Getting an accurate estimate of your shipping fees helps you set pricing for your ecommerce products and shipping. With the right pricing, you can ensure you earn a profit from your hard work while delivering for your customers.
To calculate your shipping costs, you’ll need to know your package dimensions, weight, shipping distance, and delivery speed.
How to calculate shipping costs
Shipping costs depend on four main factors and which shipping carriers you use. The four factors that impact your shipping costs are:
Package destination , zip codes, and shipping zones
Package dimensions
Package weight
Shipping speed
Packages that take up more space in a delivery truck, weigh more, and need to travel farther or arrive more quickly all cost more than those that don’t. You’ll also pay more if you need to add shipping insurance or international shipping.
Shipping carriers are the services that deliver your packages to their destinations. Each shipping company has different pricing rules and tiers. For example, USPS is often the cheapest way to ship smaller and lighter packages. But FedEx, UPS, or DHL can have better shipping options for bulkier or heavier packages. You can also use different carriers for domestic and international shipments (if you choose to sell globally).
Dimensional weight
Many shipping carriers charge based on dimensional weight. Dimensional weight refers to the amount of space a package takes up relative to its actual weight.
If the dimensional weight of the package is heavier than its actual weight, your cost of shipping is based on the dimensional weight and vice versa. Squarespace has shipping extensions that help you calculate this formula automatically, removing the manual work.
It’s useful to understand how we get this number. To calculate dimensional weight:
Measure each side of your package.
Multiply package height by width by length.
Divide that total by a dimensional factor, also known as a DIM divisor. The DIM divisor varies by shipping carrier and represents cubic inches per pound.
Here’s an example of how you’d calculate dimensional weight for a 12”L x 12”W x 6”H package. The DIM divisor is 139:
12 x 12 x 6 = 864 inches
864 / 139 = 6.21 pounds
Shipping services prefer you round up, so in this case, the dimensional weight is 7 pounds.
How to estimate shipping costs
Major shipping companies have tools for calculating shipping costs based on package dimensions and other factors. The easiest way to estimate and compare the cost of shipping is to use a tool that compares shipping costs across companies.
Squarespace’s shipping extensions help you compare rates across providers in real-time. Use them to get a sense of shipping prices for your online store products so you can set your rates and pricing appropriately.
Learn how to write a shipping policy for your business
How to reduce shipping costs
Two common ways to save money on shipping costs are taking advantage of flat rate shipping and increasing your shipping volume. Many carriers offer discounts if you ship many packages in a set period. Minimums for volume discounts can be in the hundreds, which can be tough to meet for small businesses or independent sellers.
But you may save significantly if your products fit into USPS flat rate boxes or envelopes. Those items ship via USPS priority mail for a set price, up to 70 pounds. However, you can end up overpaying with flat rate shipping if your items are small and light.
You can also save money by managing your order fulfillment through Squarespace. You can buy UPS® shipping labels and USPS shipping labels directly through a Squarespace account on mobile or desktop. Rates are typically lower than postal service retail pricing. Plus, customer addresses and tracking numbers populate automatically to streamline your fulfillment process and ship packages more quickly.
How much to charge customers for shipping
High extra costs at checkout are the top cause of cart abandonment for shoppers, so choosing the right pricing is key. Your profit margins and customer service dictate what you can charge customers for shipping.
Generally, you’ll offer three options:
Free shipping
Standard shipping
Expedited shipping
Do the math on what it costs you to make each of the products you sell. Factor in material costs and other continuing costs, like packaging. Then, calculate your shipping costs for each product. How much would you need to charge to make a profit after making and delivering an item?
Free shipping
Free shipping is the ideal option for any online store. Many ecommerce customers expect to see a free shipping option during shopping. But you don’t have to sell at loss to offer free shipping. Simply fold the total cost of shipping into your product price.
For example, if your cost to create and package a product is $15 and you want a 20% profit margin, you’d need to charge $18. If it costs $8 to ship the product, you can either charge $18 + $8 shipping or $26 + free shipping.
Adding shipping to your product price keeps customers from feeling surprised by shipping costs at checkout. That makes them less likely to abandon their cart.
If adding shipping to every product would raise your prices too much—keeping customers from adding to their carts at all—set a minimum purchase amount instead. Any customer who spends over a certain amount gets free shipping.
Common minimum purchase amounts are $25, $50, or $75. Do the math on what you’d need to charge to protect your bottom line. Calculate your profit on the minimum threshold, then subtract shipping costs.
Standard shipping
Standard shipping is a regular shipping method with delivery in three to five days. Ecommerce businesses usually charge standard shipping fees in one of two ways: at cost or as a flat rate.
Keep pricing as low as possible to avoid negatively surprising customers. Charging a flat rate is best if all of your products fit into flat rate boxes that ship for the same price. Remember that you’ll need to add a surcharge if you plan to offer international shipments.
Charging customers for shipping at cost can put you at risk of cart abandonment. Watch your online store analytics to see if customers tend to exit once they hit checkout. If you can’t roll the entire cost into the product price, experiment with rolling part of it into the price to lower the shipping cost you show at checkout.
Expedited shipping
Expedited shipping is a premium shipping service that ensures quick delivery times for an additional fee. It’s great to offer this option for customers who need next-day or two-day shipping.
Like standard shipping, you can either charge a flat rate for expedited shipping or charge customers at cost. Customers that choose expedited shipping are prepared to pay extra. But charging at cost may still be too much for them depending on the weight or size of the package. Finding the right shipping fee might require some experimentation.
Keep your customers informed
No matter which shipping strategy you choose, make delivery timelines clear for your customers. Many business owners list estimated delivery windows on the checkout page. Consider adding a section to your shipping policy or store FAQ with more details on delivery times for domestic shipping, different delivery zones, or destination countries.
Ultimately, a smart shipping strategy makes all the difference for a successful online store. By understanding these factors and using accurate shipping calculators, ecommerce businesses can keep their sales profitable while building trust with their customers.
Read our full guide to setting up shipping for your online store
This post was updated on October 31, 2023.
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