Hello Readers,
In our last post, we dove into the fees we’re paying to sell our products. This week, we’re going to talk about the biggest fee of them all: shipping.
The Problem
If you’ve ever looked into shipping, you’ll know it’s expensive. On top of that, most shoppers expect shipping to be free. Thanks, Amazon. It’s such a big deal that Etsy will offer to list your shop higher in the search results if you sign up for their free shipping guarantee. What is that guarantee? If someone spends $35 or more in your shop, you’ll ship the order for free.
When we started, we wanted to be transparent and separate shipping from the product cost but we’ve ended up on the other end of the spectrum. Prices now have shipping baked in where possible, and we offer free shipping instead. It just got too complicated trying to figure out the right amount of shipping to charge.
The complication largely stems from trying to ensure there is some profit when you sell a single item. For example, on a recent sale an Etsy user purchased one 7×10 art print for $15. The shipping charge that we paid for that single item? $3.75. Our total profit on that single sale was approximately $3-$4 after shipping, Etsy fees, and production costs.
Now had this customer purchased a second print of the same size, our shipping cost would not have changed. This was a padded envelope measuring 8.5 x 11 in size and weighing approximately 3 ounces. An additional print would not have changed this enough for the shipping cost to change.
If the customer had purchased a second print, the profit on that second print would have been about $8 for a total of $12.
This is a problem when trying to calculate how much shipping to charge. If you charge a flat $3 per item for shipping, you’ll end up over charging the customer.
Charge less and you’ll end up losing profit on small sales like this one. It can be a frustrating experience.
Shipping Discounts
Another thing to note here is that you can buy shipping labels at discount prices from third-party providers. Platforms like Etsy and Shopify have this functionality built-in to the platform. WooCommerce offers many extensions along-side their own built-in product. This was not something we were intimately familiar with when we first started.
We looked at a couple options, but we landed on PirateShip. It’s a reputable platform. It’s also completely free to use and provides the core tools you need:
- Emailing customers with shipping status directly
- Importing orders from multiple sources including WooCommerce and Etsy
- Cost comparison across multiple shipping providers
- In-platform tracking of your packages
If you take anything away from this article, let it be this: You need to sign up for a service like this. It doesn’t matter if you’re shipping one product or fifty products every month, you need this. It makes shipping more affordable.
As an example, I pulled pricing to send a 1.5 ounce package, 8.5×11 dimensions, to Las Vegas:
USPS First Class would cost $3.97 but if I had stood in line and paid for that, I would have been charged $5.15. This $1.18 makes a big difference when product margins aren’t particularly large to begin with.
As always, there’s a key exception. If you exclusively ship using MediaMail (only books and educational material qualify), you may not save money with a service like this. MediaMail is already cheap and we haven’t seen discounts in this platform for that specific shipping class.
One other thing to add here, we were nervous about using these services at first. Not because they are free but because you need to weigh and measure your packages to get the right shipping label and then you’ll have to print the shipping label. We didn’t want to invest a lot of money into this without having a clear vision of how often we’d be shipping products, so we reused things from around our house.
- For measuring dimensions, we use a standard issue Stanley tape measure.
- For weighing, we have a digital food scale that has worked perfectly.
- For shipping supplies, we’ve been hoarding packing materials from packages shipped to us.
Granted, we did buy 14″x18″ mailers because for most purchases, a box would have been excessive. We also purchased shipping labels that work with our existing inkjet printer. (We chose these particular envelopes and labels to make our shipping a bit more ecoconscious.)
So, should we charge for shipping?
For all the research we’ve done on this topic, the most consistent advice we found was that you should include your shipping costs into the price of your product and then offer free shipping. This is sound advice in most cases.
You can implement this in different ways. For us, we opted for free shipping wherever possible no matter how much you spend in our store. Another alternative is to offer free shipping after a minimum purchase amount. There are drawbacks to each of these approaches. For example, without a minimum purchase amount being required, we have to ensure that prices on all products are high enough to account for shipping charges if you purchase a single product.
Consider this tank from our store. Our price for this product is $28.99. The base product price from the provider is $17.99 and shipping is $4.69 for the first shirt. (If you were to buy a second shirt, we would be assessed a $2.20 charge for the second one.)
Anyway, if you bought this tank right now from our site, we would pay 22.68 for the product and about $1.15 in transaction fees leaving us with a profit of $5.15.
This assumes a 0% discount.
We frequently run sales and offer discounts so here’s how the margins look for different discounts:
| Discount | Profit |
|---|---|
| 0% | $5.15 |
| 5% | $3.75 |
| 10% | $2.34 |
| 15% | $0.94 |
Having said all of this, we need to tell you about the exception.
Not Everything Can Have Free Shipping
When you purchase books through our website, there is a shipping charge. Specifically, the charge is being calculated by WooCommerce as 15% of the total price of the books with a minimum charge of $3.50 and a maximum charge of $15. This is largely because book prices are based on market rates and even the big box stores charge shipping for books.
It’s also because many of our book covers include the price in the barcode. You can always charge less than the printed price but you certainly can’t charge more.
So here’s a What NOT to Do: Our book Scribble originally had a list price of $18.99, but due to an overlooked typo, it ended up with a barcode showing a price of $15.99. This book costs approximately $11 to print and shipping a single copy with media mail costs $3.65. With a 0% discount applied to the book our estimated profit is about $4.22 – or slightly more than the shipping cost.
That’s still a good margin for us but at this price, we can’t place the book in a bookstore. (You can read more about the practice of wholesale discounts here.)
Wrapping Up
There’s a lot more to product pricing than we covered here, so we’ll leave you with some general guidelines:
- Research the market for your product. If you can’t produce/ship the product in that relative price range, consider alternatives.
- Don’t underprice your product in the hopes of exposure or increased sales. Remember, it’s easy to offer discounts on your product. It’s harder to raise established prices.
- Account for marketing and advertising costs. You will pay for advertising and this comes out of your profits.
- Make room in your cost for sales. When you advertise, you’ll do better if your advert also offers a coupon code. You can’t offer coupons if your prices are already set as low as possible.
- Remember to pay yourself too.
Follow us here, on Facebook, or LinkedIn to stay up-to-date on our business and our future plans. If you like what we are doing here, check out our shop and use discount code WELOVEBOOKS to get 13% off any order of $50 or more through the end of July.