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How to Add Shipping Costs to Products, the Effortlessness Math

image of shipping packages and calculator cost increase

Offering free shipping is not easy; it requires a math mastermind and advances business knowledge. Well, that is not true; any entrepreneur can offer free shipping. As long as you do your basic math, you will be okay.

The truth is that shipping is not free, no matter the service you use. Someone will be charged for it, either the customer, the business, or both. Also, another fact that affects the service is the increase in prices. Such event happens almost every year around the world. So, don’t feel you are the only one with the load; everyone is. It seems like the best alternative is to add the shipping cost to the products in a very conspicuous way.

Offering great prices plus free shipping looks like a complex task, but you can do it using the right strategies. Therefore, it is time to use your ingenuity to come up with solutions to stay competitive or use simple math. Whatever rock your boat! We prefer math!

A fact is that free shipping decreases your cart abandonment, shortens the check-out time, makes price simple, and gives customers satisfaction.

How to Offer Free Shipping?

Small businesses work with a minimal budget and small profit margins. Having to give something for free is not the best ideal situation for a business. Then how can you offer free shipping without breaking your bank? 

Check this out!       

Sale in bundles

Free shipping on bundles is effortless and convenient. Here are the steps to do it:

  1. Indicate that when combining multiple orders, the shipping is free. 
  2. Set your rules, for example:
    1. Set a maximum of days to select all your products for free shipping to apply.
    2. All items must go to one address.
    3. The minimum threshold; for example, you will receive free shipping with the purchase of $89 on products selected within seven(7) days.
    4. The business charges a shipping deposit at the beginning of the transaction; once the customer reaches the threshold, the company returns the deposit. 
  3. If the customer accumulates a total sale price of less than the threshold, purchases don’t apply for free shipping. 
  4. The business holds the merchandise for the set period for the bundle. On the last day of the bundle period, the shipment should be ready to be sent.

For example:

Sussy visits your store and reads that you offer free shipping on bundle shipments. Sussy has seven days to select all the items for a minimum threshold of $89. By the seventh day, she had already accumulated a total of $100, so she was eligible for free shipping. 

This alternative gives you significant advantages:

a. you have a customer returning to purchase more products

b. you satisfy your customer by offering free shipping

c. you are moving your inventory faster

Free Plus Shipping

 Free plus shipping is a method used by e-commerce stores selling products with zero purchase prices (yes, $0.00). It looks crazy, but it is a technique that works like a charm. All the prices on the store cost nothing. The customer pays only for the shipping, and if you think you won’t make any money, you are mistaken. 

For example:

  • The actual product’s price is $3.15; after adding the shipping cost, it goes up to $11.15, uses the charming price technique, and sells for $11.99.  
  • You add your sale price to your shipping price. 
  • This technique only works for a product with a cost lower than $10.00

Showcase Product for Free Shipping

 This technique shows products to the customer that will qualify them for free shipping. 

After the customer selects the product, pop another product that will make them eligible for free shipping. For example, if the customer chose a t-shirt, a popup would show another shirt or accessory to make the purchase free of shipping costs. 

The product on the popup should already have the shipping cost included in the price. It would be best if you made a balance between the original item and the showcase product. Check this example:

  • The customer shop for one t-shirt, they proceed to place the shirt in the cart. 
  • A showcased product will pop up to offer free shipping. You show how much the customer will save on shipping costs. 
  • The customer takes advantage and purchases both items.  

This technique helps you move inventory and increase your revenue.  

Free Shipping on Personalized Boxes

Sometimes is not what you offer; it is how you present it! It is not the same telling a client, “Free Shipping in orders over $50.00” that “Free Shipping on Special Deals.” Then you can present a minimal number of products they can add to their cart. Let me explain with an example.  

 You own a makeup store (it can be any product, not just makeup).

  • Show an image of an already personalized box (you don’t have to write their names, but you can use special color tissue paper or special ribbons on top of the box or include a particular card, whatever will make the package unique).  
  • Then have a list of products; for example, a bundle of products that will qualify the customer for free shipping. For example, if you need to sell at least five (5) products to offer free shipping, show nine (9) and let the customer select. Don’t give too many products that will delay the decision-making time. They can leave without purchasing anything.  
  • Once they select the products, show the shipping is free.

You see, it is not what you say is how you say it!

Complimentary Home Delivery

Luxury products never carry the word “Free” next to them. It affects the brand and makes it “lose” prestige. But, of course, this depends on whom you are targeting. Most people love free stuff; it is our nature! But when you sell premier items, the word “Free” is a no match.
Using the word “complementary home deliver” sounds more sophisticated. There is nothing wrong with this; it is just how you want your customers to feel.
Remember one thing, if you don’t make them feel great, someone else will, and there go your revenues.

Special Delivery at special times during the day or special days of the week  

 If you can deliver personalized products, then this is your technique. Use the day of the week or the time of the day when your sales are slow and offer same-day delivery to certain areas. Add more days or times, don’t let your customers get used to the same time or day; if not, they will not visit during other periods. How to work this technique?

  • Make a campaign “Special Delivery on Thursdays from 9 am ’til 4 pm on qualifying products”. 
  • Run the campaign for a couple of weeks.  
  • Then add another day, “Special Delivery to Your Door on Your Time, only Tuesdays and Thursdays, from 9 am ’til 4 pm”. 

Don’t overuse this technique. Leave it for a maximum of 3 days until you grow your clientele, then include other offers. 

Use the “Wish” Technique

Wish is the eCommerce (actually is a dropshipping using AliExpress) that offers low price products. The trick is to add a shipping charge to each item.

They adjust the item’s price to look even lower than on AliExpress. Then they add a shipping charge per item to everything you order. Crazy, but it worked! So the buyer pays more than what they will pay if they buy the product directly from AliExpress.

This technique is great if you are doing dropshipping from China or any place, and the warehouse selling you the items also is your competition. For example, most people use Chinese e-commerce, like AliExpress, CJ Dropshipping, Zendrop, Banggood, Eprolo, Chinabrands, DHgates, DealeXtreme, Global Sources, Jingsourcing, Light in the Box, and QuarkSCM.

The process is easy; you get connected with those stores through an API. Then you add your products to your page or site, including a profit per product.
The e-commerce Wish did the opposite; they lowered the price of the items compared to the original on the warehouse. Then add a shipping cost per item to make it look like another unique dropshipping warehouse. Their profits are enormous because they charge per item shipped, not per total sale!

Selling by Threshold 

A threshold (limit) is the amount of money you need to earn (either in sales or royalties). Therefore, knowing how to work thresholds is critical if you want to make money even after offering free shipping. 

You need to have all your data before you do the threshold. 

Calculating the Threshold for Free Shipping:

    1. Calculate your Average Order Value (AOV)

Do not include the shipping cost in this calculation. 

Use the formula: 

Revenue ÷ Number of Order= Average Order Value

 For this example, we will use an AOV of $60 (below)

 2. Define your Average Shipping Costs (ASC)

The Average Shipping Cost is a “hands-on work” kind of procedure. You need four essential elements to find the ASC: weight, container size, time, and destination. 

You may also need insurance and unexpected problems. I suggest two routes: a. general average, b. detail average

General average

Add all the expenses on shipping and divide them for the total amount of sales. Use a period, for example, 30 days. Thus this will tell you the average (to provide a baseline of actual cost) of shipment cost.  

Detailed average

Make a pivot table and start collecting data. Use Excel to make the table. Use the following information: 

Note: SHIPPING COMPANIES ALREADY HAVE THIS DATA

State/Destination| Weight| Dimensions (container)| Delivery Time| Price| Carrier

Now you know the exact price for a package of 2lbs going to State Bee, taking two days. Once you know the average price for this type of package, you are ready to offer free shipping without losing money.  

 For this example, we will use an ASC of $8.00

 Step 3 Calculate your Gross Profit Margin

The Formula for Gross Profit Margin

 Gross Profit Margin=Net Sales− COGS / Net Sales

Gross Profit Margin is the amount of money left after you take off the cost of the goods. Here is how to calculate this:

Subtract the Cost of Producing Product (how much it cost the product) from Total Sales and divide that number by your Total Sales 

Example:

($160,000 – $90,000) ÷ $160,000 = 44% Gross Profit Margin 

Now Find Out the threshold:

    1. Proposed a Minimum Cart Value, PMCV (PMCV is the minimum amount you need before offering free shipping)

       MCV= $65

    1. Subtract the Proposed Minimum Cart Value and Average Order Value $65-$60=$5
    2. Multiply the difference by the Gross Profit Margin $5 x .43= $2.15
    3. Now subtract the result from the Average Shipping Cost 

       $8.00-$2.15= $5.85.

This is the amount you will be paying out of your pocket. You need to readjust your Proposed Minimum Cart Value to avoid paying for shipping. 

New Proposed Minimum Cart Value= $74

    1. $74.00-$60=$14.00
    2. $14.00 x .43= $6.02
    3. $8.00- $6.02 = $1.98

Thresholds give you significant advantages:

    1. Lower the cost of shipping to the store or business
    2. Provide great value to the customers
    3. It gives you better management of your expenses and offers

 

You need to check other business prices to be competitive. Then find your great spot and start selling.  

Remember you need to know your numbers, including taxes, marketing, expenses, salaries, and supplies. This will give you a more defined idea of the average revenue you need to succeed. 

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