Tag Archives: free

Free, flat or variable shiping costs

Let’s talk about shipping.  Now, we all know that you need to let customers or potential customers know what the cost of shipping is before they hit checkout.  So you put in the necessary shipping estimators on the shopping cart and otherwise.

However, what kind of shipping methods do you use? The various options have pros and cons.

Free shipping (pure) generally means you put the cost of the shipping items in the cost of your products. This works quite well if, for example; you have a high margin product with a low shipping cost.  It also does well if you can get customers to purchase more than 1 of the item at the time, to save on shipping costs.

However, the cons are that you generally have to put a much higher price on your product which could make you seem uncompetitive.  I’d say this type of shipping method works best for really high value products (where shipping is a small portion of your actual price) or low value products  (where you can ship the order really cheaply).

Secondly, you can do a combined free / variable shipping method. Basically, you provide free shipping at a certain level.  Now, this shipping option pushes people to purchase a certain amount and if set right, can push people to the next ‘level’ of purchasing.  This kind of method requires more calculation but in many cases can be quite profitable.

Flat rate shipping on the other hand is perhaps the easiest for customers to understand.  It’s a simple number that they can work with, but has the disadvantage of requiring to you know your shipping cost quite well.  It also means that if a customer does a large order, and a lot of customers do that, you cost is going to go much higher than you expected.  Depending on how you price it, you might also be losing money on each order.

Lastly, you have variable – or actual – cost of shipping.  Here you charge everybody the actual cost of what it costs to customer to ship. This is of course the most fair method, but the customers that you really want – the large order customers might decide to go elsewhere because other businesses are offering them free shipping.