Chapter 4- Free vs Paid Shipping

Unexpected shipping costs are the number one reason for shopping cart abandonment, but at the same time, sellers need to make sure they are able to cover their costs and maintain their bottom line. So, what is a seller to do?

Well first let's look at the different types of shipping options you have as a seller: 

  •  Offer Free Shipping - This means you are responsible for including shipping costs in the price of your item. 
  • Charge Exact Costs - You can find out exact costs using eBay's shipping calculator. This will fluctuate based upon the distance from you to the shopper. 
  • Flat Rate Shipping - This is where you charge a flat rate. 10$ shipping whether they live in Florida or Alaska. 

 Each of these options has pros and cons, but there are several things to consider before hopping onto the free shipping train: 

Margins- Your profit margins will be an important consideration when it comes to the type and level of discounted shipping you can offer your customers. This may differ from product to product, so it's essential to come up with a formula that matches your business. For example, if shipping takes up more than 5% of your profit margin you'll charge instead.


Product Size- Previously in this guide we advised measuring and weighing your product before you source. Naturally, larger, heavier items are more expensive to ship. In the same way that some retailers will offer free shipping on accessories but not on furniture, you should base your shipping costs on the makeup of the item itself. 


Order size- A common goal among sellers is to increase average order value by offering free shipping with certain thresholds. For example, if you sell two items but one is a higher quality, more expensive item, consider offering free shipping on that item and raising the price of the other. This will give the illusion of saving money when really you're pushing the buyer towards a larger purchase price.


Customer base- Who are your customers? Where are your customers located? Do you ship internationally, or to Alaska and Hawaii? If so, you’ll have to absorb more costs with shipping to these locations, which is why many retailers will exclude all areas outside of the contiguous United States with their free shipping. If you sell internationally, make sure you thoroughly research your shipping options to those countries, along with taxes that are applied at the border. 

Once you've come up with the answers to this you can make an educated decision about free vs paid shipping. The one thing you never want to do is blindly offer Free Shipping only to realize later that you lost money off of a sale. 

 

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