How to Calculate Shipping Costs for Your Online Store

8 min read

The ecommerce boom has made it easier than ever to find nearly any type of product online. Ecommerce has been steadily rising for a couple of decades now.

Global Ecommerce Retail Sales from 2018 to 2026

Source: Ecwid Insights

The steady increase in traffic makes it an incredible time to start an ecommerce business.

However, this flock to online shopping has also led to increased customer demand and expectations across the board, especially in shipping.

Customers shop online for convenience, and part of this is receiving their orders in a timely manner. This makes it more critical than ever to have an effective shipping strategy in place.

It can be difficult for smaller ecommerce brands to know where to start in a sea of big brands with massive shipping budgets.

Fortunately, we have compiled the brief guide below to help you calculate shipping costs for online store orders.

Factors for How to Calculate Combined Shipping Costs for Online Store

Several factors go into calculating combined shipping costs for online store selling.

These include:

Speed of delivery

Probably one of the most important factors in online shipping these days is the speed of delivery.

Amazon Prime, for example, created a significant shift in consumer expectations by offering two-day shipping. In fact, this has essentially become an industry standard.

However, the faster the shipping, the more it will cost. While speed needs to be considered, profit margins must also be a focus.

Size of the package

As a general rule, the larger the package, the more it will cost to ship.

When handling larger packages, carriers have to consider something called “dimensional weight.” In other words, they can’t fit as many larger packages into transport vehicles as they can with small packages. This means there will be an additional charge.

There are some certain tricks to ship large products for less money but those tricks don’t work for all products.

Package weight

Just like size, the heavier the package, the more it will cost. Carriers need to consider the weight they are placing into transport vehicles, which means it will cost more to handle these packages.

Destination

Depending on the shipping model used, there can also be additional costs for the distance a package is being shipped.

After all, it takes more transport time and worker hours to get these packages to their destination. This can also affect shipping time.

Value of package

The value and cost of a package can play a huge role as well.

When shipping high-value items, it may be a good idea to have them insured to protect the order. This can help to cover damages, losses, or stolen items throughout transportation. Of course, this will also be an additional cost to the shipping charges.

How to Calculate Custom Shipping Costs for Online Store: Carrier Websites

One of the best ways to figure out how to calculate custom shipping costs for online store orders is through carrier websites. This is most effective for ecommerce stores that handle their own fulfillment needs.

Let’s take a look at some of the common carrier options.

USPS

The United States Postal Service (USPS) offers an extremely simple shipping calculator right on its website. First, plug in the zip code of the desired destination. Then, choose one of the preset rates of delivery option and box size, or enter in custom dimensions.

USPS does offer commercial pricing, which can net discounts of up to 15% on all retail shipping and postage. However, businesses will have to apply for this through USPS.

FedEx

The online FedEx shipping calculator is similar to the USPS calculator in simplicity. Unfortunately, it doesn’t allow the user to check shipping two days in advance, which will have a higher price than more forecasted options. FedEx offers multiple delivery speeds, including ground, overnight, and same-day.

UPS

UPS offers one of the most detailed shipping calculators out of the carrier options, which can make it a little more challenging to use. However, the details also mean more accurate and cost-effective shipping options when using precise package dimensions.

Deciding on a Shipping Strategy

The next question in learning how to calculate shipping when selling online is the pricing strategy used. A business has a few options in deciding on how to handle shipping charges, which include:

Offering free shipping: This means the business will take the hit on all shipping charges, but it can increase sales and bring in more customers.
Flat rate: Charge a single flat rate to cover product shipping costs. This may not necessarily cover all associated shipping costs, but it can be a good way to cushion the hit.
Charge per order: Charge shipping costs based on those associated with the product. In other words, pass the shipping charges over to the customer.

The right shipping strategy can vary depending on the business, its overhead, and the general model.

While free shipping is a standard for many online stores, there are still many successful businesses that still charge shipping costs. Realistically, it will likely be difficult for new businesses to take the hit for shipping costs regularly. They may have to start off by passing at least a portion of the costs to the customer.

However, businesses can also test out the best model for them.

For instance, if they generally charge for shipping, offer free shipping for orders over a certain amount or for a promotional period. This is an excellent way to determine if free shipping leads to increased order sizes or more customers.

Determining the shipping cost for online store orders can be a tedious part of starting ecommerce. However, once a business finds a cost-effective model that works for them, it can streamline order fulfillment.

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Oct 26, 2023

About the author

Max has been working in the ecommerce industry for the last six years helping brands to establish and level-up content marketing and SEO. Despite that, he has experience with entrepreneurship. He is a fiction writer in his free time.