High volume sellers must balance shipping speed, seller cost, and buyer cost (which can influence purchasing decisions), but beginning for sellers the calculation is almost always simpler and involves two questions:
- Do I need to offer free shipping on my listing to make a sale?
- If not, how much should I charge for shipping so as not to lose money?
The first question can be answered using Terapeak. The second question requires a little bit of calculation and strategy.
Deciding Whether to Offer Free Shipping
In general, if shoppers have the option to purchase at the same price from two sellers, one offering free shipping (no shipping cost for the buyer) and one not, they will choose the free shipping option.
For this reason, it is important to understand whether other sellers are offering the same product(s) that you are with free shipping, and if so, at what price(s).
To see what percentage of sellers are offering free shipping for your product(s) and at what average price(s), follow these steps:
Visit sell.terapeak.com and log in to Terapeak.
Click Research -> Product Research 2.0 to start the Product Research 2.0 tool.
Enter basic search terms, such as a product make and model.
Select a recent date range. 30 days is often the best choice to gauge recent demand.
Apply search or category filters as needed to show only the desired results.*
Select the Transactions tab if it is not already selected.
Locate the "Shipping Average / Free %" box and note the second (percentage) figure shown there.
Locate the "Average Price" box and note the figure shown there.
* In particular, consider filtering by item condition—used or new—to match the condition of the item that you plan to sell. This will result in shipping and pricing data that is far more accurate and predictive.
The percentage figure in Step 7 indicates what percentage of recent sales for this product did not require shoppers to pay shipping costs. If this figure is high (over 50 percent, for example), then you are far more likely to generate sales if you also offer free shipping (i.e. pay for shipping costs yourself, rather than pass them on to your buyer).
The price figure in Step 8 indicates the average sale price for this product in recent sales. You are far more likely to generate sales if your offer price is at or below this average.
Most sellers use free shipping and average pricing information, weighed against their own costs to acquire inventory items, to decide whether product(s) are worth selling at all.
Using Fixed-Rate Shipping Services
The easiest way to cope with shipping costs is to use fixed-rate shipping services like USPS Priority Mail flat-rate packaging. These services offer:
- A small range of predetermined container sizes
- At a small range of predetermined flat shipping rates
- Without any consideration for weight in most cases
For these reasons, USPS Priority and other similar flat-rate services are a popular choice for beginning sellers. They require that you remember only 2-3 stable price points and depend entirely on item dimensions rather than weight.
This simplicity makes the research outlined above—and related sourcing decisions—far easier. Given that USPS Priority is also a relatively fast service, usually offering 2-3 day delivery with all boxes and containers free at local post offices, it should be a leading candidate for new sellers.
Using Calculated-Rate Shipping Services
When using calculated-rate shipping services, several other complexities enter the picture:
- Rates may vary not just by parcel, but by seller as a matter of volume and location
- Both size and weight are important and can affect shipping costs in unexpected ways
- Buyers are generally unsympathetic to sellers' shipping costs concerns
- Sellers using calculated-rate services must generally provide their own materials
- Service quality varies widely depending on the service selected
For these reasons, new sellers usually don't focus carefully on shipping optimization early in their selling careers. If, however, you plan to use variable-rate services and/or to charge buyers your actual shipping costs, keep in mind the following points:
There's more to your cost than the carrier fee. Remember to consciously account for the costs of boxes, padding and protective materials, tape and sealers, and labels in your shipping cost calculations, even if you don't pass all of these costs on to your buyer.
A little scale goes a long way. Don't try to use a bathroom scale to weigh packages, and don't feel that you have to invest in an expensive postal scale. In most cases and for most types of goods, a little food scale is a good and inexpensive compromise—accurate enough for carriers, granular enough to measure in ounces and/or grams, and inexpensive enough to be affordable for beginners, and widely available enough (at most grocery and department stores) to not be a hassle to acquire.
You don't need to visit the carrier to get costs (or print a label). If you are able to provide weight and size information to eBay and/or a carrier, you can pre-calculate actual shipping costs exactly and, once a sale is made, pay for and print a shipping label in your own workspace.
The cheapest option isn't always best. While trying to remain competitive on shipping costs, or to minimize them for yourself, is a reasonable thing to do, remember that services with rock-bottom costs like ground services, USPS Parcel Select, or FedEx SmartPost often have much longer and less predictable delivery times. Similarly, less expensive boxes and tape may reduce costs, but at the expense of increased shipment damage.
If you plan to begin by passing shipping costs along to buyers, the best bet is often to get a food scale, pick a mid-range service, estimate a percentage cost for your materials (boxes, tape, foam, etc.) and mark up carrier rates by that amount, perhaps with an additional margen, when adding shipping cost to your listings.
- Carrier size-x-weight cost $6.57 +
- Box and tape cost averaging 10% of shipping costs +
- Additional 5% handling fee and safety margin =
- Shipping cost of $7.56
Remember that the percentages are likely to vary based on your location, types of goods, and other factors, and can only be worked out accurately over time, with experience and data about your own sales and costs.
If you find that you're unable to be competitive on shipping costs when calculating actual fees in this way, it is often a better choice to offer free shipping instead, even if it means a slight markup, since research shows that buyers often prefer free shipping even if it means a slightly higher purchase cost.