How to Set Shipping Rates – Balancing Costs with Sales

Facebook
Twitter
LinkedIn
Print
Email

We all know the satisfaction of finding a good deal online. The rush at seeing our minutes, hours, or even days of searching pay off in a discounted rate on the item we desire. And like-wise, we all know the disappointment, the sinking feeling at check-out, when we realize that the deal we worked so hard to find is offset by the unexpected cost of shipping. Truth be told, it’s often disappointing enough to sink the sale altogether – and what’s more – most online shoppers agree.

As a business owner, you might shrug your shoulders and ask, “What am I supposed to do? I have to charge for shipping or I’ll lose money. Shipping isn’t free you know? Why should it be free for the consumer?”

And you’re right. Shipping costs do have to be accounted for. It’s quite literally the cost of doing business. Fortunately, there are some things you can do to balance those costs and maintain your profitability.

You can’t bill on what you don’t know, so if you haven’t already done so, spend some time calculating your true shipping costs. Look up current shipping rates from the carriers you use most, whether parcel, LTL, or FTL. Factor in potential accessorial costs like fuel charges, lift-gate fees, residential delivery fees, etc., and calculate your packaging costs for each item, including materials and labor.

For example, if it takes an employee making $15 per hour 10 minutes to package a shipment, and he uses $2.00 in materials, then you pay $7.99 in shipping, your total cost looks like:

((10 minutes/60 minutes) x ($15/hour)) + ($2.00) + ($7.99) = $12.49 total cost

After you’ve established a complete view of your shipping costs, you can start implementing strategies to recoup them. One way to do this is by selling more. Incentivizing free shipping gives you the opportunity to up-sell customers and increase sales volume, thus offsetting your shipping costs. A few popular ways to offer free shipping as an incentive include:

• Offering free shipping when spend thresholds are met (ex: free shipping when you spend $100)

• Offering free shipping for return customers

• Offering free shipping on specific items

• Offering free shipping on certain days (Black Friday, Independence Day, Labor Day, etc.)

While not as appealing as free shipping, low cost shipping may be enough to encourage more customers to follow through on orders, especially if you’re selling goods they can’t find elsewhere. Cutting your shipping costs by half to a third of your competition (and promoting it) can net you sales that you may otherwise lose – without taking on the full costs associated with offering free shipping.

By now, savvy online shoppers are familiar with Amazon’s Prime service, which offers free two-day shipping on all Prime items, among other benefits, for an annual cost of $119 per year. This is perhaps the best (and most popular) example of a “premium shipping service,” which has generated tons of new business for the online retail giant.

Consider taking a page out of Amazon’s book by creating your own premium shipping service, and cultivating your own group of loyal, premium customers who will be more likely to bring you repeat business.

Today’s online shoppers expect free shipping, and may decide to take their business elsewhere if those expectations aren’t met. Being creative – and careful – when implementing strategies that balance consumer expectations with your need to remain profitable, can help your business grow and succeed far into the future.

 

For more articles like this, subscribe to our newsletter!

Was this article helpful?

Michael Eichenberg is the co-founder and CEO of FreightSnap, allowing the supply chain, logistics, manufacturing, distribution and transportation industries to measure, weigh, photograph and ID pallets and parcels in just seconds. Learn more and share your ideas on Facebook and LinkedIn.

Subscribe to our Blog

Stay up to date with our latest news, receive exclusive deals, and more.

2023 Newsletter Subscription Contact Form

Subscribe to Our Blog

Stay up to date with our latest news, receive exclusive deals, and more.

What is Reverse Logistics? Reverse logistics is the process of planning and controlling the flow of goods from the end consumer back to the point of origin – typically the retailer, or even the original manufacturer. Having a well-thought-out, well-implemented process for handling the reverse flow of goods (returned items)...

So, how can we maximize efficiency inside the warehouse? These five ideas are a great place to start....

Is there a truck driver shortage in the United States? According to Statista’s 2022 report, the answer is yes but this shortage is not new. In 2011, the industry was down 9,000 truck drivers. Today, that number has skyrocketed to 80,000, while experts predict it will double by 2030. So...

You have the latest pallet wrapping equipment. You take great care to correctly package your freight, wrap it, and prepare it for shipment. You’ve even purchased the right size of pallets to avoid needless shipping charges due to unused space. Then what happens? The dreaded reclassification from the carrier.  ...

A FreightSnap Solution Case Study Introduction FreightSnap, a renowned provider of dimensioning solutions, collaborated with Daifuku Logistics Solutions to tackle a critical challenge faced by FedEx at Charles De Gaulle Airport in France. The objective was clear: deliver a tray-based non-conveyable freight handling solution that seamlessly measures irregular products at...

Sr Partner Partner’s Primary Contact 1 Flexaust Leigh Elliot | eigh.elliott@flexaust.comJames Hall 2 Freightsnap Michael Eichenberg | michael@freightsnap.com 3 Motus Logistics Jaron Klopstein 4 Texcel Rubber Steven Dickson | steven.dickson@texcelrubber.com Partnership Date: Wednesday, August 21, 2019 #1 Describe the challenge that led to the formation of the partnership. * Flexaust:...

Challenges in Modern Shipping Shippers today are faced with all sorts of logistics challenges. Lost shipments, damaged freight, reweigh charges and size reclassifications to name a few. “Most of our Shipper customers have experienced all sorts of issues, which is why we decided to craft a great documentation solution to...

Subscribe to our Blog

Stay up to date with our latest news, receive exclusive deals, and more.

The American Transportation Research Institute (ATRI) has released its 2018 report on the Cost of Congestion to the Trucking Industry, which showed that congestion caused nearly 1.2 billion hours of delay (the equivalent of 425,533 commercial truck drivers sitting idle for an entire working year) and cost the industry more...

In April of 2016, Elegant Lighting Company, a designer and manufacturer of beautiful crystal and modern lighting pieces, chose FreightSnap to help them with their freight dimensioning needs. As a high-volume shipper based in Philadelphia, they needed a dimensioning solution that would help them document and analyze their shipments easily...

The Importance of Freight Class As the debate between density-based freight pricing and the class-based system rages on, it’s no secret that less-than-truckload carriers in the United States are steadily moving toward dimensional weight pricing regardless of shipper’s qualms – after all, density based pricing is already the standard in...

Like parcel and air freight carriers, LTLs are looking less at what you’re shipping and more at how big it is. Space is the name of the game, and carriers are doing everything they can to make sure they’re getting paid for the amount that’s being used on their trailers....

A FreightSnap Solution Case Study Introduction FreightSnap, a renowned provider of dimensioning solutions, collaborated with Daifuku Logistics Solutions to tackle a critical challenge faced by FedEx at Charles De Gaulle Airport in France. The objective was clear: deliver a tray-based non-conveyable freight handling solution that seamlessly measures irregular products at...

Sr Partner Partner’s Primary Contact 1 Flexaust Leigh Elliot | eigh.elliott@flexaust.comJames Hall 2 Freightsnap Michael Eichenberg | michael@freightsnap.com 3 Motus Logistics Jaron Klopstein 4 Texcel Rubber Steven Dickson | steven.dickson@texcelrubber.com Partnership Date: Wednesday, August 21, 2019 #1 Describe the challenge that led to the formation of the partnership. * Flexaust:...

Challenges in Modern Shipping Shippers today are faced with all sorts of logistics challenges. Lost shipments, damaged freight, reweigh charges and size reclassifications to name a few. “Most of our Shipper customers have experienced all sorts of issues, which is why we decided to craft a great documentation solution to...

Product Sheet - FS Parcel Dimensioner

2023 DimReimag LP - FSParcel PS Dwnld

Product Sheet - FS 5000 Dimensioner

2023 DimReimag LP - FS500 PS Dwnld

Request a Quote!

2023 DimReimag LP Pricing Request Form