How much to charge for shipping and handling to maximise your profits

As with pricing your products properly, there is also an art to setting the right shipping and handling fees. While most DTC sellers focus on ensuring that their prices factor in their costs of production, the more hidden expense of getting your product to the customer’s door can often be overlooked.

This is one of the best areas to optimize your profit margins, so it’s worth investing time in your shipping strategy.

If you charge too much, you’ll start to see your carts being abandoned - no matter how amazing your products are, there will always, unfortunately, be an upper limit as to how much shipping people are prepared to pay. Not charging enough, on the other hand, can eat into your profit margins that you have worked so hard to achieve.

What should you charge for shipping?

There are a few factors to consider when determining how much to charge for shipping and handling.

Firstly, you need to take a look at your costs - this includes packaging materials, postage costs, and any additional fees such as insurance or tracking. Next, consider the weight and size of your product, as well as the destination it is being shipped to.

But beyond calculating these numbers, it’s important to also understand your target market and their expectations for shipping fees. For example, if you are selling luxury items at a premium price, customers may be more willing to pay higher shipping costs. On the other hand, if you are targeting budget-conscious shoppers, offering free or lower-cost shipping options may be more effective.

A simple shipping formula

One approach to determining your shipping and handling fees is to use a simple formula:

Shipping Fee = (Cost of Shipping + Packaging Materials) + Desired Profit Margin

This allows you to cover your costs and also make a profit from your shipping fees. Of course, this formula may not work for all products or situations, so it’s important to regularly review and adjust your fees as needed.

Test and assess

As with any aspect of your business, it’s important to continuously test and assess the effectiveness of your shipping strategy. Consider offering different shipping options, such as free or discounted shipping for orders over a certain amount, to see how it impacts sales and customer satisfaction. Also, don’t be afraid to ask for feedback from your customers on their shipping experience. This can help you identify any pain points and make necessary adjustments to improve your shipping process.

Choosing the right shipping fee: Top Tips

Package your products efficiently

While you may not be able to control the weight of your items completely, the size of your box can play a big factor in your total postage costs, so it’s worth taking the time to play with different ways of packaging your items.

Small Flat Rate Boxes or Padded Mailers can be quite cost-effective if you can fit your items into this size. Always ensure you can also wrap and protect your items properly within this size, as any cost savings you make through shipping can promptly be lost via breakage claims!

For larger items, it’s good to be aware of maximum dimensions as this can tip prices from one bracket to another. Try optimizing the wrapping of your products to minimize at least one dimension - even shaving off an inch can make a huge difference to your shipping fees.

Tip: USPS also offers a range of free boxes from their website here: Free Shipping Supplies on USPS. You can order up to 25 at a time, however note that these boxes can only be used when purchasing Priority Shipping.

Choose the most cost-effective shipping provider

It’s also wise to shop around for your best rates for shipping. Although your local post office may be the most convenient, it is often the most expensive - ensure that you get quotes for the same size and weight box for several shipping providers to compare and get a feel for costs.

Consider offering tiered shipping options

Providing different shipping options can cater to the different needs and preferences of your customers. For some, getting their purchase quickly may be a priority, even if it costs more.

For others, the cost may be more important than speed. By offering options such as standard, express, and overnight shipping, you give your customers the ability to choose what suits them best. Remember to price each option appropriately considering the increased costs associated with faster delivery times. This not only enhances customer satisfaction but also allows you to cover your shipping costs without hurting your bottom line.

Etsy Shipping Fee Strategy

Etsy has recently introduced a new feature that allows sellers to set different shipping profiles for each item, making it easier to offer tiered shipping options. It’s also worth noting that Etsy has now implemented a “Free Shipping Guarantee” program, where shops that offer free shipping on orders of $35 or more will receive priority placement in US search results.

While this may seem like a daunting expectation for some sellers, it’s worth considering the potential benefits of attracting more customers through this prioritized placement. You can still build your shipping costs into your product price and offer “free” shipping to meet the $35 threshold.

Etsy also offers an integrated option for shipping that is commonly cheaper than the post office. This is because Etsy has negotiated bulk rates with a range of shipping companies on behalf of their sellers. To use this option, click the “Print Shipping Label” on your order page. This will lead you through customizing the shipping quote for priority shipping or first class, your package type, weight, dimensions, and insurance.

Etsy also allows you to add a “Handling Fee” for your orders. If you have items that require some labor to package, you may like to use this option to ensure that you are accounting for this time. Etsy will not display this cost as a separate item to the customer; it will be incorporated into the total shipping fee.

Giving the customers a choice about their shipping options can be useful - it allows you to set a minimum base shipping rate and gives the customer the freedom to pay a little extra if they want to receive their package earlier or tracked.

Do you need to buy Insurance?

Most shipping providers include a certain amount of insurance, so it’s not usually necessary to pay for insurance unless you are selling something quite costly. For example, Priority Mail in the US comes with $100 of shipping insurance. For international shipments, this rises to $200.

If your item is worth more than this, it’s usually better to purchase additional insurance. In the event of a claim due to damage or loss, you will need to provide proof of the value of your item and also evidence that it was shipped - this can be in the form of an online tracking number.

International Shipping - Yay or Nay?

Shipping your products to far-flung locations can be good for maximizing your sales. However, it can feel like it adds overhead and uncertainty to your shipping strategy.

The only real difference from a workflow point of view is that you’ll need to complete a couple of extra custom forms and ensure that they are stuck to the front of your package. You will also need to keep a careful eye on your international shipping costs - they can add up, particularly if you do not have a broad selection of products that help offset the cost.

Some sellers prefer to limit their business to domestic-only sales for this reason. If you decide to offer international shipping, it’s recommended that you select either First Class International or Priority Mail as these services tend to be the most reliable and cost-effective. Additionally, it’s essential to research the customs regulations and potential taxes or duties of each country you ship to - this information can be easily found on government websites.

Should you offer free shipping?

This is a question that often comes up when discussing shipping and handling fees. While offering free shipping can be appealing to customers, it may not always be the most profitable option for DTC brands. However, there are some key factors to consider before deciding whether or not to offer free shipping:

• What are your competitors doing? If other brands in your industry are offering free shipping, it may be necessary for you to do the same in order to remain competitive.

• Can you absorb the cost of shipping into your product pricing? This is where having a thorough understanding of your production costs comes in handy. If you can add a small markup to your products to cover the cost of free shipping, then it may be worth considering as an option.

• Are customers willing to pay more for your products if they come with free shipping? This is where market research and customer feedback can be valuable. If offering free shipping will significantly increase sales and customer satisfaction, then it may be worth the investment.

Ultimately, the decision of how much to charge for shipping and handling should be based on a combination of your production costs, competition, and customer preferences.

Using Craftybase to calculate your shipping “sweet spot”

Using dynamic pricing software such as Craftybase allows you to completely track and tweak your pricing, including what you should charge for shipping.

With our software, you can easily adjust your prices and options to maximize profits while keeping customers satisfied. Don’t let the complexities of shipping hold you back from growing your DTC brand - with Craftybase, scaling up is easier than ever before. Try us for free today

Conclusion

In conclusion, shipping and handling fees are crucial in maximizing profits for DTC brands. It’s important to find the right balance between charging too much and not enough, choosing the most cost-effective shipping provider and considering international shipping options. Additionally, carefully evaluating the feasibility of offering free shipping can impact profitability. By taking the time to optimize your shipping strategy, you can ensure that your business runs smoothly and successfully.