How You Should Be Charging for Shipping – How to Ship Smarter As A Small Business Part 5
How much should I charge for shipping? How much is too much? How little is too little? Should I offer free shipping?
In the era of Amazon Prime and similar programs offering free or discounted shipping from many of the top retailers in the country, choosing how to charge for shipping can often seem like a lose-lose for small business owners.
On the one hand, if you choose to bear most or all of the shipping costs, you’ll likely end up chewing through your margins with each order that has to ship across the country.
On the other hand, if you choose to let your customers pay full shipping price, your sales are bound to plummet. Customers cite what they deem as excessive shipping costs as the number one reason they abandon a purchase.
So what can you do?
Who are your customers?
Before you decide which of the following approaches is best for you, you need to consider your customer base and product offering. There are two main questions you need to ask: Are my customers value-minded (see: cheap) and are my customers primarily individuals or businesses?
If your customers are value-minded, then it makes your decision a little clearer. If they’re shopping with you because you beat the competitor’s prices by more than 10%, then they’re not going to be happy if they’re hit with a shipping charge that seems excessive.
If your company is not a B2B company, this means that you will ship a large number of items to residences. This is more expensive than shipping to commercial locations, meaning you stand a lot to lose if you bear the brunt of the shipping cost.
All or Nothing or A Happy Medium?
At LabelValue.com, we realize that our customers shop with us because they want high-quality products for less. We aren’t the cheapest on the market (unless you’re buying bulk), but we are very competitively priced and deliver some of the highest quality labels available. So if we were to charge for shipping (label rolls are dense!), we likely would price ourselves out of the value-minded market.
At the same time, our customers are primarily businesses, and since we are savvy about our shipping efficiency (hence this blog series!), we can find ways to cut shipping costs to ensure we don’t go out of business by taking on the cost of shipping.
For those two reasons, we offer free shipping on every order, no matter how large or small. Our customers love it and it forces us to continuously improve our shipping methods to make sure we stay cost-effective.
So offering free shipping is a great way to gain customers, but it’s certainly not viable for everyone. Many companies will offer free or discounted shipping costs, but build the cost into their item’s prices. While this might seem like a great idea, it has a good chance of backfiring. Customers will realize this more often than not and nobody likes to feel duped.
On the other side of it, if your customers aren’t choosing your products because they’re cheap (e.g. fashion clothing, electronics, etc.) then you likely have some liberty in letting them take on the shipping charges. What you do not ever want to do, however, is try to profit from the shipping charge. If a customer receives a package with a label that has a smaller charge than what they actually paid for shipping, well… you can guess how happy that will make them.
That being said, for many companies, especially non-B2B companies, it makes sense to either have the customer pay for shipping based on the calculated rate (this means you’ll need to know the weight of your items) or you can charge a flat rate, based off the average shipping price for all your items.
Every business is different, so your choice on how much to charge for shipping will need to be made based on the characteristics of your business. These are some good things to consider when you begin the conversation about how to charge for shipping.