Pricing Your Shipping

By Chris Malta
Posted Monday, December 13, 2004

When you're selling on the Internet, shipping costs can create problems.

You're charging your customer UP FRONT for the cost of shipping their product. That is really the best way to do it, for one very good reason:

Customers don't like to be charged twice. I've seen sites that tell the customer that they may be charged an additional amount later to cover unexpected shipping costs. Yikes! If I saw that when placing an Internet order, I'd be headed for the hills. I would definitely go somewhere else. Who wants to give someone they don't know a license to charge their credit card an unspecified amount at a later date? Not me. That's a great way to lose sales.

Unfortunately, when dealing with distributors who drop ship, you really never know how much a shipping charge is going to be on any given order. Most of them ship UPS Ground as a matter of course. Some of them will ship US Postal Service if they feel it's more expedient. Well, alright, you say, UPS and USPS have rate charts, don't they? Just figure it out!

Not as easily done as said, unfortunately. Some distributors have contracts with UPS that change their rates. Some don't always use UPS, as I've said. But the real killer is that you can't set one shipping price on your site for an item, because the item may be shipping anywhere in the country!

Many kinds of eCommerce store software allow your site to directly access the UPS Online Shipping Tables to calculate our shipping. You would think you'd be covered, right?

Nope.

You see, in the Shipping manager of the store software that I've worked with, you have to enter a Zip Code of Origin for the entire site. ONE zip code of origin, for ALL your products. There's no way to enter more than one. The software wants to know where all of your products are shipping FROM, so it can go to the UPS tables and calculate how much it will cost to ship TO the address on the order. The problem is that not everything on your site will ship FROM that one zip code. Your products can ship from distributors all over the country, as I said.

Say I entered my zip code, 34711, which is just outside of Orlando, Florida, US, as the Zip of Origin for a site. I get an order for a product to be shipped to 32818, which is IN Orlando, near Disney World. The site is going to calculate a very small shipping charge for that order, since the distance is very small. But what if the product that was ordered actually ships from a distributor of mine in California? The actual shipping I have to pay the distributor is going to be a good deal higher than the site has charged the customer for shipping, and that cuts into my profit. That's a BAD thing.
The first remedy I tried was to enter a central Zip of Origin in the site software, hoping that shipping losses and gains would even out. I chose Billings, Montana, figuring that it was north-central US.

Nope again. Turns out that Billings is TOO central a location. It's too easy for UPS to ship from there, so the rates are lower, and you still lose money.

Then I realized that we were talking about UPS ground. If I was shipping from Miami, UPS ground has to travel the entire length of the State of Florida just to begin to get anywhere else! I entered a Zip of Origin in Miami, and the shipping came into line.

Yes, a customer who lives in California and orders a product that is distributed in California pays more for the shipping, because the site thinks the product is coming from Miami. It only comes out to a small amount, though, and it offsets some of the losses you'd suffer because of shipping situations that go the other way. (A product that ships from California to a customer in Miami...you lose on that one).

Is your customer being cheated? No. Internet customers will virtually always check their total (product plus shipping) price before completing an order, and they'll go elsewhere if they can get a better deal.

Your site may work differently, and you may be able to use your site software to come up with a better solution. I hope this gives you a little insight by showing you how I've handled the problem in the past.

There are other shipping problems I'll reserve for another time, such as Motor Freight (heavy items) and including the varying drop ship handling charges you pay. Please check back in the near future to read about how I've handled those.

Chris Malta
WorldWide Brands, Inc.
For more information, visit (http://www.YouCanDropship.com)

About the Author
Chris Malta is a Microsoft Certified Systems Engineer. He has worked with computer Systems for 18 years. He's been involved in eCommerce systems, networking and site design for more than 6 years. He's taught college-level computer courses in Western NY. He developed The Drop Ship Source Directory, and he and his partners at Worldwide Brands, Inc., publish the Directory and run eCommerce sites of their own using Drop Shipping as their only business method.