How to choose a shipping cost method that suits your delivery process

If you’re selling a product online, shipping and delivery (and the communications around these things) are a crucial part of a customer’s experience of your business. In this four-part series, we look at how you can meet customer expectations when it comes to shipping and delivery. Here, we cover five of the most common methods to calculate shipping charges and how to pick one that’s right for your business.
· 07 October 2021 · 5 minute read

Your customers will often consider the shipping costs associated with delivery while online shopping. Even so, the Business Intelligence report on Customer Experience found that many businesses underestimate how postage charges influence a customer’s decision to shop with you online. 

Given the rise in popularity of online shopping, and the increase in eCommerce sales during peak trading periods, it’s important to calculate shipping charges in a way that suits both your customers and your business. 

Here, we list popular shipping cost methods and how they work, so you can choose the option that makes the most sense for your delivery process.

Flat rate shipping

In ecommerce, flat rate shipping refers to a postage method where online businesses set a standard shipping rate per item, per shipping class, or per order.

Flat rate shipping is suitable for: 

Businesses that sell products of the same approximate weight and size to be shipped within Australia.

Flat rate shipping is not suitable for:

Businesses who need to ship items overseas, as international shipping can incur taxes and import fees.

Best practice:

Check sales history data to figure out the average size and weight of items sold to help calculate the flat rate you’ll charge customers.

Consider this shipping cost method if you sell items of similar weights and sizes to customers within Australia.


Weight-based shipping

Weight-based shipping rates are determined by the weight of the item to be posted. So, by using the weights of products from your eCommerce store, you can offer different shipping charges for products based on how much they weigh.

Suitable for:

Businesses that sell products that are similar in size but that differ in weight. For example, items such as furniture.

Not suitable for:

Businesses that sell items of similar weights, as manually applying weight-based shipping costs is a time-consuming process.

Best practice:

Plan how you’ll display item weight on product pages and consider adding a cost of shipping calculator to your web store.

Consider this shipping cost method if you sell items of similar sizes but differing weights. And if you’re able to add a cost of shipping calculator to your web store.


Quantity-based shipping

A shipping method based on item quantity will be calculated by the total amount of products your customers purchase from your web store. Quantity-based pricing means that the shipping cost is calculated based on a base rate with an additional charge for each subsequent product added to the order.

Suitable for:

Businesses that sell products that differ only in a way that is not related to size or weight, such as colour or flavour.

Not suitable for:

Businesses that sell items that vary in weight and size, such as appliances of differing dimensions.  

Best practice:

Consider offering lower or free shipping costs to customers who buy more items. For example, $10 for up to 5 items or $5 for 6 items or more.

Consider this shipping cost method if you sell items that are similar in size and weight, such as candles or confectionary.


Price-based shipping

With price-based shipping, the shipping cost is based on the total price of the items being purchased. With this delivery method, shipping costs may decrease as the total price of orders increase, potentially encouraging customers to spend more per order.

Suitable for:

Businesses that want to encourage customers to add more to their cart, as the more an online shopper spends, the less they’ll pay for postage.

Not suitable for:

Businesses that don’t want to pay for shipping costs. In these scenarios, flat rate shipping may be a more suitable option.   

Best practice:

Consider offering lower or free shipping costs to customers who spend a certain amount or above.

Consider this shipping cost method if you want to encourage customers to spend more during each online shopping session. And if you’re happy to contribute to postage charges if it means customers may place larger orders.


Free shipping

In eCommerce, some online businesses offer free shipping so that customers don't have to pay for the delivery of their order. Some brands offer free shipping on all orders, while others do so for orders that reach a certain dollar amount.

Suitable for:

Businesses that want to gain a competitive advantage by offering customers free postage.

Not suitable for:

Businesses that may not be in the position to offer free shipping without impacting their profit margin.

Best practice:

Promote free shipping on your website and social media channels to help encourage customers to shop with you online.

Consider this shipping cost method if your online business is in the position to pay for postage when an order reaches a certain dollar amount, as it may be worth your while.

The Customer Experience report found that 73% of customers found free shipping to be important, but only 32% of small businesses considered it so. Businesses who offer this option may stand out from competitors online.


Why should you think carefully about your shipping cost method?

The shipping cost method you choose may help give you a competitive edge in the world of eCommerce. In the Customer Experience report Ben Franzi, General Manager of Parcel and Express Services at Australia Post, highlights the importance of shipping costs on customer satisfaction.

“The delivery experience starts at the checkout,” he says. “Make sure you give your customers choice and are upfront about shipping costs, delivery timeframes and your return policies.”

So, to plan a delivery experience that helps improve customer satisfaction, choose the shipping cost method that suits both your brand and your online shoppers. And, most importantly, communicate postage information clearly on your business website.


This article does not necessarily reflect the views of Telstra or its staff.

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