Business owners often overlook moving products from point A to point B. However, all customers demand timely delivery. If your business is not actively searching for the best transportation ways, you are behind the competition.

How to Calculate Shipping Costs

Shipping costs revolve around many factors and vary based on what products you are shipping and the mode of transportation. Of course, the further your goods travel, the more costs will increase. But distance is not the only thing to consider before shipping.

Modes of Transportation

The most popular option for domestic shipping is truck freight. Moderate costs, efficient delivery times, and accessibility make full truckload (FTL) and less-than-truckload (LTL) shipping the go-to option for most businesses.

It is essential to understand the trade-off between speed and price. For example, Air transit is about 4-5 times more expensive than road transit. Yet, it is efficient. Whether you value speed or cost more depends on your business needs and consumer demands.

Product Size and Value

The larger your product is, the more expensive it is to ship. Product length, width, height, and weight contribute to the cost of shipping, but some factors are not as easy to measure as size.

Stackable packages are the least expensive to ship. Goods that can be fitted into standard packaging, moved on pallets, and stacked are the gold standard of shipping. Fragile products such as glass or electronics require special handling, resulting in increased costs. Value is also a contributor to freight costs. High-value products that risk damage or theft will cost more to ship, even if the product is small. Hazardous materials such as chemicals, paint, fuel, and lighters require additional permits and packaging.

Costs of Shipping

Retailers state that shipping costs range from 5 to 20 percent of their total revenue, so any free shipping offer forces them to absorb an extra expense. These costs are harrowing for companies with thin margins or view shipping as a profit center.

Free shipping might cause unexpected costs for shippers. While the cost of delivering a package is the key component associated with free shipping, additional challenges persist. For example, increased labor, customer service, and IT costs should be considered before offering free shipping to customers.

Free Shipping with a Minimum Purchase

Free shipping without a minimum purchase can get expensive for a business. It encourages customers to buy cheap, convenient items online one at a time. Many retailers have found creative ways to offer free shipping. Because most retailers want to drive sales without losing margin, some executives note they found tactics like premium shipping clubs, flat-rate shipping, and incorporating shipping into the cost of the product are effective in balancing free shipping service.

Should my business offer free shipping?

As consumer shipping expectations continue to increase, retailers must pay attention to demand and service. Gauge what is most important to your customers: quick delivery or low costs? Be sure to communicate shipping fees or discounts with your audience. Understand that free shipping is enticing to consumers but may not make sense for your business.

Shippers are always looking for new ways to lower transportation and delivery expenses. Partnering with a leading third-party logistics (3PL) provider like Dexters Logistics can reduce shipping costs while improving productivity. Get a free quote on your freight today with Dexters!