Rethinking my shipping charges to customers

[mishmish]

I've been in business for thirteen years and had a website up for eight years but most of my sales have been at farmers markets and festivals. With the pandemic I've had to rely on web sales and I finally realized how outdated my website was! Now that we're working on updating it, I've also realized that I've been losing money on shipping. I charge $7 flat rate, free shipping over $75 and send most everything by priority mail. And if someone wants one bar of soap or something small, I'll send it in a padded envelope and charge $4. I have a good intuitive sense for which shipping option is going to cost me the least, but lately I'm losing money on every package I send.

Do you think it's better to increase my flat rate charge to $8 (or more), or figure out a way to calculate the exact cost of the order and make customers pay accordingly, OR just raise my prices a bit? I know that customers HATE to pay shipping but I assume they'll pay more for the merchandise if the shipping is "free" or cheap.

One reason I'm hesitant to raise my prices online is because of my local customers. I can't charge one price online and another price in person, and I don't think the local market would support higher prices right now.

We're weighing commonly ordered weights and considering priority and flat rate prices to various parts of the country (which is how we figured out the $7 as a break even point eight years ago.) I'm just wondering what other people do. Anyone want to share/advise? Thanks!

Michelle

 

[The Park Bench]

I've been in business for thirteen years and had a website up for eight years but most of my sales have been at farmers markets and festivals. With the pandemic I've had to rely on web sales and I finally realized how outdated my website was! Now that we're working on updating it, I've also realized that I've been losing money on shipping. I charge $7 flat rate, free shipping over $75 and send most everything by priority mail. And if someone wants one bar of soap or something small, I'll send it in a padded envelope and charge $4. I have a good intuitive sense for which shipping option is going to cost me the least, but lately I'm losing money on every package I send.

Do you think it's better to increase my flat rate charge to $8 (or more), or figure out a way to calculate the exact cost of the order and make customers pay accordingly, OR just raise my prices a bit? I know that customers HATE to pay shipping but I assume they'll pay more for the merchandise if the shipping is "free" or cheap.

One reason I'm hesitant to raise my prices online is because of my local customers. I can't charge one price online and another price in person, and I don't think the local market would support higher prices right now.

We're weighing commonly ordered weights and considering priority and flat rate prices to various parts of the country (which is how we figured out the $7 as a break even point eight years ago.) I'm just wondering what other people do. Anyone want to share/advise? Thanks!

Michelle

I offer free shipping on all orders. I charge more for items on my website than I do for in person sales. I charge the same on Amazon as I do on my website.

 

[DeeAnna]

...One reason I'm hesitant to raise my prices online is because of my local customers. I can't charge one price online and another price in person...

I think two pricing structures -- one for local sales and one for online sales -- makes perfect sense. Businesses routinely charge different prices for sales on their actual business website versus their sales on Amazon. Why not two pricing structures for local/direct sales vs. online/shipped sales?

I bet you already have two pricing structures in place assuming KY charges sales tax. Your out of state website customers probably don't pay sales tax, right? But I bet your locals do (or they should be if your biz is paying sales tax to the KY Guv'nor). So there's already a difference in the pricing structure that's to the advantage of your website customers.

 

[mishmish]

I'm actually in Maryland, KY was the other person who responded, who offers free shipping on every order. One reason why I have difficulty with the two-tiered price system is that most of my local farmers market and annual festival customers are ordering online now (I'm offering them free or reduced price home delivery, depending on distance from my home.) So I can't imagine charging them $9 or more for the same bar of soap they're used to paying $7 for. It's true that MD has 6% sales tax that out-of-state customers don't pay. I always resist raising prices, even though our costs for everything continues to rise. I can't do free shipping, but I want to charge a fair price that doesn't make me lose money.

 

[DeeAnna]

"...So I can't imagine charging them $9 or more for the same bar of soap they're used to paying $7 for ..."

So maybe then the "free" shipping model is something that won't work for your business. I don't use it either, partly because I refuse to mislead people about "free" shipping even if they want to be misled, and partly because I also don't want to overcharge my local customers.

It's possible to create various shipping options and pricing structures to fit the different circumstances you have to deal with, but you might have to spend some time thinking it through.

I re-evaluate my shipping options about once a year to make sure my overall shipping costs aren't higher than what I charge for shipping. I don't expect to make money on shipping charges, but I sure don't want to lose money either. Break even is my goal.

My apologies for thinking you were in Kentucky. My mistake.

 

[mishmish]

Exactly. I don't want to make money off shipping, but don't want to lose either. In the beginning, my east coast customers were subsidizing the west coast customers to some extent. But over the holidays, I sent a lot of $8.00 + packages for $7, sometimes closer to $10 or more. And that's not considering the cost of boxes, bubble wrap, peanuts, and tape.

 

[soapmaker]

In Canada the postal service has something for small businesses called Snap Ship. You weigh, measure and create your own shipping label, then just drop off at the P.O. or they will pick up if you are in an area where that's offered. I charge the exact price.

 

[DeeAnna]

If you charge only for the exact cost of shipping, do you add the overhead costs of the label, shipping box or envelope, packing tape, and other shipping incidentals into your cost of product? I know it's pennies here and a dime there, but it all adds up in the long run.

It's easy to ignore these costs if a person ships a package or two every so often, but I ship over 500 packages a year and I have to pay attention to this. Boxes, packing tape, box labels, paper, printer toner, etc. ... it adds up. I include these costs in the cost of shipping to be the most fair to everyone.

 

[soapmaker]

I don't ship very much at all so didn't initially charge for this but have since added a "handling" for all that stuff plus drive to the P.O. It's only 5 minutes away but still it's a service.

 

[TheGecko]

I would just increase your shipping costs in line with actual costs plus a flat 'handling' charge. You could also offer "will call" for your local customers.

 

[SPowers]

In Canada the postal service has something for small businesses called Snap Ship. You weigh, measure and create your own shipping label, then just drop off at the P.O. or they will pick up if you are in an area where that's offered. I charge the exact price.

I'm in Ontario as well - I've developed a tierd system based on # of soaps bought. I weighed them in advance and came up with pricing based on an average weight. I offer free shipping over $100. The smaller orders subsidize the smaller orders to some extent. Having said that, I don't do much shipping at all - most sales are local and picked up curbside. Having said that and even with Snap Ship, costs are quite high imo, although after spending so much for on shipping for supplies, etc. I no longer have that 'sticker shock' - most customers still do though.

 

[melinda48]

In Canada the postal service has something for small businesses called Snap Ship. You weigh, measure and create your own shipping label, then just drop off at the P.O. or they will pick up if you are in an area where that's offered. I charge the exact price.

We do that in the US. It is called Click n Ship. Put in weight, destination and voila! Pay for postage and print the label. You can also track easily. I'm use it for everything.

 

[soapmaker]

We do that in the US. It is called Click n Ship. Put in weight, destination and voila! Pay for postage and print the label. You can also track easily. I'm use it for everything.

Why aren't the rest of you U.S. soapers using this?

 

[rdc1978]

I'm actually in Maryland, KY was the other person who responded, who offers free shipping on every order. One reason why I have difficulty with the two-tiered price system is that most of my local farmers market and annual festival customers are ordering online now (I'm offering them free or reduced price home delivery, depending on distance from my home.) So I can't imagine charging them $9 or more for the same bar of soap they're used to paying $7 for. It's true that MD has 6% sales tax that out-of-state customers don't pay. I always resist raising prices, even though our costs for everything continues to rise. I can't do free shipping, but I want to charge a fair price that doesn't make me lose money.

Are you putting an order minimum for delivery?

I'm just curious.

 

[soapmaker]

I know you aren't asking me but just saying no I don't.

 

[maxine289]

This is a thorny issue indeed. As a small vendor, I cannot really offer free shipping on small orders. I've done it on large orders, but most of my orders are small. I cannot ship a $7.00 bar of soap for free, and wonder if someone would pay the $12 I'd have to charge to ship a 4 oz. bar of soap for "free". I calculate my shipping by weight. I input the weights of my soaps, which is a little more than the actual weight of the bar to account for packing materials and "handling", and the shipping fee is calculated based on total weight of all the soaps in the order. The charge shows up at checkout. I use the Priority Mail and do Click & Ship so I print my own postage on plain paper. The Priority Mail shipping envelopes and boxes are free and the post office will mail them to you for free. I don't use the Priority Mail flat rate boxes as those are very expensive to mail. Does your e-commerce/web site have a shipping cost function that you could configure to charge by weight?

 

[The Park Bench]

So, my local customers also order from my website in the "off season" and even though I thought they would balk at the increased prices on my website, it doesn't seem to bother them!. And I don't charge sales tax at the farmers market but I do on my website, again they don't seem to mind.

 

[mishmish]

This is a thorny issue indeed. As a small vendor, I cannot really offer free shipping on small orders. I've done it on large orders, but most of my orders are small. I cannot ship a $7.00 bar of soap for free, and wonder if someone would pay the $12 I'd have to charge to ship a 4 oz. bar of soap for "free". I calculate my shipping by weight. I input the weights of my soaps, which is a little more than the actual weight of the bar to account for packing materials and "handling", and the shipping fee is calculated based on total weight of all the soaps in the order. The charge shows up at checkout. I use the Priority Mail and do Click & Ship so I print my own postage on plain paper. The Priority Mail shipping envelopes and boxes are free and the post office will mail them to you for free. I don't use the Priority Mail flat rate boxes as those are very expensive to mail. Does your e-commerce/web site have a shipping cost function that you could configure to charge by weight?

At the moment I have three tiers: Very small, <8 oz, packages are sent by 1st class mail for $4. Like a single bar of soap, or a few samples, or a few lip balms - things like that. Over 8 oz I charge $7 flat rate but since recent raise in price that no longer covers the average cost. and over $75 of sales I'll send it free. Problem is, I lost $70+ on postage in December. So my shipping price has to rise, but I don't want to discourage sales because of shipping costs. I use GoShippo and print my postage, and I use a lot of the USPS flat rate boxes. We're switching to Wix from Weebly, and they do have different configurations for shipping. My DH does a lot of this type of calculations for work, I just would never have thought it was this complicated.

So, my local customers also order from my website in the "off season" and even though I thought they would balk at the increased prices on my website, it doesn't seem to bother them!. And I don't charge sales tax at the farmers market but I do on my website, again they don't seem to mind.

Are you putting an order minimum for delivery?

I'm just curious.

$10 minimum purchase for home delivery. We're adjusting th cost of home delivery as well. It will still be free for anyone in our town, $3 for the rest of the county, and $5 to the next county over where a lot of customers from one particular farmers market reside.

We need to drive the cars during the pandemic to keep the batteries charged, so we do a "road trip" once or twice a week. Luckily, there's a good restaurant in either direction we usually go, so we either get Thai food or the best spicy fried chicken sandwiches in the world (Roamin' Rooster in NE DC)

 

[amd]

Why aren't the rest of you U.S. soapers using this?

Because I use pirateship which gives me a discounted rate on shipping and does all the same things.

For the OP: I played with shipping charges alot through 2019, watched ordering trends for my online store (which is the only place I take shipping orders), and finally decided that based on how my customers order I could afford to charge a low flat rate on all orders and based on the way I source and price my products it would only nominally affect my profits (like 30cents per item shipped in most cases). When shipping rates increased in Oct, I decided to also increase my flat rate - from $5 an order to $8. No one complained, threw a tantrum, and I was at the PO almost every day in Dec to ship orders. I did figure out the order size where I could consider doing free shipping without it breaking the sale, so I created a free coupon code for free shipping with order of $ or more, that only goes out to customers who get my email newsletter. Also, when someone orders something small that I can ship for $3, I'll refund them back the difference of shipping+materials+a bit for time. I get labels and envelopes for around 5cents each (I have a wonderful friend who works at 3M and can get them for me for employee cost), so typically for a $3 shipping order I will refund $4. I think it helps build trust and relationships with the customer that I am charging fair prices.

 

[JackofallShaves]

I charge a flat rate of $5 for shipping. I used to offer free shipping earlier but that was really killing my margins. I still eat $3.40 in shipping costs per order as most of my customers order 2 products at once and shipping them via USPS Priority Flat Rate padded envelope is actually cheaper than shipping via regular First Class Mail.