There’s a lot of thought and effort that goes into coming up with a product that customers want to purchase. As a new Shopify store owner, you want to focus on selling your product and create a good customer experience. Part of this experience is shipping for Shopify stores, which can also have a huge impact on your margins and profitability.
In this post, we’ll go through an overview of all things related to shipping for new store owners including some key terms, different ways of structuring shipping costs, and some Shopify apps and services you can use to manage your shipments.
Shipping for Shopify stores: Set destinations
One of the first things you can do to set up your shipping is to set regions to which your store will ship orders. You can create different zones (or groups) for a single or a number of regions. For example, you can create a zone called “North America” and add U.S., Canada, and Mexico to that zone.
For most countries, you will also be able to select the states or provinces that are supported by your store. As an example, you can select only the east-coast states in the U.S., or a single state to where your business will ship products.
Once you’ve created a zone, you can add a shipping rate that applies to the entire zone. For the shipping rate, you have three options – free shipping, cost by order price, and cost by order weight.
For each rate option, you can set certain conditions like free shipping above a threshold order price.
Shipping for Shopify stores: Costs and customer experience
Now that you’ve set shipping rates and different zones, you will have to determine how you will charge customers for shipments. eCommerce stores typically have three major ways to charge customers for shipping. These fall on a spectrum of being the most costly to the least costly for customers. This in turn means on a spectrum of having the least to the most impact on your margins.
For each cost structure, you will have to find the right balance between keeping your business profitable and margins healthy for future growth, and creating a good customer experience.
In this method, the entire cost of shipping is put on the customer. For each order, you can determine the shipping cost and have the customer pay the entire cost at checkout. Shopify allows you to automatically calculate a shipping rate at checkout through the carrier-calculated shipping rate option under the “Shipping zones” section in Settings.
In this case, shipping does not take away from your margins as the cost is borne by the customer.
Average-cost or flat rate shipping means that you calculate the average cost of shipping for orders on your store. You can use this, or a different amount, to add a flat rate for shipping zones on your store.
This means that a person purchasing a single item on your store will pay the same amount as a customer purchasing a number of items. One benefit of flat rate shipping is that it is very clear to customers what they can expect to pay for shipping. However, this will create a bad experience for customers purchasing a single or a few items on your store, as they have to pay a higher amount than the cost.
Free shipping can create a great customer experience as customers don’t have to worry about shipping costs while shopping on your store. This can help increase sales as it removes an additional barrier from purchasing your products.
The flip side to potentially higher sales is that your business has to cover the shipping costs in entirety, which eats away at your margins and lowers profitability. As your store grows, this cost can balloon and have a higher impact on the viability of your business.
One strategy you can use is to offer free shipping after an order threshold based on price. This takes away some onus of the shipping costs from your business, and incentivizes customers to have a higher order value. As an example, you can drive up revenue by setting a threshold that is slightly higher than your average order value.
Shipping for Shopify stores: Key terms
As you start to navigate the world of shipping, there may be a terms that you hear but are not familiar with. Here are a couple that you definitely need to know:
When you ship your very first order, you may go to a courier vendor, purchase a package, fill out the information, and then note the tracking number you can send to your customer. As your store gets more orders, this may not be a sustainable, and you will need to start using labels for your custom packaging.
You can purchase shipping labels for each order. The labels contain important information about the shipment, including the shipping and return addresses, the tracking number, type of shipping service, etc. Once your label is purchased and created, all you have to do is to add it to your shipment package and drop it off with the carrier.
Learn more about shipping labels here, including a breakdown of a typical label.
Drop shipping or order fulfillment is when you use a third-party vendor to manage and warehouse your inventory, and ship orders directly to the customers. This means that you don’t have to worry about finding warehouse space, storing inventory or managing your orders. You free up more of your time to focus on marketing, and doing research and development for your products.
You can connect external vendors to your Shopify store through the shipping settings in your dashboard. These vendors charge a fee for this service. Learn more about fulfillment services for Shopify in their manual.
Shipping for Shopify stores: Apps and services
Once you’re at the stage of managing shipping for Shopify and creating shipping labels, there are a few apps and services for Shopify that can help simplify this process.
The Shippo app connects your Shopify store to the Shippo service where you can order shipping labels, manage shipments, and get an overview of all your shipments in one place. Learn more about the app in our recent post.
ShipStation is a similar service where you can organize, purchase, and manage shipping labels and your shipment information within one dashboard. You can also use the ShipStation mobile app to keep track of all your store shipments while on the go.
You can use the default Shopify Shipping (for U.S.-based stores only) to get preferred pricing for USPS packages. You can add packages in the shipping settings section of your store dashboard. You can then purchase shipping labels on the orders page.
Shipping for Shopify stores: Summary
As a new Shopify store owner, you are probably working through many aspects of your business operations. Shipping is a big part of this as you typically need to use an external vendor like USPS, UPS, DHL, etc. Shipping costs can make a dent in your margins if you haven’t picked the right vendor, or the right shipping cost structure for your orders.
There are a number of ways to structuring the cost of shipping for Shopify stores. This ranges from offloading shipping costs completely on the customer, to partially charging the customers on some orders, to providing shipping as a free service on each order. You will have to pick a balance between keeping your margins healthy, while delivering on a good customer experience.
Once an order is created, Shopify has a number of options and apps that can help you manage and organize shipping labels that you can use to deliver each product. Even if you started your store by packing and filling out labels for each shipment, ordering shipping labels can simplify and reduce your work. Standardized shipping labels also look more professional.
What cost structure do you use for shipping when it comes to customer orders? Is there something that worked really well for you? Please tell us in the comments below.
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