Competitive pricing is crucial for eCommerce success; if you can best your competitors on price, you’ve got a leg up at the outset. But you must be careful not to cut your margins so thin that you slice off all your profit. So, it’s critical to understand the true costs of getting your products from the factory to your customers, including transport, fulfilment, and shipping.
Surprise shipping charges are a frequent source of sticker shock, particularly for retailers new to online sales and fulfilment. Here are four of the more common hidden fees in eCommerce shipping and how to reduce or eliminate them.
Volumetric charging
If you sell oversized merchandise, your parcels could be subject to volumetric charging (also known as dimensional weight). Volumetric charges are shipping fees calculated by size rather than weight, and delivery services will typically charge you the greater of actual or volumetric weight.
Let’s imagine you’re shipping an order with an actual weight of 2 kg in a box with dimensions of 50cm x 50cm x 20cm. To calculate the volumetric weight of the package if shipped with Parcelforce, multiply the dimensions and then divide by 5000, thus:
50cm x 50cm x 20cm/5000 = 10kg
If you ship this order via Parcelforce, you’ll pay to ship 10kg, not 2kg. FedEx and DHL also use a coefficient of 5000 for packages measured in centimetres.
Most carriers have volumetric weight calculators or publish the calculations you need. To avoid undercharging your customers for shipping or failing to build enough into your pricing to cover free shipping, you need to know which products will be subject to volumetric charging.
As another example, if you were to buy building heavy materials online, the chances are that some of the dimensions and weights of the items would mean that some couriers could reject them. This is where a dropshipping strategy could come in handy to bypass this problem by getting your building materials supplier to do the shipping for you.
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In some cases, there’s no way to escape volumetric weight charges. But, if your package is just a smidge too big for the weight, work with your factory and fulfilment company to see if you can rework the packaging to avoid volumetric charging.
Surcharges
Shipping companies add surcharges for various circumstances, including peak eCommerce season, which puts a high demand on delivery services. Rising fuel prices have led shippers like FedEx to apply fuel surcharges that change frequently. You can’t skip these surcharges, but by keeping an eye on them and adjusting the shipping charges in your shopping cart accordingly, you can keep them from ruining your profitability.
Other surcharges, however, are avoidable. For example, your packing and shipping method for lithium batteries can make the difference between a 4.00 GBP DHL surcharge or no extra charge. Lithium batteries shipped in a box with other equipment are subject to the surcharge. However, if the battery is shipped installed, there’s no extra charge to send it. So, suppose you sell electric bikes powered by lithium batteries. If you include the battery pack in the box with the bike, that’s an extra 4.00 GBP; if you install the battery on the bicycle before you ship it, you save the surcharge and reduce your shipping fees. Plus, your customer will have less assembly when they receive their new bike.
Shippers add surcharges to packages transporting materials that are considered hazardous, parcels that need to be shipped with dry ice, and other special handling requirements. Check the classification of your products and make sure your shipper doesn’t misclassify products as hazardous and apply the surcharge in error (it happens).
Insurance vs. lost parcels
When calculating your shipping costs, you may not include the insurance cost. If your product range includes high-value items, additional insurance is a must.
For instance, FedEx provides claims coverage of 3.40 euros per kg for packages shipped from the UK to the EU. If that doesn’t cover your potential loss in case of damage during shipping or a lost parcel, you need to purchase extra insurance.
Parcel tracking is very sophisticated, and carriers don’t lose many packages today, so you might figure that the replacement cost for a few lost orders is less than the fees to add insurance to every package. That’s a valid and reasonable choice; just make sure you base it on data, not assumptions or hunches. And recalculate the costs of insuring vs. not insuring parcels every half year or so to see if the balance has tilted in one direction or another.
Returns
Returns aren’t technically a hidden shipping fee, but the cost of return shipping can be a hard-to-quantify variable for eCommerce companies. And the cost of returns includes goods that can’t be resold and replacement packaging.
Some percentage of returns is unavoidable in online retail, and you must build that cost into your cost of goods sold. But you can take steps to reduce your return rate.
Preventing returns begins in the fulfilment warehouse. A logistics company with robust checks at every step of the pick and pack process is less likely to make a fulfilment error that could lead to a return.
One of the most common picking errors is getting the wrong quantity. For instance, if an order includes two of one SKU, the picker can easily miss the amount and pull a single item. Fulfilment centres can use bar codes, RFID chips, and scanners to alert pickers when the items scanned into the bin don’t match the corresponding pick list. The warehouse management system can halt picking until the worker corrects the error.
Another common reason for returns is improper packaging. A heavy item shipped in a box that’s not strong enough is more liable to be damaged during transport. Using the proper packing to fit the order is a simple way to head off returns due to damage. Choose a fulfilment partner that understands how to handle and ship products of similar size, weight, and other characteristics to yours. You’ll have fewer returns and protect your operations from that hidden shipping fee.
An excellent 3PL is your best ally in reducing hidden shipping fees. Leverage your fulfilment centre’s experienced staff to share the expertise they’ve gained working with hundreds of eCommerce companies.
Jake Rheude is the Vice President of Marketing for Red Stag Fulfillment, an eCommerce fulfillment warehouse that was born out of eCommerce. He has years of experience in eCommerce and business development. In his free time, Jake enjoys reading about business and sharing his own experience with others.
