you offer shipping for free before your business is sustainable, your margins will drop.

For example, print on demand supplier Printify determines shipping costs based on the product type. Shopify Shipping, in-built software for Shopify members, offers discounted shipping rates via popular carrier services.

Choosing a Shipping Provider

You’ll also have to choose a shipping provider – or carrier – to ship your packages to their destination. Major carriers include UPS, DHL, USPS, and FedEx, but there are many more options to choose from. Delivery services and pricing can vary greatly between each, so you should consider which aligns best with your business needs and customers’ expectations.

More Information

• Best Shipping for Small Businesses: Review your options in our detailed guide
• Returns Management: Don’t forget to consider the cost of returns when developing your shipping strategy

Before you can apply your shipping costs, you need to adopt a preferred shipping type that suits your business and customers.

Calculated or bespoke shipping is where the shipping costs are determined by the weight and size of the package, as well as the customer’s location. It’s an easy enough system, especially if you have a small catalog, but you’ll need to commit some time to work out the shipping costs for each individual product.

It’s hard for customers to know exactly what they’ll be paying in total until they’re at the checkout page, which can cause some frustrating cases of cart abandonment.

One way around this is to provide a helpful shipping calculator on product pages to help customers avoid any unwanted surprises. Despite its difficulties, calculated shipping is beneficial if you sell large or heavy items, so it’s worth considering if that suits your store best.

Flat fee shipping is where you charge one fee for all shipments, no matter how large an order the customer places. With it being an upfront cost, it’s a simple system for customers to understand, and they know what to expect if they shop with you again.

It’s especially popular with online stores as many customers will feel tempted to add more to their basket since they know their shipping charge won’t increase.

Flat fee shipping helps you streamline your strategy, and you’ll save time by not having to weigh and measure each parcel. While it’s great for customers and smaller businesses, it doesn’t offer much flexibility on pricing, and large orders will see you losing out on additional money.

Free shipping does what it says on the tin — you absorb the shipping costs into your product pricing, or elsewhere in your business. Realistically, most customers don’t want to pay for shipping at all, and a lot of larger companies offer this. It makes checkout less complicated, and customers know exactly what they’re spending as they add products to their baskets.

However, there are a few things to know before you offer free shipping. Unfortunately, it’s only a feasible option if you have a good profit margin because you’ll still have to pay the shipping costs to your chosen carrier. Increasing your product prices, and boosting your average order value could help you sustain this shipping method.

Beyond what we’ve already discussed, there are a number of factors that can also affect the shipping cost. It’s important to keep a note of these when calculating your shipping fees to reduce customer frustration at checkout.

For example, shipping specialist items (such as high-value, fragile, or potentially dangerous products) cannot be done without shipping insurance, which is an additional cost to consider. However, the cost of insurance will be minimal in comparison to any potential loss from damaged goods.

You should also consider that when shipping internationally, especially if using express services to deliver quickly, you’ll likely be charged for fuel, and multiple delivery attempts if the first is unsuccessful. Don’t forget to also look out for import and export fees when shipping worldwide too. Keep all of this in mind when figuring out how to calculate shipping for your online store.

Understanding how to calculate shipping for your online store is essential if you want to be successful. The best strategy is one your customers can easily understand, and expect each time they shop with you. Whether you calculate shipping fees based on the package, operate with a blanket fee across all products, or eliminate shipping costs altogether, you need to weigh up the pros and cons we’ve described and find what will work best for you and your customers.