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How to Set Up Shipping for Your Online Business

A smooth shipping process should be at the core of any online store

When you set up shipping for your online business, your three main priorities are to: 

  1. Be cost effective.

  2. Streamline your operations.

  3. Create a positive experience for your customers.

It’s important to establish a shipping strategy that supports those priorities and works for your business. In this article, we’ll walk you through the basics of small business shipping tips, including best practices for shipping costs, branded packaging, and return policies. 

Determine your order fulfillment method

The first step to setting up your online business shipping strategy is to determine how to ship your products. There are two primary order fulfillment methods for online businesses: self-fulfillment and drop-shipping. Check out their pros and cons to understand which is the best route for your online store. 

Self-fulfillment

In this method, you handle or oversee the entire order fulfillment and shipping process on your own. Depending on the size of your inventory and volume of orders received, you might hire someone to assist in fulfillment or rent a storage or studio space where you can process orders outside of your home. Self-fulfillment is most manageable if you run a smaller operation. Regardless of the size of your operations, self-fulfillment gives you the most flexibility in how you package and process orders, as well as the most visibility into your inventory, so it could be the right method for you if you like being hands-on with every aspect of your business. 

Drop-shipping

If you expect to sell a high volume of orders, or sell print-on-demand products, drop-shipping could be the right fulfillment method to help scale your business. With drop-shipping, you leave all of the inventory management, order fulfillment, and shipping operations in the hands of an off-site third-party partner. Although drop-shipping simplifies the fulfillment process for you, keep in mind drop-shipping typically won’t give you the option to brand or personalize your order packaging. 

Sync with shipping extensions

Whether you choose self-fulfillment or drop-shipping, there’s a shipping extension that could be right for your business. Extensions are third-party tools that you can sync with your online store in order to streamline various logistics in the shipping process. For example, if you want to use drop-shipping, Squarespace offers extensions that seamlessly communicate between your online store and a drop-shipping partner. Or if you use self-fulfillment, there are extensions that can help you reduce the time it takes to process orders and sometimes even offer discounted rates on shipping labels.

Save with integrated shipping labels

If you’re going the self-fulfillment route, Squarespace makes shipping labels simple. Instead of adding a third-party tool for shipping, you can purchase USPS shipping labels directly from a Squarespace Business or Commerce account. Squarespace shipping labels simplify your ecommerce fulfillment workflow, as customer addresses and tracking numbers populate automatically in your account. They may even help you save on shipping costs with rates typically lower than retail pricing for USPS shipping options. When you use Squarespace shipping labels, you still have the option to integrate third-party fulfillment extensions for dropshipping, international shipping, or other shipping methods, if that supports your business needs. 

Calculate shipping costs and set pricing

Understanding how to calculate shipping costs is a common obstacle for small business owners, but it doesn’t have to be. We’ll demystify how to calculate your shipping costs and the best options for what to charge customers for shipping. 

Before you can calculate accurate shipping costs, you first need to determine if you want to ship domestically or internationally. Factor in where your target audience lives, and consider the additional costs, forms, and policies associated with international shipping. In this guide, we’ll focus primarily on domestic shipping costs, but the basics of these small business shipping tips are a helpful framework for if you need to learn about international shipping costs as well. 

How to calculate shipping costs

In order to calculate your shipping cost per product, you need to understand the variables that contribute to that cost. 

Carrier, service, and speed

Shipping carriers are the services that deliver your packages to their destinations. Each carrier offers different types of shipping services, all set at varying pricing tiers and with their own expected delivery windows. For example, most major carriers offer expedited options, which cost more but deliver more quickly. 

When deciding on the right shipping extension for your online shop, it’s best to choose an extension that offers a simple way to compare the services and pricing of different shipping carriers. That will make it easier for you to explore your options and select the shipping tiers and pricing that work best for your business. 

Distance between sender and destination

Shipping carriers set different zones to base their rates on domestically. That’s why if you ship to someone in the same zone as you, the cost will be lower than if you ship outside of your zone. For example, shipping from New York to Chicago would typically cost more than shipping from New York to New Jersey. 

Shipping volume

The number of packages that you ship in a given time period is also known as your shipping volume. Most carriers offer discounts if you ship a higher volume of packages, so that’s a benefit to keep your eye on, especially during peak selling seasons. 

Package dimensions and weight

Most shipping carriers charge based on what’s called dimensional weight. Instead of simply weighing each package on a postal scale, you need to calculate dimensional weight with a formula that involves measuring the dimensions of your package. 

To calculate dimensional weight: 

  1. Measure each side of your package. 

  2. Multiply package height by width by length.

  3. Divide that total by a dimensional factor, also known as a DIM divisor, which is a number that represents cubic inches per pound. The DIM divisor varies by shipping carrier, so you should use the DIM divisor that’s set by your carrier of choice. 

Once you have your answer, if the dimensional weight of the package is heavier than the actual weight of the package, then your cost of shipping will be based on the dimensional weight, or vice versa. 

Many shipping extensions will help you calculate this formula automatically, removing the manual guesswork. But it helps to understand it for yourself, so here’s an example of that formula in action, wherein the package length and width are each 12 inches and the height is 6 inches, and the DIM divisor is 139. 

12 x 12 x 6 = 864 inches
864 / 139 = 6.21 pounds

In this example, your package’s dimensional weight would be 7 pounds, since most shipping carriers prefer that you round up to the next pound. If you weigh your package on a postal scale, and the package’s actual weight is 10 pounds, then your cost of shipping will be based on the higher number — in this case, the actual weight. 

How to charge customers for shipping

Once you understand the costs of your shipping options based on package weight, you can decide what type of shipping pricing will produce the highest profit margins for you and the lowest friction for your customers. The two recommended shipping options to offer customers are free shipping and standard shipping. 

Free shipping

It might sound daunting, but offering free shipping should be a priority for your online store. Most customers these days expect a free shipping option, so you’re at risk of customers abandoning their carts at checkout if shipping is too expensive. 

Offering free shipping doesn’t have to mean selling at a loss to you. The most effective way to offer free shipping is to fold the cost of shipping into your products’ list prices. 

For example, if you sell a product that costs $13 to produce and $2 to package, your cost per product would be $15. To create a 50% profit margin, you could list your product at $22.50. But then what about shipping? Say that product costs $9.50 to ship. You could sell it for $22.50 + $9.50 shipping, or you could fold that shipping cost into the list price and sell the product for $32 + free shipping. 

Free shipping is always more appealing to customers. When you do these calculations on your end, instead of surprising customers with a new total at checkout, it helps to create a more positive customer experience and lowers the risk of customers abandoning their carts. 

Setting a minimum cart threshold is another free shipping tactic that can be more profitable for you. With this tactic, customers can only get free shipping when their cart total meets the minimum requirements you’ve set. For example, you could charge shipping on orders under $100, but once a customer spends $100 or more, you’ll waive their shipping fees. When online stores offer free shipping thresholds, it’s common for customers to buy more in order to get free shipping, even if their order total is higher than if they’d simply paid for shipping. 

One important thing to remember with free shipping: Choose a relatively quick shipping speed and be clear with customers about how long free shipping will take to deliver their package. For example, if you can fold in the price of 2-day shipping into your products, set expectations with a little leeway by telling customers that products will arrive within 3 days with free shipping. 

Standard shipping

If you can’t yet offer free shipping, the next best option would be to offer standard shipping to customers. Standard shipping means that what you charge customers for shipping will not fluctuate. This helps to set expectations and give options. For example, you could offer a standard shipping price for packages that arrive within 5 business days, as well as an expedited shipping price for packages that arrive within 3 business days. 

Standard shipping could be right for your business if you’ve decided to use your shipping carrier’s flat-rate options, which keep your shipping costs the same with each shipment. Flat-rate shipping is a smart option if you sell products that are both small and heavy (typically up to 70 pounds, depending on the carrier). For example, if you sell ceramic mugs and have calculated with your carrier of choice that the cheapest way to ship is with a flat-rate box that costs you $8, you could consistently list standard shipping at $8 for your customers. 

However, flat-rate shipping is not your best option if your products are small and lightweight. Flat-rate shipping can bring down the cost of larger or heavier items, but bring up the price of lighter or smaller items. Also keep in mind that, if you select flat-rate shipping, you have to use the shipping carrier’s flat-rate boxes. That may not be the right option for your business if you’ve decided to use branded packaging. 

Regardless of which of those shipping pricing options you choose, since shipping prices are often a blocker for making a sale, it’s best to keep pricing as low as possible. If you can offer free shipping, that’s best. Otherwise, charge customers at cost: If you pay $8 for shipping, charge them that $8 for shipping. Don’t try to create a profit margin on shipping by charging more for it — you’ll risk turning customers away. 

Brand your product packaging

The way you package your products should be a consideration in your shipping strategy. It’s not only important for the products’ stability and safety during transit, but an opportunity to bring your brand to life with branded packaging in order to create memorable experiences for your customers. 

The moment when a customer opens the package you sent them is known as “the unboxing experience” — a key touchpoint in your customer relationships. Unboxing is a prime moment for surprise and delight: Many businesses include branded packaging materials like tissue paper, stickers, or boxes printed with branded colors and messaging inside and outside. You can also include free samples, guides, or personalized notes. 

Branded packaging is an opportunity to present your brand’s personality in a way that connects directly with your customer the moment they receive the package. For loyal customers, a delightful unboxing experience might even factor into their reason for shopping with you. 

The goal for branded packaging is not only to encourage customer loyalty, but word of mouth marketing — the unboxing experience is a common social media video trend, which brings you more brand awareness. 

Establish your order fulfillment process

You’ve calculated shipping costs with your carrier, set your pricing, and chosen your packaging. Now it’s time to establish a streamlined order fulfillment process before the orders start rolling in. 

Prepare your home fulfillment center

Set up a space in your home or studio that can be your dedicated fulfillment workspace. This is where you’ll stock: 

  • Postal scale, so you won’t be reliant on shipping centers

  • Printer, backup ink, paper, and self-adhesive shipping labels

  • Internal packing materials like tissue paper, crinkle-cut shredded paper, bubble wrap, and packing tape

  • Boxes or padded envelopes. If you haven’t chosen to brand your packaging, you can find free boxes and envelopes through most major shipping carriers, or buy in bulk for discounted packaging. If you’ve chosen the flat-rate shipping method, you’ll be required to use your carrier’s flat-rate shipping packaging, but you could still customize what’s inside. 

  • Any other items that you include in your packaging, such as printed inserts or free samples

Your fulfillment workspace should be adjacent to where you stock your inventory. Manage your physical inventory by keeping it tidy and organized with a system that makes sense to you. That will make it easier to audit what you have in stock and find each item when you’re fulfilling orders, which helps to improve the efficiency of your operations. 

Schedule time for fulfillment and shipping

Your shipping strategy should include scheduling a consistent time each business day for packaging and shipping products, so you can form an assembly line and fulfill orders in bulk. A consistent fulfillment schedule also keeps you on schedule to process and ship orders within one business day, which is best practice. For example, you could schedule time each business day to fulfill orders, then set aside every order that arrives after that window to tackle during tomorrow’s fulfillment time slot. Also schedule a time the morning of each business day to ship out all of those packaged orders from the previous day. 

Create your small business shipping and return policies

In order to protect your business and build trust with customers, it’s important to create shipping and return policies for your business. Keep each policy concise, clear, and straightforward. 

Small business shipping policy examples

A shipping policy is a page connected to your online store that sets expectations around when and where you ship your products. It helps to reassure customers around when to expect their packages, and it’s also a resource for customers to confirm whether or not you ship to their location. 

Your shipping policy should include the following information: 

  • When you ship once an order is placed and how often. It’s best practice to ship within one business day of order placement, and typical to only ship on business days (Monday - Friday). 

  • If you offer more than one shipping tier, and if so, what those tiers are, their pricing, and how long shipping takes for each tier. For example, your shipping policy could state that $7 Standard shipping delivers products within 5 business days, and $15 Expedited shipping delivers products within 2 business days. 

  • Where you do and don’t ship to. Maybe you ship domestically, but only to the 48 contiguous states, or you ship to all 50 states and internationally, but only to certain countries. 

  • Which shipping carrier you use and whether or not you use tracking numbers. It’s best practice to always share tracking numbers with customers.

  • Whether or not you offer local pick-up options, and if so, when and where. 

  • Link to your return policy. 

Small business return policy examples

A return policy is a page connected to your online store that sets expectations around customer returns and refunds. Since online shopping involves more risk than shopping in person, customers often look at return policies before making purchases, so they know how cheap and easy it might be to make a return if needed. 

Your return policy should answer the following questions: 

  • Do you offer returns on all products, or are there limitations to what’s refundable? Are there products that can only be exchanged for another product or for store credit?

  • Will you include free return labels in your shipments or to print out? Or will the customer need to print their own label and have the cost of the return deducted from their refund? 

  • Do you refund shipping costs, or only what the customer paid for the product itself?

  • How long will it take for the customer to receive their refund after you receive the returned product? 

  • What can the condition of the product and its packaging be in order to qualify for a return?

  • Are there return deadlines, and if so what are they? Return windows can vary greatly, anywhere from 30 days to 365 days, depending on the type of product you sell.

  • What is the return procedure? For example, does the customer need to use a contact form or email address to request a return? Or have you integrated a third-party extension that provides customers with an interactive return center?

Make both of your policies easy to find by linking them at the bottom of your online store’s homepage and at the checkout page. 

Communicate with your customers

One more crucial piece of your shipping strategy should be your customer communications plan. How will you communicate with customers from the point of purchase through delivery? With online stores like Squarespace, you can automate the purchase confirmation email and use third-party extensions to automate the shipping tracking notifications that help customers stay in the loop. You can even use Squarespace Campaigns to follow up with customers after delivery to ask for feedback or customer testimonials

It’s also important to communicate with customers if any unexpected delays arise due to something on your end or shipping carrier issues. It’s always a better experience for customers to know what to expect even if there’s a delay, than for their shipment to be delayed without warning. 

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