E-commerce Shipping Pricing Methods - GoShip.com

The Pros and Cons of Different E-commerce Shipping Pricing Methods

Posted on:
Nov 25, 2022

There are several shipping pricing methods for e-commerce businesses–each with its strengths and weaknesses.  

Pros and Cons of Flat-Rate Shipping Method  

Flat-rate shipping is a pricing method where the shipping fee depends on the size of the box or envelope rather than the item’s dimensional weight.  

Pros of Flat-Rate Shipping  

  • Price consistency: With flat-rate shipping, shipping fees are predictable and consistent since they do not depend on the weight of each package. The pricing method is also immune to peak season surcharges, keeping shipping fees uniform all year round.  
  • Lower shipping costs for small, heavy items: Flat-rate shipping helps businesses avoid the higher rates associated with shipping items with a high dimensional weight.  
  • Streamlines the shipping process: This pricing method simplifies shipping by eliminating time-consuming activities like weight and dimension tracking, price calculations, etc.  

Cons of Flat-rate Shipping 

  • Loss of branding opportunities: Opting for flat-rate shipping often requires that you use courier-supplied packaging. While, on one hand, this helps you save costs on the packaging, on the other, it is a missed branding opportunity for your business as you’d lose control over the delivery experience.  
  • It isn’t ideal for lightweight packages: Flat-rate shipping can significantly lower the costs of shipping heftier packages but can lead to spending more when used to ship lighter items.  

Pros and Cons of Live Rate Shipping Method

Live rate shipping is a method where shipping costs are calculated in real-time based on the dimensions, weight, and destination of the items in a customer’s cart.  

Pros of Live-rate Shipping  

  • Transparency: Live-rate shipping costs depend on the content of a customer’s order and update immediately after changes are made. In addition, this pricing method promotes transparency and helps customers make well-informed decisions about their purchases.  
  • Better customer experience: With live-rate shipping, customers can choose their preferred shipping option based on price, delivery date, and other factors. Since there’s no need to use courier-supplied packaging, you have complete control over the delivery experience and can make long-lasting impressions on your customers.  
  • Ideal for lightweight packages: Unlike the flat-rate pricing method that charges the same amount irrespective of package weight, live-rate shipping charges cheaper rates for lighter items with lower dimensional weights.  

Cons of Live-Rate Shipping  

  • Unpredictable prices: Live-rate shipping costs are determined by a product’s weight and size, making them unpredictable.  
  • Can increase cart abandonment rates: Customers with heavy items in their cart may be discouraged from completing the checkout process due to high shipping fees.  

Pros and Cons of Free Shipping Method

As its name implies, free shipping is a shipping method where customers receive packages free of charge.  

Pros of Free Shipping 

  • Reduces shopping cart abandonment: Customers have an irrational hatred for shipping fees. Unsurprisingly, shipping costs are one of the leading causes of shopping cart abandonment. Additionally, free shipping tackles this problem by reducing the friction in your checkout process, which encourages shoppers to complete their orders.  
  • Boosts sales: Free shipping is an effective marketing tool that drives sales to an e-commerce platform. Several studies prove its efficacy in boosting sales, conversion rates, and order volume. 
  • Improves customer experience: Offering free shipping shows an understanding of your customers’ pain points and more importantly, proves your willingness to relieve them. This can significantly improve your customer experience and boost retention rates.  

Cons of Free Shipping  

  • Lower profit margin: The most obvious downside to free shipping is its impact on a business’s bottom line. Shipping is never really free. If your customers do not pay for it, you will have to bear the costs. Unless you factor shipping fees into your product prices, offering free shipping will eat into your revenue. It will also reduce your profit margin.  
  • Increased returns: Free shipping removes guilt and hesitation from the buying process. This makes customers more likely to purchase items they don’t need, only to return them later.  

How to Decide Which Method is Right For Your Business  

The right shipping method for your business depends on its unique needs and priorities. You should choose a cost-effective method that’s best for the kind of products you sell. It should also deliver your customers’ packages to them quickly and accurately.  

Address, Test, and Optimize  

There’s no one-size-fits-all method to shipping. Understanding how each method works helps you decipher the one that will work best for your products and meet your customers’ expectations without being too expensive. After choosing your method, you should test its effectiveness to figure out if it’s the right fit for your business. In addition, testing also helps you detect the areas that require some adjustment. This also allows you to optimize the method to fit seamlessly with your shipping strategy.  

Get Affordable Shipping rates with GoShip  

Regardless of which shipping method you choose for your business, GoShip is available 24/7 to connect you with certified carriers that will meet all your shipping needs. Our self-service platform allows e-commerce businesses to access affordable shipping rates from over 42,000 companies in the US and Canada. Enter your shipment details in our online quote tool to find the best offers from carriers around you. 

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