How to Calculate Shipping Costs for Your Online Store

Shipping costs are the fees involved with transporting a product from a warehouse or shop directly to the customer’s door — an amount to charge your customers in addition to their order.

The costs generally include postage, packaging, the labour involved, and any import or export charges. Ultimately, you want to get your product to the customer as quickly as possible, in a good condition, and without any hiccups. You need to take all of this into consideration when calculating your shipping costs.

Shipping products successfully is crucial to your business and customer satisfaction. In this day and age of shopping online, fast and inexpensive delivery is an important selling point to have.

If your delivery is slow, your customers will be frustrated and are more likely to shop elsewhere. Calculating a good shipping rate — without putting your business at risk — can set you apart from your competition.

You need to juggle your budget and your customer’s happiness when looking at how to calculate shipping costs for your online store.

The best approach to figuring out your shipping rates is to look at the package weight and size, expected delivery timelines, and the shipping distance. Make sure to also factor in the labor involved, materials used, import and export fees, and postage.

If you charge too much, you’ll drive customers away, but if you offer it for free before your business is sustainable, your margins will drop.

For example, print on demand supplier Printify determines shipping costs based on the product type. Shopify Shipping, in-built software for Shopify members, offers discounted shipping rates via popular carrier services.

For larger catalogs, understanding how to calculate shipping rates for your online store might take a bit of extra work to set up, but it’ll pay off in the end when you have an organized system in place.

Most shipping providers, such as USPS, UPS, and FedEx, offer various tiers of shipping rates. The cost can vary greatly, depending on the delivery timeline and the packages being sent. However, all of these leading shipping providers supply you with a calculator to help you with your estimates.

Bear in mind that inflation can have an impact on shipping costs over time, and the overall cost of running you business. Find out more about how inflation impacts businesses here.

More Information

• Best Shipping for Small Businesses: Review your options in our detailed guide
• Returns Management: Don’t forget to consider the cost of returns when developing your shipping strategy

Before you can apply your shipping costs, you need to adopt a preferred shipping type that suits your business and customers.

Calculated or bespoke shipping is where the shipping costs are determined by the weight and size of the package, as well as the customer’s location. It’s an easy enough system, especially if you have a small catalog, but you’ll need to commit some time to work out the shipping costs for each individual product.

It’s hard for customers to know exactly what they’ll be paying in total until they’re at the checkout page, which can cause some frustrating cases of cart abandonment.

One way around this is to provide a helpful shipping calculator on product pages to help customers avoid any unwanted surprises. Despite its difficulties, calculated shipping is beneficial if you sell large or heavy items, so it’s worth considering if that suits your store best.

Flat fee shipping is where you charge one fee for all shipments, no matter how large an order the customer places. With it being an upfront cost, it’s a simple system for customers to understand, and they know what to expect if they shop with you again.

It’s especially popular with online stores as many customers will feel tempted to add more to their basket since they know their shipping charge won’t increase.

Flat fee shipping helps you streamline your strategy, and you’ll save time by not having to weigh and measure each parcel. While it’s great for customers and smaller businesses, it doesn’t offer much flexibility on pricing, and large orders will see you losing out on additional money.

Free shipping does what it says on the tin — you absorb the shipping costs into your product pricing, or elsewhere in your business. Realistically, most customers don’t want to pay for shipping at all, and a lot of larger companies offer this. It makes checkout less complicated, and customers know exactly what they’re spending as they add products to their baskets.

However, there are a few things to know before you offer free shipping. Unfortunately, it’s only a feasible option if you have a good profit margin because you’ll still have to pay the shipping costs to your chosen carrier. Increasing your product prices, and boosting your average order value could help you sustain this shipping method.

Beyond what we’ve already discussed, there are a number of factors that can also affect the shipping cost. It’s important to keep a note of these when calculating your shipping fees to reduce customer frustration at checkout.

For example, shipping specialist items (such as high-value, fragile, or potentially dangerous products) cannot be done without shipping insurance, which is an additional cost to consider. However, the cost of insurance will be minimal in comparison to any potential loss from damaged goods.

You should also consider that when shipping internationally, especially if using express services to deliver quickly, you’ll likely be charged for fuel, and multiple delivery attempts if the first is unsuccessful. Don’t forget to also look out for import and export fees when shipping worldwide too. Keep all of this in mind when figuring out how to calculate shipping for your online store.

Understanding how to calculate shipping for your online store is essential if you want to be successful. The best strategy is one your customers can easily understand, and expect each time they shop with you. Whether you calculate shipping fees based on the package, operate with a blanket fee across all products, or eliminate shipping costs altogether, you need to weigh up the pros and cons we’ve described and find what will work best for you and your customers.