How to Price Shipping and Handling Fees

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6215 In an era when shoppers 6215 want free ecommerce delivery, knowing 6215 when and how to set 6215 shipping and handling fees can 6215 be a conundrum.

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6215 You’ll lose customers if the 6215 fees are too high. But 6215 if they’re too low or 6215 always free, your online shop 6215 risks not making enough profit 6215 to be successful.

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6215 So how do you strike 6215 the perfect balance? You do 6215 a little math (or at 6215 least a little estimating).

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6215 Free Shipping Offers

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6215 The first step is determining 6215 if and when you can 6215 6215 offer free shipping without going 6215 broke 6215 .

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6215 Free shipping is one of 6215 the most popular online retail 6215 incentives. But what was once 6215 a marketing ploy has become 6215 a consumer expectation. Most enterprise 6215 retailers provide it in some 6215 form. It’s free with an 6215 Amazon Prime membership. And plenty 6215 of stores offer free shipping 6215 on every order regardless of 6215 size or value.

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6215 The first task is to 6215 review the products your store 6215 sells and decide if free 6215 shipping is suitable for any 6215 or all of them.

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6215 To begin, gather the facts 6215 about your current shipping costs. 6215 How much does it cost 6215 to ship one product and 6215 10? Do some products cost 6215 more or require additional effort?

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6215 Here is a plan.

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  • 6215 Determine current shipping rates. 6215 Your ecommerce platform almost certainly 6215 does shipping rate calculations in 6215 real-time, so use it. Set 6215 up several test orders that 6215 include both product weight and 6215 package dimensions.
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6215 You can do this for 6215 all products or focus on 6215 products that are heavy, bulky, 6215 or otherwise hard to ship. 6215 Large pillows, for example, can 6215 cost significantly more to ship 6215 than most merchants expect thanks 6215 to 6215 dimensional weight charges 6215 .

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6215 Finally, remember that for relatively 6215 small and heavy items, 6215 flat-rate shipping 6215 is your friend.

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  • 6215 Estimate packing material expenses. 6215 The packaging materials required 6215 to send a t-shirt, for 6215 example, are simpler than for 6215 a sofa, a glass vase, 6215 or a kettlebell. If your 6215 business uses a warehouse and 6215 fulfillment service, material expenses could 6215 be included in a pick-and-pack 6215 fee or similar. If so, 6215 the math just became easier. 6215 Otherwise, estimate material costs yourself.
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  • 6215 Include labor costs. 6215 Customer orders won’t box 6215 themselves. You will pay a 6215 third-party fulfillment service or employees 6215 to do the work.
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  • 6215 Check popular product combinations. 6215 If consumers frequently purchase 6215 your kettlebells, glass vases, or 6215 t-shirts in pairs, check out 6215 those shipping rates, too. Does 6215 selling more of an item 6215 reduce the cost?
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6215 Free Shipping for Pet Rocks

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6215 Let’s work through an example. 6215 Imagine that you’ve just licensed 6215 the “pet rock” from the 6215 estate of Gary Dahl, the 6215 creator.

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6215 In the 1970s, Dahl devised 6215 a way to keep his 6215 dog amused. He took some 6215 small stones and put them 6215 in a cardboard box. His 6215 friends saw the contraption and 6215 wanted one, too. Thus the 6215 pet rock was born.

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6215 By 1975, consumers could purchase 6215 a pet rock in many 6215 stores. Dahl marketed the stones 6215 as live animals, placing them 6215 in a perforated cardboard box. 6215 I had one —my dad 6215 mumbled under his breath all 6215 the way to the checkout 6215 stand.

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6215 Gary Dahl sold his rocks 6215 like live pets. The box, 6215 shown here, included holes. 6215 Image: Wikipedia.

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6215 Dahl’s pet rocks were relatively 6215 small. But you’ve decided to 6215 market larger versions, so let’s 6215 look at the costs.

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6215 If your warehouse is in 6215 Los Gatos, California, zip code 6215 95030, and you’re shipping a 6215 40-pound per rock in a 6215 12-inch, cube-shaped box to zip 6215 code 58318 in Bottineau, North 6215 Dakota (Dahl’s birthplace), the UPS 6215 would have charged $81.76 on 6215 July 15, 2022, for ground 6215 shipping.

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6215 Take that amount and add 6215 the cost of a custom, 6215 triple-reinforced pet rock box (say 6215 $7) and the cost of 6215 labor ($5 — 12 minutes 6215 at $25 per hour). Thus, 6215 shipping a large pet rock 6215 would cost $93.76.

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6215 If you sell 40-pound pet 6215 rocks for $350 with a 6215 certified pedigree, and your wholesale 6215 cost is $18, there is 6215 room to offer free shipping. 6215 The math is clear:

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6215 $350 selling price – $18 6215 cost of goods – $93.76 6215 shipping and handling = 6215 $238.24 gross profit

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6215 When Free Shipping Won’t Work

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6215 However, before you know it 6215 someone else starts to sell 6215 pet rocks, forcing you to 6215 reduce prices to $100 each. 6215 Now it doesn’t make sense 6215 to offer free shipping.

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6215 $100 selling price – $18 6215 cost of goods – $93.76 6215 shipping and handling = 6215 $11.76 gross loss

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6215 As an online merchant, you 6215 have two options. You can 6215 stop selling pet rocks and 6215 focus on other products, like 6215 the easier-to-ship pet feathers, or 6215 pass at least a portion 6215 of the shipping expense to 6215 your customers.

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6215 Now we are back to 6215 the conundrum. How much of 6215 the shipping cost should you 6215 pay? Testing can help decide. 6215 For example, Shopify merchants have 6215 several shipping rate testing apps 6215 to pick from. HulkApps makes 6215 one, as does ShipScout.

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6215 These apps allow showing different 6215 shipping rates to sets of 6215 customers and then tracking which 6215 works better. But don’t test 6215 once and be done. Create 6215 permanent shipping-charge tests to optimize 6215 conversions and profits.

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