How to Calculate Shipping Costs for e-Fulfillment Services

As an e-commerce business, your company goes through a lot to decide on how much to charge for each product. Several factors go into that decision along with input from different staff on your team. However, it’s important to consider the cost of e-commerce fulfillment services before making final decisions on what your customers will be paying for any given product.

There is definitely a fine line in figuring out what to charge and how that process works. If you end up not charging enough, your net profit could take a serious hit. If you charge too much, customers might start abandoning their carts at higher-than-normal rates. A high charge is sure to leave some with a bad taste, especially if the delivery charge isn’t added on until the final stage of purchase.

Getting It Right

Knowing how much to charge for delivery is something you need to get right. Some e-commerce retailers opt for simply charging precisely what they themselves pay for delivery. While this may seem like the most straightforward approach, it doesn’t always work out as intended.

Some shipping companies, like UPS, do have standard rates they can sync with the product’s total while your customers are checking out, but this automation doesn’t always take into account additional surcharges that may later appear, such as a local delivery surcharge. This can lead to cart abandonment, which we touched on earlier. Charging your customers the same rate you pay means they won’t know their cost till they reach the final stage of checkout. This is, no doubt, one way your cart abandonment rates will skyrocket.

And what if you are working with a third party logistics (3PL) provider at a discounted delivery rate? The shipping carrier doesn’t always use that rate, which means your cost is not in line with what you are charging your customers. Any confusion can lead to further miscalculations in your revenue.

Get All the Facts

Before signing off on any charges that could be costing your company revenue and affecting customer experience, get all your facts. Gather all the info you need in order to know your shipping costs as they are currently. To get an accurate number, you will need the following:

1.Current USPS shipping rates
2.UPS daily pick up rates (for both FedEx and UPS contracts)
3.The UPS retail rate if packages are dropped off at a FedEx or UPS location

Once you have this information, you can move on to determining surcharge rates, estimating your surcharge volume, determining your warehousing and supplies expense for each order, and figuring out your preorder costs. Then you can compare what you make in sales to your shipping and handling fees. This will provide an accurate bottom line and allow you to create a realistic and practical shipping charge.

Going through all these steps may seem like a lengthy process, but not getting your shipping charge right can cost you much more than the time needed to arrive at the correct number. If you start with your end goal of reaching net revenue in mind, then you will go into this process with a much different attitude

APS Fulfillment is a Florida-based specialist in direct-mail marketing and warehouse fulfillment. We have stored, sorted, and delivered products of all shapes and sizes for all kinds of companies and offer complete e-commerce fulfillment services to all of our clients. Contact us by phone at (954) 582-7450 or by email at info@apsfulfillment.com for more ways third-party warehousing and fulfillment services can help support and grow your business.