online shopping

Shipping Costs for Online Shopping Sites

As the number of goods delivered globally via online shopping grows each year, the role of online shopping sites and their integration with Transport Management Systems (TMS), or shipping solutions, becomes ever more important.  Shippers are looking to improve the online shopping experience and the right TMS that accurately calculates the shipping costs for both the customer and the shipper can assist with this.

Shipping Cost Issues

For many shippers, shipping costs are a significant component of their total product sales value and therefore managing this cost input is critical to sales success. Traditionally, shippers have taken a simplistic approach to their shipping costs and have often offered their customers free shipping. Of course, as part of a marketing strategy there is nothing wrong with free shipping, however if not managed correctly, shippers can end up subsidising these costs well beyond their intention and create an unprofitable situation.

As a response to this, many shippers end up providing their customers with an average, blanket shipping cost per order.  This helps the shippers recover some shipping costs, but it can be a very blunt instrument for the freight cost recovery problem, and also lead to shopping cart abandonment when the shipping cost estimate is too high for some customers.

Normally, an average, blanket shipping cost policy is not an effective solution, especially where you have significant disparity between the shipping locations, or the size of the order, or the types / value of products that are being shipped. For example, if you set an average shipping cost of say $25.00 per order, it’s likely that you are over charging some customers who are located near to your warehouse, and under charging other customers who buy your products from regional or remote areas.

Another potential response to the freight cost issue is for shippers to set a policy of free shipping for high value or high-volume orders.  This is a more effective policy than simply having an average freight cost for all shipments, as it does provide some incentive for customers to add to their order.  However, those that don’t or can’t order in bulk will be disadvantaged, and there are still very significant freight cost differences for shipments of bulk items when they are shipped to wide-ranging, disparate receiver locations.

The frequent outcome for ineffective freight cost management within your shopping cart is for customers to abandon the order when they believe that the freight cost or the service options provided are unappealing. Alternatively, the customer may be happy, but the shipping company will fail to recover their freight costs.

Shipping Cost Solutions

Live or calculated carrier rates is the practice of showing your customers the actual calculated shipping cost for their specific order in the online store checkout.  Advantages of this capability for you and your customers are as follows:

  • Each online shopper receives the actual cost of shipping, considering the size of the shipment, and location of the receiver. 
  • You can an also show the customer any difference in shipping services by price and speed of delivery.  That way customers who are prepared to wait for the receipt of their orders can choose a slow and more economical service, while the customers who are keen to receive their orders quickly, can choose a priority service and pay accordingly.
  • Many carriers now charge handling surcharges for large or oddly shaped, or heavy items, and therefore properly configured live rates can also improve online shopper pays functionality for these difficult shipments so that only the shoppers that purchase these types of items will have to pay the surcharge cost of shipping them.
  • By showing customers specific live rates and services, we believe that customers notice the transparency of the shipping process and therefore the freight costs have greater credibility.  Because customers are more willing to accept these “real” shipping costs, live rates can reduce the instances of shopping cart abandonment, and therefore grow your sales, and improve your profitability.

These examples clearly demonstrate that live or calculated shipping rates in real time, directly displayed in the shopping cart are significantly fairer for your customers and ensure that you are fairly compensated for providing a shipping service to your customer.  It’s a genuine win-win situations for all parties.

How are Live Rates delivered to your Shopping Cart?

Our cloud based TMS has a plug and play connection (a 3 click wizard) to integrate the shipping platform and all the most popular online shopping platforms. By connecting our TMS with the shopping platform, customers will now have a facility whereby their online shoppers can proceed to check out and ask for the shipping cost and in real time the connected system will return to the online shopper several options for shipping costs based upon the actual weight, and dimensions of the items’ order, and the location where the online shopper resides.  This all happens within several seconds and reduces the risk of cart abandonment. Please see the snap shot below of a sample cart for illustrative purposes.

What are the limitations to Live Rates and how do we address them?

Live rates are immediate and require a good internet connection. Shopify, for example, allows up to seven seconds for the carrier rates to come through to the shopping cart. If for some reason the carrier’s rate API is down or there is some other type of outage, then the rate may not appear and this could be for all carrier options or more likely just one carrier or service. As a result, the online shopper could be presented with an error or limited choices.

It is possible to add additional agility to the shopping cart by using the Shopify TMS application that is embedded into Shopify.  This application provides advance shipping options such as:

Flat rates – this option is a fall-back system, just in case the live rates fail and allows shippers to add fall back flat rates to prevent an error and ensure that the online shopper has a shipping estimate to select from in the shopping cart.

Mixed flat and live rates – This option allows shippers to display both live and flat rates as a mixed result in the shopping cart.  These flat rates can be determined via a script embedded into the app. Flat rates based upon order details and the receiver’s State location. Again, the flat rates offer back up to the live rates, but this time they can also offer a method of catering for the order value and location of the receiver in determining a potential flat rate.


Using a sophisticated shipping platform can provide many different options and solutions to cater for all scenarios that you may come across when servicing your online shoppers’ needs.  This sophistication and agility will allow you to give your online shoppers the optimum opportunity to complete the order and for you to earn your sale quickly and easily. 

In an environment of heightened competition between various producers and distributors, having a sophisticated and effective shipping platform, and the right advisor to show you how to make the most of the sales opportunity that comes your way, is a key component in any successful ecommerce strategy.  As always, we will be delighted for you to reach out and discuss any issues or queries you might have about how you might incorporate live shipping rates into your online offer.

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