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How Much to Charge for Shipping

A big part of your expenses as an online retailer are shipping costs.  For items that are large, heavy, or not very expensive, the shipping cost can easily be a large fraction of the product cost.  You need to recoup these costs, but buyers are very sensitive to shipping cost and any appearance that an online retailer is gouging them.

My favorite way to deal with this is to add the cost of shipping to the price of the item, and don’t charge the customer any shipping fee.  This will make your price appear high relative to other online retailers that split out shipping separately as an add-on item, and will cost you some sales.  But you can minimize this by emphasizing your free shipping policy on your product pages.  Buyers like the comfort of knowing the price they’re shown is the price they’re actually going to pay, and avoiding check-out time fee surprises will make them feel better about your company.

There are other to deal with shipping charges, of course, but they haven’t worked out as well for me as free shipping.

One alternative is to get real-time quotes on shipping, and just charge the customer whatever you’re being charged by the carrier.  While this will get you past the appearance of gouging, the shipping fee will still look large to a customer.  I don’t like leaving my customers with a bad feeling about buying from me, and whenever people see a large shipping fee relative to the price of what they’re buying they’re not going to feel good about it.

Another option is to charge a flat fee for shipping.  If you know what your average order size is, you should have a good idea of what the average shipping cost to you is, and you can just apply that to every order.  If you use this tactic, I would recommend emphasizing your flat rate shipping policy on your website or product pages.  It isn’t as good as free shipping, but again customers will feel better about knowing there won’t be any surprises at check out time.  It will also encourage them to buy more things from you, since the shipping fee they’re paying will be the same.

You can also use a combination of the above tactics.  For example, you can add half the shipping cost to the price of each item and charge a flat shipping fee of half your average shipping cost to each order.  I still think advertising free shipping is more valuable, but a fixed shipping fee that’s clearly less than the customer’s expectation of shipping cost will give them a good impression, too.

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