One of the biggest pain points for many ecommerce businesses is figuring out how much to charge their customers for shipping. It’s not always feasible to offer 2-day delivery or free shipping, as you may not cover your costs.
At the same time, you don’t want to make your customers pay too much. According to Shopify, 80% of stores overcharge for shipping when they set rates manually. This can have just as bad of an effect, leading to high cart abandonment rates.
But when your customers are scattered across the country — or even globe — the cost of shipping an item to Customer A may be vastly different from shipping the same item to Customer B. Of course, factoring in varying weights and dimensions for each package makes these calculations even more difficult.
So, how do you consistently charge each customer the right shipping amount?
What is real-time carrier shipping?
Real-time carrier shipping is when the exact shipping rates that carriers charge are automatically pulled in to checkout for any given order. The rates take order weight, dimensions, and the customer’s shipping destination into account to display the accurate rate to the customer once they are done adding items to their cart.
Real-time carrier shipping allows ecommerce businesses to charge every customer the actual amount it will cost to ship the order, which helps ensure you don’t overcharge some customers or lose money on other orders.
3 benefits of offering real-time carrier calculated shipping
Setting shipping rates yourself manually is not always exact and can be very time-consuming based on the level of customization (e.g., rules for countries, order weights, total order values, and more). Real-time carrier calculated shipping helps in several ways.
1. Calculate shipping costs automatically
Shoppers will see real-time carrier rates displayed at checkout as soon as they enter their shipping destination, without you having to do any complex calculations yourself to get the accurate amount.
2. Charge customers the right amount
Unlike flat rate shipping, real-time carrier calculated shipping means you charge customers the correct amount every time, so you don’t have to worry that it will be too much or not enough.
3. Drive more international sales
Researching international shipping costs can be tough. With real-time carrier shipping, you know your customers will always get an accurate rate from any location, including abroad.
What to consider when you switch to real-time rates
If you’re thinking of making the switch to real-time rates, you still have some important decisions to make. The following will help you shape your real-time rates strategy.
Which countries you will ship products to
You have the ability to ship to almost any country, but that doesn’t necessarily mean you should ship to every country. Different countries have various regulations, tariffs, taxes, and requirements for incoming shipments, and shipping and logistics costs can be very high.
Which carrier(s) you’ll choose
Each carrier has its own advantages and disadvantages regarding specialties, speed, cost, and flexibility. Look at UPS, FedEx, USPS, and DHL and compare the costs. The more carriers you partner with, the more places and customers you can reach; However, you may forgo discounted bulk rates when your business is going to several carriers, unless you work with a 3PL.
How to incorporate handling costs
With real-time carrier rates, you are passing 100% of the direct shipping cost onto the customer. Handling costs, which include packing boxes and moving product, are not included in these shipping rates, so you must be aware of how you will make up these costs and not forget to factor them in when looking at your margin.
Pricing your shipping at amounts that are different from the actual rates can be a recipe for disaster if you don’t have the right strategy in place. There is no one-size-fits-all method to charging for delivery, but real-time carrier shipping is one of the best ways to protect your margins.
Shipping and fulfillment can be time-consuming for ecommerce businesses. Want to learn more about how working with a fulfillment company like ShipBob can give you more time to focus on growing your brand? Download the e-guide, “How to Choose a 3PL for Your Ecommerce Business.”