There are several options concerning how to charge for shipping with your online store. We’ll take a look at the common solutions and discuss the pros and cons of each.
Common Shipping Solutions
- Free shipping: You just don’t charge for shipping at all.
- Flat rate shipping: A single rate for all orders
- Price based shipping: The shipping price is based on the total price of the items being purchased. The price may go either up or down as the total price of the order increases, but the price tiers are defined by the price of the order.
- Weight based shipping: The shipping price is based on the weights of the products ordered.
- Real-time shipping rate calculators: The shipping rate is calculated in real-time with a particular shipping carrier such as FedEx, UPS, or USPS.
Sometimes you might want to combine a few of these options on your store. For example maybe you offer free shipping on orders over $100 but charge a weight based price for orders less than that.
Up Front vs Calculated Rates
In the end, all the different options for setting the price for shipping falls into one of two categories. It is either an up front price or a calculated price.
An up front price is one where the customer knows up front what the rate is going to be before checkout. Shipping options such as free shipping, or flat rate shipping are up front methods. During the shopping process your customers know what it will cost to ship their orders. When they get to your checkout page the hurdle of the shipping price has already been cleared.
Calculated rates account for all other options for setting shipping prices such as weight based, price based, and real-time shipping quotes. With calculated rates we need to know exactly what products are being ordered and where to ship them before we can determine the cost of shipping.
Out of all the ways to calculate shipping rates, real-time quotes from your carrier (FedEx, UPS, USPS, Canada Post, etc.) are the sexiest. With many e-commerce solutions, real-time shipping rates are a premium feature for which you may have to pay extra. With live rate quotes you can simply pass through the exact cost to ship the order to your customer. Our research has clearly shown, however, that calculated shipping rates – including live rate quotes – decrease sales. This is true even when the end price is the same as a flat rate or free shipping order. It’s not the final price that loses the sale, it’s the way you get to the final price.
Whether you use live rate quotes or some other method helpful hints of calculating the final shipping cost for an order, there are two main problems with using calculated shipping rates on your store.
- Cart abandonment
- Sticker shock
Shipping Induced Cart Abandonment
When a customer shops your store he essentially needs to make two decisions. First, does he want the products your are selling and second, is he willing to pay the price you are asking. The more decisions you ask the customer to make, the less likely he will be to complete the purchase and abandon the order. While he is shopping your store, comparing and researching products, he is building an expectation of what his order will cost. Supposing the customer decides to add a product to the cart and checkout, he has now made both of the decisions – “Yes, I want the product. Yes, I agree to this price.” But now, when the customer reaches the checkout page, we are going to challenge him with another series of decisions.