June 10, 2024

Delivery fee calculation methods on eCommerce

Customer satisfaction and loyalty are two key elements that have been responsible for the success of any business from time immemorial. Even when we have reached the era of digitization and are witnessing a rapidly evolving world of eCommerce, providing a seamless and cost-effective shipping experience is crucial for maintaining customer satisfaction and loyalty.
Now, in this new-age way of conducting business one of the key aspects of this experience is how delivery fees are calculated and presented to the customer. If you are going to build your eCommerce Website, then this article will be super helpful in making you understand the shipping cost calculation method which suits your business. There are several popular delivery fee calculation options available for eCommerce web applications. Each has its own advantages and suitability depending on the nature of your business. Let’s explore five such common methods.

1. Flat Rate Based on State

In this method a flat delivery fee based on the state is charged. To this the order is being shipped. The best part about this is that it is straightforward and easy for customers to understand.

 Advantages:

Some of the other advantages that you can enjoy with this deliver fee type is that you know exactly what to expect. The customer does not have to be worried about bad surprises in the form of shipping costs. Further, it helps in maintaining consistent shipping charges across similar regions.

  Disadvantages:

• Inflexibility: Doesn’t account for variations in distance within a state or differences in package size and weight.
• Potential Overcharging/Undercharging: Customers near the warehouse might feel overcharged, while those farther away could be undercharged.

This form of delivery fee calculation is ideal for businesses with a localized customer base or where shipping costs are relatively uniform across states.

2. Free Shipping

This way of calculating delivery fee is trending in the present times. Free shipping is a popular strategy to attract more customers. The cost of shipping is absorbed by the

Advantages:

As already mentioned, free shipping is a strong incentive for customers to complete their purchases. Whenever a customer notices, they do not have to pay the shipping charges, they tend to purchase more than they would otherwise. Additionally, the checkout process becomes smoother as no other costs must be calculated.

Disadvantages:

• Cost: Can be expensive for the business, especially if shipping costs are high.
• Profit Margins: May require adjusting product prices to cover shipping costs, which could affect competitiveness.

Businesses with high-profit margins or those that can afford to absorb shipping costs as a marketing expense could use this method of calculating the delivery fee.

3. Pincode Wise Rate

This mode of calculating shipping costs is done based on specific pincodes. This offers a more precise approach than state-based rates.

Advantages:

The primary advantage of this mode of calculation is its accuracy. It provides a more accurate shipping cost based on the exact location. This makes it a fair strategy and more acceptable to customers.

Disadvantages:

• Complexity: Requires a detailed database of shipping rates for various pincodes.
• Maintenance: Can be time-consuming to maintain and update the pincode database.

This is best suited for those businesses that have a wide geographical reach and significant variations in shipping costs across different areas.

4. Volumetric Shipping Fee

This other way of calculating delivery fee is based on the volume (size) of the package rather than its weight. This is particularly useful for large, lightweight items.

Advantages:

This is an extremely fair pricing technique that ensures that shipping fees reflect the space taken up by the package. The efficiency of this method is also par excellence. It helps in optimizing logistics and reducing shipping costs for smaller, dense packages.

Disadvantages:

• Customer Confusion: Customers might find it difficult to understand how volumetric shipping fees are calculated.
• Implementation: Requires accurate measurements of package dimensions.

Those businesses that deal in furniture or large home decor items must avail of this delivery fee calculation. Their bulky but lightweight products can be best shipped in this way.

5. Manual Shipping Fee Update

In this final method, customers place orders without immediate payment for shipping. Once the order is received, the admin calculates the shipping fee and updates it manually. A payment link is then sent to the customer to complete the order.

Advantages:

This is one of the most flexible modes of calculating the delivery fee. It allows for precise calculation of shipping fees based on real-time rates. It could be considered as the method that customizes the customers requirements as it accommodates special shipping requests or unusual package sizes.

Disadvantages:

• Delay: Introduces a delay in the order confirmation process.
• Complexity: Requires more administrative effort to manage and update shipping fees manually.

This, however, is best for businesses with variable shipping costs or those offering bespoke products that require custom shipping arrangements.

Choosing the right delivery fee calculation method for your eCommerce business depends on various factors including the nature of your products, your target market, and your operational capabilities. Flat rate and free shipping offer simplicity and customer appeal, while pincode-wise rates and volumetric fees provide greater accuracy and fairness. Manual shipping fee updates, although more labor-intensive, offer the highest level of flexibility. By carefully considering your business needs and customer expectations, you can select a shipping fee strategy that enhances your overall service and helps you stay competitive in the eCommerce landscape.