How I Lost Money on Shopify’s Shipping Cost (& Then Fixed It!)

By    Last updated March 24, 2017   Shopify

When I set up my first Shopify store, I lost quite a lot of money.

 

It started off good (at least, I thought so!) I easily launched the store with Shopify, I had tons of orders coming in, and I was pleased with the way everything was going along.

 

It wasn’t until I sent off all the orders that I realised my mistake: I’d miscalculated the shipping cost.

 

 

 

 

What Went Wrong?

 

Thing is, I’d read hundreds of articles about cart abandonment, and it worried me. For example, 68% of all customers abandon their cart, and the biggest reason is unexpected shipping costs popping up at the last second.

 

So I decided to offer free shipping on all my products and advertise it heavily. It was the best way to get people through the checkout. (And it worked – my abandonment rate was way below 40%).

 

Problem is, I made no profit. Once I’d paid my carrier for delivery, I actually lost money. Argh!

 

Eventually, I found a sweet spot. I found a shipping cost that didn’t scare away customers, but did make a profit. So, here are the options, and how to get it just right.

 

 

Step 1: Weigh your products and get accurate shipping quotes

 

Before you start changing rates or meddling with the cost on Shopify, get a scale out and weigh each products. Take the weights and dimensions to a handful of local couriers and get an average quote for shipping.

 

 

 

 

You can also approach USPS, FedEx and other carriers to strike a deal or get a one-off price. Either way, make sure you know the exact shipping cost AND how much the packaging costs.

 

Now that you know how much it costs to package and ship, you can choose a delivery option:

 

 

Offer Free Shipping

 

Despite my horror story, you can make a profit with free shipping. You just have to be very careful with the math!

 

 

 
 

Option 1: Taking the hit yourself

 

Option one is taking the hit of delivery costs yourself, like I originally did. You sell your products at the usual price, and absorb the cost of shipping from your profits.

 

  • Pro: the customer gets a great deal. A cheap product and free shipping.
  • Con: you’ll only get a very small profit margin (or none at all, like me!)

 

This method will work if your products are very expensive or have a big profit margin. Expensive and luxury items often work well in this category.

 
 

Option 2: Bumping up the products price

 

Option two is bumping up the price of your products to cover the cost of shipping. Rather than selling a t-shirt for $8 and charging $2 extra shipping, you charge $10 for the t-shirt and offer free shipping.

 

 

Offer free shipping by bumping up product price

 

 

Although the product is now more expensive, the lure of ‘free shipping’ is a big psychological incentive to buy. It removes a little hesitation. Cons? Well, the customer might find the same product cheaper somewhere else.

 
 

Option 3: Meet in the middle

 

Meeting somewhere in the middle is the last option. Maybe you sell the t-shirt for $9 and swallow the $1 cost yourself. This is the method I use now. My customers will struggle to find the same product cheaper elsewhere and the free shipping helps clinch the deal.

 

 

Set Your Own Shipping Rates

 

Although ‘free shipping’ is a nice way to lure customers, setting a shipping rate is still standard practice online. On Shopify, you can’t set a shipping cost for each individual product, so you’ll have to use one of these three options:

 

 

Weight-based shipping

 

In this case, you’ll charge a delivery cost based on the weight of the customer’s order. If their total cart weighs between 0-1kg, you might charge $10 shipping. If it’s between 1-2kg, you might charge $20. To set this up you’ll need to know the exact weight of your products.

 
 

Know the exact weight of your products

 

 

Price-based shipping

 

Using this option, you charge a delivery cost based on the total cost of the cart. If the customer spends between $0-$20, you might charge $5 shipping. If they spend $20-$50, you might charge $10.

 

Pro tip: your profit can get eaten up using this method if you have lots of low-priced but heavy items.

 

 

Offer a flat rate

 

A third option is offering a simple flat rate on all orders. This is a great option if all your products are similar size and weight. For example, if you just sell sunglasses, you probably don’t need to account for different weights.

 

 

Note: in all cases, I’m talking about domestic shipping. If you want to ship internationally, you’ll almost certainly want to charge a ‘regional surcharge’ which you can find in your Shopify pricing settings.

 

 

Calculate Real-Time Shipping Costs

 

This third option is the most advanced, but probably the most accurate. Real-time shipping automatically calculates the cost of shipping any product based on the customer’s location and delivery preferences.

 

See how this store calculates the exact shipping cost for each customer:

 

 

 

 

It means every customer gets a completely accurate, up-to-the-minute shipping cost tailored to them. Shopify taps into FedEx or USPS prices to calculate the exact rate.

 

It’s great for you because you’ll never underestimate your shipping costs. It’s always exactly right. And it’s good for the customer, because they know they’re not getting ripped off by excessive shipping fees.

 

The only downside is you’ll need the ‘advanced’ version of Shopify, which comes at an additional fee.

 

 

Let someone else do the shipping for you

 

Of course, the final option is to let a professional logistics company do all the hard work for you.

 

 

 

 

Shopify has partnered with a handful of fulfillment services, including Amazon to help you take care of this. With this option, you’ll store your merchandise at one of Amazon’s warehouses, and they’ll take care of the shipping for you. It will cost you a little extra, but takes away all the hard work and guesswork.

 

If you choose this option, you can simply take Amazon’s shipping rates and apply them to your Shopify store.

 

 

Final Thoughts

 

As I found out the hard way, shipping costs can make or break your profit margins! It’s the difference between a successful store and a struggling store.

 

I’ve always found this table (created by Shopify) very helpful when it comes to pricing your products and making sure you are always on the right side of profit:

 

 

Calculate your product price

 

 

Hopefully, with this information locked down, you won’t make the same mistake I did, and you’ll take your Shopify store to glory!

 

Ben Brown

Ben is a copywriter and editor from London. His work regularly appears in The Huffington Post, and he has worked on several successful copywriting campaigns for Sony UK. Feel free to connect with Ben via Twitter.

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