Whether you have a marketplace or an e-commerce site, shipping costs are a very significant cost to your business. 

To calculate your shipping costs or postage, you must take into account your commercial margin.  For example, if your margin drops as revenue increases, you will need to reduce your shipping costs to avoid losing profitability. 

Commercial margin = Selling price excluding VAT – Purchase cost excluding VAT (or Manufacturing) +/- Change in stocks  

Example: the commercial margin of a product bought for 6 euros and resold for 10 euros is equal to 4 euros.

In addition, the total cost of purchases taken into account for the calculation of the margin must include:

  • Manufacturing cost 
  • Other ancillary purchase costs 
  • Freight handling charges
  • Non-recoverable taxes
  • Incidental supply costs 
  • Logistics costs 

Indeed, if you buy a large quantity of products, it is important to keep a fairly low unit purchase price. The sales margin must be greater than all of your fixed costs and other operating costs.

Defining shipping costs: Things to consider

The geographical area 

Sending a parcel in France does not have the same price as sending a parcel internationally and customs fees will also have to be provided for. 

Segmenting your shipments according to geographical areas in Europe or internationally can simplify the organization of your price lists. Take into account the specificities of certain countries (see article on brexit).

In fact, return practices vary by country.

The cost of packaging

Do not neglect the quality of your packaging which remains your best insurance in the event of damage (see our article on packaging). Good packaging guarantees the risk of breakage, especially if you send fragile parcels (see our article on properly preparing your shipments of fragile parcels). 

The delivery method 

Customers like to have a choice of delivery method. “Indeed, 55% of French shoppers abandon their cart due to insufficient delivery options”.  

Offer your customers the delivery method they want according to their needs. This is a good way to increase your sales. 

The express delivery mode is more expensive and faster (Fedex, UPS) than the standard mode (Colissimo, Chronopost). 

 You also have the choice of the relay point which is much more economical and ecological (Mondial Relay).

The price of insurance

If your shipments are of high value, taking out additional insurance will allow you to insure your parcels. Opt for Ad valorem insurance which insures your parcels up to an amount of €100,000. In the event of theft, loss or damage, compensation will be calculated on the basis of the value declared during your shipment. See our article 

The potential returns

The Hamon law authorizes a withdrawal period of 14 days from the date of receipt of the product. In case of return, you have the obligation to reimburse the shipping costs paid by the customer when ordering. Count 10% return rate as your first margin of safety if a customer sends their order back to you. 

The consequences of late delivery 

If delivery has not taken place on the date indicated on the order form, the buyer is entitled to demand that the seller deliver the goods immediately. In the absence of delivery within seven days, the buyer may request the cancellation of the sale. (source litigation.fr)

In the event of an order not received within 30 days of payment, the buyer may consider that there is a delay or failure to deliver and request the cancellation of the order not received. 

This is why you need to put in place the right strategies to control your shipping costs. 

How to calculate shipping costs? 

To calculate postage or shipping costs, it is necessary to evaluate what is the average cost of a shipment according to the formula: 

Average cost of a shipment = cost of packaging + transport + insurance + return rate + cost of order preparation. 

If you already know your average basket and want to offer your shipping costs you can also use another method of calculation. 

Shipping costs = average basket + average cost of a product – cost of shipping costs. 

Example: 50 + 10 – 5 = 55. You can therefore offer shipping costs from a purchase amount of €55.

How to offer free delivery? 

Anticipate seasonality on your sales 

See what your top products are and highlight promotions especially during the best times of the year such as Black Friday, sales, or holidays. Do not hesitate to communicate and invest in Google Ads and Social Ads advertising in order to attract traffic to your site and boost your sales.  

Offer delivery from a certain purchase amount

 

In fact, 43% of shoppers add an additional item to their cart to qualify for free shipping. Offer delivery from a certain purchase amount will allow you to retain your customers and increase your average basket.

Or, offer free delivery over a period of time or on the first shipments! 

The mistake to avoid

Do not offer shipping if the prices of your products are higher compared to the competition! 

Implement a product bundling strategy

Product bundling is a marketing strategy that consists of offering several products together in the same pack. This will increase your average basket and optimize shipping and logistics costs for each order. 

Your customers will have a higher perceived value of your offering and this will lead to more sales. 

Automate your shipments

The time spent preparing your shipments is not something to be taken lightly. If you take care of order picking yourself, you would have less time to focus on your core business. Otherwise, you will have to hire labor to take care of it.

With our platform, you can compare the prices of different carriers and print your shipping labels in just a few clicks. Finally, benefit from personalized customer service that can be reached all week long by phone.  

    Do you have one or more online stores? You can integrate API shipping functionality into your CMS and manage your shipments. No more integrating and implementing each carrier individually. This saves you time and money.