Shipping without giving away the margin

Shipping is where small shops quietly give away their margin, because the price was set to look competitive rather than calculated, and nobody revisits it once orders start arriving.

Know what it really costs you

Not the carrier's headline rate. The cost per order includes the carrier charge for the band your parcel actually falls into, the packaging, the time to pack it, and a share of the parcels that go wrong.

• Carriers charge on dimensional weight as well as actual weight, so a light parcel in a big box is priced as a heavy one. Shrinking the box is often the single largest shipping saving available.
• Surcharges apply to remote areas, residential delivery, fuel, and parcels over certain dimensions. These appear on the invoice rather than the rate card.
• A failed first delivery costs a second attempt or a return, and the time.
• Lost and damaged parcels are a cost of doing business at a rate you should measure rather than hope about.

The three pricing models, and who each suits

1. 01Charge actual cost. Honest, and it makes small orders look expensive, which they are. Works best where the customer expects to pay postage.
2. 02Flat rate. Simple to understand and simple to display. Works when your products are similar in size and weight, and loses money steadily when they are not.
3. 03Free over a threshold. The most effective at raising basket size, and the most dangerous if the threshold is set by copying somebody else. It has to be set from your own contribution arithmetic.

Illustrative for the third. If an average order of 40 contributes 16 and shipping costs you 5, a free shipping threshold at 50 means you absorb 5 on orders that would otherwise have been 40, and gain on the ones that rise from 40 to 50. Whether it pays depends on how many customers actually move, which you can only find out by running it for a month with the previous month to compare against.

What customers actually care about

In roughly this order: knowing the cost before checkout, knowing when it will arrive, and being able to find out where it is. Speed matters less than certainty for most purchases that are not gifts or replacements for something broken. A shop that says four to six working days and delivers in five is in a better position than one that promises two days and takes four.

Cross-border adds one more: who pays the duty. A customer who receives a bill from the courier remembers it as a trick, regardless of the small print. Decide whether you absorb it or state it prominently, and never let the courier be the one to break the news.

Practical savings worth the hour

• Measure your actual parcels and check which carrier band they fall into. Being one centimetre over a band boundary is expensive and fixable.
• Buy packaging that matches your products rather than one box size for everything.
• Compare two carriers on your real parcel profile rather than on their rate cards, and ask about rates once you have volume, because published rates are a starting point.
• Offer a pickup point option where customers use them. It is usually cheaper for you and it removes the failed delivery problem.

Packaging is a cost that pays for itself

Packaging looks like pure expense and is usually the cheapest insurance available, because a damaged parcel costs the item, both legs of shipping, the replacement and a customer who now tells people.

Illustrative. Spending 0.60 more per parcel on packing that actually protects the product costs 600 across a thousand orders. One damaged order on a 40 item with 5 shipping costs around 50 all in. If better packing prevents more than twelve breakages in that thousand, it has paid for itself, and that is before counting the complaints you did not have.

• Fit the box to the product. Less void to fill, less movement, and often a cheaper carrier band.
• Protect the corners and edges, which is where almost all transit damage happens.
• Assume the parcel will be dropped from waist height at least once, because it will be.
• Make it easy to open without a knife, since cutting into the product is a self-inflicted return.
• Make it repackable if returns are common in your category. A customer who has to find their own box is a customer who starts a dispute instead.

Track your damage rate rather than assuming it. If you have never measured it, the first month of recording it is usually a surprise, and it tells you whether this is a problem worth spending on at all.