The Boss of You

One common business question we help our smaller (and larger) online retailers with in our day jobs as website designers, is figuring out how to price online shipping. As anyone who’s bought something off eBay (and not paid attention to the shipping costs), or who has tried to mail a care package loaded down with goodies to a friend on the other coast knows, shipping is not cheap. And when the cost of shipping is coming out of your bottom line — read: your paycheque — you really want to make sure you’re covering your costs. That said, shipping is never a flat rate and mere distance doesn’t always help tell the story of the final cost. There are several factors that will impact shipping rates, things like speed, weight, size and distance and unless you only sell one thing on your website it near impossible to figure out what to charge as a standard shipping rate.

So, in with all this uncertainty what do we recommend to our clients? In short: split the difference.

Start by figuring out what the high end of your shipping is likely to cost, and the low end and find a middle point. Then, be sure to track your shipping income, ie/ what you’re bringing is as shipping fees not just the price of items, and likewise track what you’re spending on shipping. At the end of each month (or after a really expensive trip to the post office) figure out if you’re coming up even. In actual fact, you should really be coming out ahead. Your costs for shipping shouldn’t just account for the hard cost of mailing, but also for the envelopes/boxes, any packing supplies you use and your time for going to the post office or paying a staff person to do that for you. Now is it starting to become clear why shipping can cost so much?

Now before you go getting all panicky, thinking that shipping on your $10 necklaces is now going to cost $25, take a deep breath. One of the other ways you can account for the cost of shipping is in how you price your goods as a part of the Cost of Goods for producing your product (by the way, if figuring out how to price your goods and determining things like Cost of Goods makes your head spin, fear not, we’ve got a whole chapter on this in the book).

As you are setting your shipping rates here are a few things to think about:

• The weight of your goods: How much does it vary from one item to another? Say you mostly sell screen printed t-shirts, but you’ve recently added some awesome brass belt buckles to your store. Those buckles may not be big, but their weight will ding you at the postal counter.
• The size of your goods: We have one client who mostly sells little trinkets, brooches, bracelets and necklaces but also sells these really big wreathes. Those puppies are going to need a big box and not fit in a padded envelope.
• Where are your price breaks relative to your inventory? Lots of people give away free shipping for orders over $100, but what happens if the one item in your catalogue that’s over $100 is also the one item that is really heavy? Make sure you factor the cost of shipping that sucker into the way you price the item.

I know that Canada Post (and perhaps US Postal Services do this as well) offers a Shipping Calculator that you can plug into some shopping cart systems so that shoppers can figure out the actual cost of shipping on items based on size and weight information, but we’ve found that most online shoppers want to get an idea of the cost of shipping for goods before they start shopping. They don’t want to be surprised when they get to the checkout.

Just remember, if your shipping is starting to cost you money, you can increase your shipping costs, or increase the prices of your goods to make sure you’re not losing money for the pleasure of shipping your products to happy customers.