What to Charge Your Customers for Shipping

Many of our customers who have us fulfill and drop ship orders to their customers have at some point had decide how they were going to go about determining what to charge their customers for shipping. This decision is an important one since what you charge your customers for shipping rates can encourage or discourage your customers from completing their purchase.

I have been involved in the ecommerce realm for over 20 years. With it, many things have evolved over those two decades and one of those has been the customers expectation on shipping. With the introduction of things like Amazon Prime an big box stores advertise free shipping, buyers have become accustomed to lower or non-existent shipping charges.  Of course shipping is not “free”. Ultimately the cost get’s wrapped up in the price the customer is paying to cover the expense of packaging and transport.

There are  3 different ways I suggest you approach how and what to charge your customers for shipping:  have them pay what you pay,  offer a flat rate or  simply offer free shipping.

Charge What You Pay

Many opt for this method but it can be very difficult to manage. Most website’s have plugins that allow you to get real-time rates from the major carriers like USPS and UPS. Their are two problems with this method.

The first problem you run into is the complexity of managing beforehand the exact weight and package size. If your product choices are very limited and simple to manage this might be feasible. But you might run into difficulty when a customer orders from a wide range of different products that have different packaging requirements or are being fulfilled from more than one location.

The other problem associated with it is the overall sticker shock. As mentioned above, your buyers have become used to low shipping. When they see what we as vendors actually have to pay, (not to mention the additional cost of labor and packaging supplies), they are more hesitant to complete the purchase. From some A/B testing I seen, this can lead to a loss of revenue that reaches 10 to 20%. Obviously it also depends on what you are selling and it’s price point.

In cases where you are having FinerWorks ship orders to your customers, you could try to charge what FinerWorks charges. For most orders going a standard ground shipping method, this will range from $6 to $15 dependent on the order size.

The best way to predetermine what you will pay is to add a product to your cart at FinerWorks, go through the checkout process  right up until you submit payment. This will give you the shipping options and their price. Some users will also pad their pricing based on this. One common scenario for some of our online sellers who sell their prints at various sites is to charge what we charge for the first print plus a little extra for each additional print the customer purchases within an order.

I think we currently have a nice “Goldilocks” zone when it comes to shipping rates. If I had my way we would charge less or offer free shipping but it would not be well received since we would have to raise our prices to cover the postage, packaging supplies and  labor costs.

Charge a flat rate.

It is simple and easy on the customer. Regardless of the quantity or size of the prints being ordered a customer pays one single rate for shipping. Initially you will want to get an idea of how much it costs to ship your prints whether it is drop shipped or are shipping the order yourself.

Allow yourself some flexibility in modifying this rate. If shipping it yourself you might discover when shipping to the neighboring state the prices averages one amount and shipping the same order contents to another state costs you a differing amount.

Keep an overall average and try to adjust your rate accordingly. Over time you will not need to tweak your shipping price as often. The point is to keep what you receive for shipping at that average so it does not hurt your bottom line in the long run.

Again, you may not want to charge your customer this actual rate but it provides you the basis on how to pad your prices to make up the difference.

Free Shipping.

This is going to be the best option in the eyes of your buyers. On your website or other online market place it’s easy to setup. Various marketing and ecommerce firms have widely reported higher conversion rates (customers finishing the checkout process) and in increase in a web site’s average order size.

But understand you will need to recoup the cost from somewhere. This means padding your prices if the conversion rate and average order value does not fully cover the cost.  Just like the flat rate method you will need to keep track of what you are spending on shipping and needs to make occasional adjustments to your product prices.

Last Advice

My last two bits of advice: Factor in shipping charge increases which happen with all carriers at least once a year. This may require you to revisit your shipping model on occasion.  Second, never try to make shipping a way to increase your profits directly. Remember you are in the business of selling your art. It might be tempting to try to charge a little more for shipping but in general you should keep it such that it does not have a negative impact on the buying experience or your customer’s perception of how you do business.