How much should shipping cost for the customer?

What should shipping cost to customer? We have gathered the most common and most used ways to charge for shipping in an e-commerce. Read our Guide here.

Should you offer free shipping, fixed shipping price or free shipping over a turnover limit? The questions are many when it comes to charging customers for shipping. E-commerce is growing and many companies have moved large parts of their business from physical stores to online, a major focus has been on shipping costs. But how should one really price their freight to increase sales and increase customer satisfaction when many customers seem to place more emphasis on the shipping cost than the total final cost?

The psychological aspect

When it comes to the pricing of shipping, one must not underestimate the psychological aspect. The question of shipping can determine which supplier the consumer ultimately chooses to place his order with.

As mentioned above, it is not always the final price that is of the greatest importance to the customer, but rather what you pay for. If you buy an item for thousands of crowns, it does not matter if it differs a few hundred crowns in product cost. But if it adds a hundred bucks instead in the form of shipping costs, it can negatively affect the customer's willingness to buy.

This has to do with customers being able to consider themselves deserving of free shipping if they spend large sums at a company. In principle, it can feel better, but in the end it is the customer who pays for the shipping, either as a surcharge or product price.

How to charge for shipping?

We have chosen to analyze the subject and highlight five important aspects you should keep in mind when deciding on your shipping policy.

Not to charge for shipping
Not taking charge for freight is seldom a strategically good choice. Why? First of all, it is not particularly painful for a customer to pay around SEK 29-49 per order. You can also use shipping cost as a method of additional sales. Using a free shipping limit can both attract new customers and get existing customers to add products to the order. Remember that completely free shipping is very unusual except in a few competitive segments, such as the clothing industry.

Charge for premium and options
Let the customer choose and create the shopping experience they want. It is becoming increasingly common to use handling and delivery time as justification for higher shipping costs. For example, the customer may have the opportunity to pay extra for a shorter delivery time. Here, the opportunities are great for you as an entrepreneur to find a model that suits your customers and your business.

More shipping options, better or just messy?
Offering several different shipping options is a controversial topic. Delivery point packages are still the most used option closely followed by home delivery without receipt. If you do not sell very awkward products, or products that require installation, we recommend that you focus on being able to offer these two deliveries.

Unique products or high competition
Always analyze the industry and your competitors before deciding on your shipping policy. Do you offer unique products or do you work in a segment with very high competition? Try to find details in the buying process that you can use to get customers to shop from you. Because there is still a difference between what you should do and what is expected of you.

Do not lose customers on unclear shipping terms
You can see a clear connection between lost customers and unclear shipping terms. Your terms should be clear enough that the customer within a few seconds understands what applies. Building functions that calculate exact cost is in most cases too complicated. Total transparency is simply too complicated and difficult for customers to grasp.

Free shipping limit with an average value of SEK 200 per product

Various proven shipping variants

Here we highlight different shipping models that are popular to use today, as well as their advantages and disadvantages.

Fixed shipping price
Clear and simple. However, can be perceived as unfair and greedy by customers who buy goods for large costs.
Free shipping over sales limit
A positive variant as it motivates the customer to increase the order value. The higher the order value, the better margin you will get.
Free shipping
Great competitive advantage, but is it really needed? Analyze what the situation looks like in your industry. In some cases this is good but in most cases we believe in other methods to increase the order value and improve your margins.
Premium options
Giving the customer the opportunity to pay more for faster delivery can increase customer satisfaction and at the same time justify a higher cost for shipping.

Conclusions and important aspects to remember!

It is important to start from which industry and segment you work in. The shipping issue becomes extra complicated if you work in a highly competitive industry where low product prices are a key to success. Then it is extra important to analyze details to differentiate yourself from your competitors. If you work instead with unique products and less competition, it is easier to justify a higher fee for shipping and handling.

Regardless of which shipping policy you decide to use, it is important to think about the psychological aspect and how your customers may view your shipping. Often it is not the price that is most important, but how you communicate with your customers. Shipping is a big part of many businesses, and so are the costs. As long as you are clear and listen to your customers' needs, it is usually well received when they realize what they are actually paying for.

Updated on: 11/08/2021