Shipping services 101: What are the costs, charges, and fees?

2022-06-15

Written by Starshipit

eCommerce shipping services get products to your happy customers. In other words, it is one of the most important systems in your business!

Setting up shipping for your eCommerce store doesn’t need to be difficult either. With the right software, you’ll understand the costs and additional charges for your shipping services and get products out to customers faster than ever.

Let’s dive into shipping services 101.

Overview on shipping in eCommerce

So what is ecommerce shipping and integration?

You probably already have an ecommerce platform where customers can make a purchase (e.g. Shopify, WooCommerce, Squarespace). Ecommerce shipping solutions take care of processing the order, getting it ready to be shipped, and keeping the customer updated with parcel tracking.

Ecommerce shipping includes basically every step from when a customer hits “buy” to them receiving the product in one piece. It covers things like:

  • Receiving and confirming orders
  • Creating labels
  • Picking and packaging orders from shelves/inventory
  • Sending tracking updates to customers
  • Processing returns

You might be doing this manually yourself as you grow. Setting up shipping for your ecommerce store means that everything is automated and streamlined and reduces errors whether you do it from your home office or through a third-party fulfilment center.

Importance of good shipping services for retailers

98% of shoppers say that the delivery experience impacts their loyalty to a brand.

Efficient shipping services could be the difference between a loyal customer and someone who never wants to shop with you again.

Not only this, but 24% of customers will abandon their order if you don’t have an estimated delivery date and over half of online shoppers say that delivery times affect who they will shop with.

Setting up shipping rules and automations take a little bit of time but save you a lot of time and money in the long run.

Setting your ecommerce shipping rates and methods

Setting up your eCommerce shipping services usually means a few calculations.

Shipping doesn’t just cover the price of postage. You also need to consider the price of things like:

  • Packaging supplies
  • Paying people to pick and pack orders
  • Inventory management and storage
  • Managing return postage
  • Courier pick up and delivery
  • Customs and international taxes'

This is why setting your shipping prices and products for profit is so important! Below are a few different ways you can charge for ecommerce shipping.

Flat rate shipping

Flat rate shipping is when you charge the same amount for every single order. This works if most of your orders have the same weight and dimension, and you mostly ship to the same geographical locations (e.g. domestic).

You might still adjust the flat rate for rural or international orders.

Basically, a flat rate covers the average cost of all the steps outlined above involved in shipping and handling.

This method is a simple way to get started, however you may lose money over time.

Calculating accurate shipping costs at checkout with a shipping app like Starshipit means that customers can choose the best option for them.

Two-day shipping

With more people ordering online than ver before, there is a certain expectation of express shipping. 27% of customers expect parcels to arrive before 48 hours if you promise “fast” delivery, and 40% would expect it by 48 hours.

You will need a shipping integration that calculates shipping at checkout for this option. A flat rate would not account for the extra costs of fast delivery.
If you are going to offer same day or next day delivery, make sure your courier partners can actually deliver on the promise!

Free shipping

Amazon largely paved the way for free shipping expectations. Shipstation research found that 56% of Americans expect free shipping these days!

While it is easy for customers, and increases the number of funnel conversions, you still need to cover the cost of shipping prices yourself

If you are still starting out but want to offer free shipping you could set up a payment threshold. 24% of consumers would spend more to get free shipping. This could be a way to offer it while increasing the average purchase amount for each customer.

Tips to calculate your average shipping costs

So how do you actually calculate ecommerce shipping? Ultimately, your shipping prices will be determined by your courier partners. However, we have a few factors below that will help you decide how much you should be charging.

Destinations and shipping zone

Domestic and international parcels will have very different pricing. The easiest way to do this without losing money is to automatically calculate shipping at checkout.

With Starshiptit for example, you can offer your customers a range of shipping options at checkout such as table rates, instead of charging blanket shipping rates that might be perceived as steep by your customers.

This price is determined by your courier partners (e.g. DHL for international, Aramex for domestic) and is connected with API technology. That way you know shipping will always be accurate for both you and your customer.

Surcharges

You may want to consider any surcharges when you price your shipping. Couriers charge more for things like rural delivery, undelivered parcels, customer signatures, fuel surcharges and international taxes.

You should especially consider these when you charge a flat rate on all orders.

Weight & Dimensions

You will of course need to consider how much your couriers charge for different weights and dimensions. Most carriers will have default prices and package sizes, so you will need to figure out if your orders fit inside the regular sizes or not.

For Shopify shipping prices, you can update your “default” package size to reflect the average cost of shipping. The weight is usually more important than the dimensions for shipping prices.

Add 'Understanding your actual shipping costs' title when page is live.

Charges for international shipping

Due to things like foreign taxes, undelivered parcels and fuel surcharges, international shipping charges will usually be more complicated for your ecommerce store. Here are a few things to consider when calculating international shipping charges.

Customs and taxes

In general, customers are responsible for paying shipping taxes. This is usually included in the cost of shipping, however you may wish to subsidize the price of this for better customer shipping prices. For example, if you ship to Europe, you can pay VAT taxes on behalf of customers on orders up to $150. Make sure you know what your obligations are before you start shipping internationally!

Undelivered or Return to sender

If an order doesn’t reach its destination, you still need to pay for customs charges. You either have to pay to have it shipped back or declare it abandoned. Both of these options will cost a lot more than the original shipping and likely result in very unhappy customers!

Using a shipping integration like Starshipit will reduce issues like this as it automatically fixes addresses and prints legible labels for you.

Declared value

In some countries, orders over a certain amount will trigger extra tax charges. You might run into this problem if you start doing wholesale orders for example. Before shipping, it is a good idea to know the rules for the country you are shipping to. Neither you nor your customer want to be slapped with a surprise bill to get it across the border!

Fuel surcharges

The international fuel market can be extremely volatile. This can change your intentional shipping fees basically overnight! Unless you are shipping huge quantities, a flat rate for international shipping will probably lose you a lot of money over time. Table fees at checkout will reduce this, and in some cases you can negotiate better delivery prices with your international carriers.

How can Starshipit help you reduce your shipping costs? Using aggregators to reduce shipping costs

Some shipping integrations are freight aggregators (freight forwarder) which means they manage the shipping on your behalf using a selection of couriers.

You might think that a shipping aggregator (i.e. all in one) is the best way to get the cheapest rates. In actual fact, if you deal with the courier companies directly you’ll be more likely to get a better rate than the aggregators because you can negotiate directly (and the aggregator can’t add a margin on top).

With an aggregator you could end up with worse courier rates because they “clip the ticket” each time.

Starshipit is purely a software provider (SaaS) which means you can bring your own shipping accounts with you and manage the mix of carriers that best suit your business.

If you have negotiated great rates with your courier partners, you can simply bring your account with you and enjoy the benefits of a full shipping integration that offers live rates at check-out, branded tracking and shipping notifications, address validation to reduce delivery errors, and speedy label printing.

This is just one of the Starshipit features that help you and your customers save money on shipping!

Try Starshipit free for 30 Days

Take the hassle out of calculating ecommerce shipping costs with Starshipit!
Starshipit is a plug and play shipping solution that integrates with your existing eCommerce platform, warehouse inventory management software, and over 40 courier providers.

Whether it’s dispatch, checkout, or post-purchase customer engagement, Starshipit’s feature-set automates and simplifies every step of the fulfilment process.

Ready for the simplest ecommerce shipping solution ever?

Book a call with our Success Team to help you ship the smart way, so you can grow faster.

Starshipit

Starshipit

Starshipit is the best practice shipping and fulfilment platform that helps retailers save time and deliver great shipping experiences.

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