How To Handle Shipping Costs With Wholesale Customers

How To Handle Shipping Costs With Wholesale Customers

One of the most critical issues to handle when you are dealing with wholesale customers is the shipping costs. The fees you set can make or break the business that you have. Setting it too high can lead to cart abandonment while setting it too low can hurt your profits. So is there something you can do to handle this?

Shipping costs is one of the main reasons why some people don’t buy things online. Some items are sold cheaply but the cost of shipment can cost twice the product’s price. While the cost of goods and operation can be handled, it is the cost of shipping that can be difficult to determine. So before your customers decide not to buy anything from your products because of that reason, know what you need to do in order to avoid that situation.

Factors That Affect Shipping Rates

Before determining cost of shipping, you must know what affects the shipping rates first. Here are the important things to take note of:

  • Sales volume – this is the number of your daily, weekly, monthly and yearly sales.
  • Pickup or drop off time and rates – is the time you prepare the orders for shipping. Are you going to take a day or two? Perhaps a week?
  • Handling costs – the materials used for your shipping like boxes, labels, packing materials and how much these costs you.
  • Location of the carrier – are you living far from the carrier? Do you need to drive out of town just to ship packages? Or, can they come and collect it from you
  • Speed of shipping – how long will the shipment take? Are you able to deliver according to the time you estimated?
  • Average weight of the shipment – how heavy is the package? Do you need to charge extra?
  • Tracking and insurance – can you or your customer track the shipment’s progress? Can you monitor the movement of the packages? Does it cost extra for insurance on the delivery?

Once you have determined all of these, you can then start calculating the actual shipping costs and find a reliable carrier to work with.

What To Calculate When Handling Shipping Costs

Shipping costs are everything with e-commerce entrepreneurs these days as it is a big part of their business. However, the amount of the shipping costs can also steer your customers away especially if they are used to shopping without one or have shopped somewhere where they can freely ship it. So in order to avoid losing customers, calculating your shipping cost is important. Here are the most common shipping costs calculations that you should consider:

  • Free Shipping

Free shipping is attractive as they are an advantage for the wholesale buyer. However, this option is only attractive if your products are pretty high end and if the cost of your product can cover for the shipping while leaving you with enough profit. One of the best examples of this is the “Free shipping for orders over $250″ which can be a great incentive for wholesale customers to make larger orders. You can do the same if you are ready to make the same offer but make sure that the price and product are reasonable as well. You will also want to use a plugin like our WooCommerce Wholesale Prices plugin to handle restricting this to wholesale customers only. With free shipping, customers can add more items than usual which can lead to better overall profit margins for the order.

  • Flat Rates

Advertising flat rates for every order is a good way to attract customers. When we say flat rates, this usually is the break-even of the cost of the products ordered. While some products may cost more to ship, other orders will cost less so sellers will figure out how much they will charge per shipping between prices. Just keep in mind that different countries have different flat rates and international shipping can cost more. The only advantage that you can have from placing flat rates is that customers will order more so they can feel that they are meeting the full benefit of the said shipping rates.

  • Shipping by state or country

If you are planning to ship internationally, the best way that you can charge shipping rates is to know the weight of the item. International shipment can be pricey compared to shipping locally so it is vital that you know the price per lbs (or kgs in other countries) as they can double or triple the price depending on the location of the country you will be sending it to. Countries outside the US have different rates so obtaining the real rates per country should be also on your list.

  • Shipping by weight

Determining the weight of the product you are shipping is important. If you choose by weight you can also check in with a shipping company as to how much they are charging per weight so you have a realistic rate to compare to.

  • Shipping by the exact shipping cost from the carrier of your choice

This may cost you more as carriers will charge you if you ever want to link to their website in order to exchange information regarding orders. At times there might be additional software needed so you can link to them (again depending on the carrier you want to use). You should also consider the size of the box; its weight and height as well as depth in some cases. This is also because some carriers will charge you for average box size and extra for oddly shaped packages. So in order to take advantage of lesser rates, you need to work with them in order to obtain cheaper rates. If you can figure out what needs to be done, this could be an advantage to you as you’re essentially passing on the costs and won’t have to factor in shipping costs into your product margins

  • Shipping by regular mail

Sending orders through the mail is probably the easiest way to deliver goods but sending it by mail also goes through sorting, packaging, labeling and tons of cushioning before it reaches its destination. You are most likely going to buy boxes, labels, ink, bubble wrap and all the necessities you need to make sure that the product you sent out comes in one piece. These will be the factors that can affect the number of charges you will be placed on the markup of your products so make sure that you have summed it up in the best ways possible.

Pros And Cons Of Setting Fixed Shipping Costs

Setting your own shipping costs can be advantageous. But there are also some disadvantages that you should consider.

Pros:

  • Flexible – you can alter them at will
  • Consistent for the customer – doesn’t vary daily
  • Can run special promotions on shipping more easily

Cons:

  • You might miscalculate and lose money on some transactions
  • You need to be aware of how shipping affects your margins

Shipping costs can help your business, in general, that is why it needs good management to be successful. With careful planning and implementation, you can solve any problems that may arise. So do plan ahead, write the calculations carefully and of course, work with a carrier you trust. Things will go smoothly in the end.

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2 thoughts on “How To Handle Shipping Costs With Wholesale Customers

  1. I am having my product made and shipped from China to the US. I will then ship the product to vendors. When I sell my product to wholesale vendors, do I charge them to ship the product to them or is that an expense I assume?

    1. Hi Jeri and Jina,

      This is entirely up to you.

      Most people charge for shipping, especially for wholesale customers because they are generally buying a lot more than a standard retail customer and therefore the shipping costs can be quite significant.

      You might want to look at pricing breaks or free shipping if they purchase a certain subtotal/quantity. That can entice people to make bigger orders.

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