Running an online store can be an exhilarating — and overwhelming — experience. You have to worry about inventory, ads, payments, customer experience and so much more.
With all the day-to-day challenges you face, have you taken the time to examine your shipping? You’ve probably noticed that it can take quite a bite out of your profits.
It’s absolutely worth the effort to empower yourself with this information, however, so that you can make smart decisions about things like whether you can offer free shipping, how to price your items and how to properly plan your overall budget.
Learning how to calculate your shipping costs for your ecommerce business can help you find ways to lower them and operate more efficiently — something both you and your customers will value.
Calculating your ecommerce shipping costs
Step 1: Identify your shipping costs
First, log into the website of your carrier, broker/reseller, or third-party fulfillment warehouse and navigate to the reporting section. From there, download the reporting offered, which typically includes the cost for each shipment.
Be aware that this is likely the landed cost for each shipment — the total of the base costs, fuel costs and any fees or surcharges that applied to each shipment.
Step 2: Break down your shipping costs
If available, look for a report that lists the cost details for each shipment. You can also typically find this information on your carrier invoices. Start to look for patterns in the costs and surcharges that are shown.
Keep a special eye out for things like:
- Address Correction surcharges (Stopping these fees from recurring is an easy way to save – learn how to fix this and other controllable costs.)
- Residential surcharges (These are tough to avoid but important to track.)
- Dimensional (DIM) weight charges (One of many dimension-based costs you might be overlooking!)
- Delivery Area surcharges
If you see costs like these happening over and over, it’s time to focus on reducing the impact they have on your shipping spend.
Step 3: Gather and standardize your data in one spot
Standardizing your shipping data helps make it easier to understand the costs and how often they occur. Beyond costs and their causes, you should keep an eye on operational issues like time in transit and on-time delivery. Knowing metrics like these help keep your customers happy.
Manually gathering all your data to find all these recurring issues can be a serious slog (with big potential for errors), but if you want to try your hand at it, you’ll have to set up a spreadsheet, download all your invoices, and enter their detailed data into the spreadsheet. Then you’ll want to look for carrier errors and validate your surcharges. (If that all sounds exhausting, there’s a better way.)
Another good reason to standardize your data is consistency. If you work with multiple carriers or third-party services, you’ve probably realized that each provider uses slightly different terminology that makes it hard to compare and calculate costs to get a true sense of your shipping spend.
Step 4: Optimize your carrier agreement based on your biggest costs
Before you speak to your carrier rep about how to optimize your agreement with them, you’ll ideally have all your shipping data details in hand. This will help you know what’s driving costs and focus on those specific items.
You should know your shipping profile — including average shipment weights, dimensions, zones and surcharges — and understand your agreement inside and out. What are your minimums? Which surcharges can be modified and which should you try to work on? Every shipper is different, so your carrier agreement should be uniquely developed for you as well.
Control your shipping costs to protect your profits
Getting a handle on all this on your own can be arduous, but without some level of understanding, you risk missing opportunities to reduce your shipping spend. There’s a lot to manage in your ecommerce business, but don’t overlook your shipping costs — they’re likely costing you more than you think.
What are your shipping assumptions costing you? Find out in our new eBook, Five Lies You’re Telling Yourself About Your Shipping.