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E-Commerce Sales

Two Sides of the Coin, Part 1

When selling online, the cost of shipping is a key factor. On one hand, it is important that buyers pay an amount that covers your shipping costs. On the other hand, you don't want to lose buyers who "abandon" their cart when they see the price of shipping. So, how do you walk that fine line?

Let's review the two sides of shipping for e-commerce sellers:

Pre-Sale: This starts in the cart and continues all the way up to the moment the buyer presses the final "purchase" button to complete the sale. Your cart needs to figure out how much to charge the buyer for shipping.

Post-Sale: The buyer has checked out. Now you are going to handle the actual act (and cost) of the shipment.

In this article, we talk about the pre-sale side of shipping.

Here are some pre-sale shipping options to consider:

Flat-rate shipping
Indexed shipping
"Free" shipping
Calculated shipping

Flat-rate shipping is easy. You set a rate and that is it. Say you sell a pretty uniform item, like sweatshirts. You could have a basic shipping charge of $8, and that is that. It might be $8 per shirt, or it might be $8 per order.

Another method that can be used is to index the shipping cost to the order amount. For example, charge $10 shipping for the first $100 purchased; $18 for the next $100 purchased, etc. But, this option only works if your items are relatively uniform. If you sell items of different sizes and weights, this option probably isn't the best alternative as the shipping cost for a 2-pound item is very different from that of a 25-pound item.

"Free" shipping is the most basic form of flat- rate shipping. With "free" shipping, you, the seller, builds the shipping cost into the item cost. This lets you advertise "free shipping" on your web store and in the checkout flow, but – as you and everyone else knows – nothing is really free! The shipping cost has been built in elsewhere.

Some e-commerce merchants offer a hybrid approach and offer flat rate shipping up to a certain dollar value and free shipping for orders over that dollar value.

Calculated shipping requires more work. To estimate shipping cost accurately the e- commerce system needs to "do the math" to figure out the shipping cost. This means it needs item weights and dimensions so that it can calculate shipping using the FedEx® rate calculation application programming interface (API).

This works great for single items, but can get quite complex for multi-item purchases. For example, one sweatshirt or three sweatshirts might all fit into the same box, only changing the weight a little. But, if the order is for laser printers, it will be one printer per box, no matter how many are ordered.

While calculated shipping makes sense to the seller, the downside is that it may be less appealing to savvy web buyers who want a low shipping cost and want to know what the shipping cost will be before they start the checkout process. Calculated shipping also requires the e-commerce system to "know" a lot about the items being purchased before it can perform the calculation.

Armed with an understanding of pre-sale shipping, you're ready to pack and ship. Stay tuned for Part 2: post-sale shipping!

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