The Problem with Shipping

It really should come as no surprise that one of the biggest challenges in online retail is shipping. You want to ensure that your shipping charges are reasonable, so that you don't lose customers. On the other hand, those charges need to be fair to you, the retailer, who ultimately must pay the shipping company for its service. You don't want to lose a bunch of money on every transaction. But, the problem is this: How do you get an accurate calculation of shipping charges when there are countless possible combinations of product sizes and weights in any order?

This dilemma has been labeled by mathematicians the Bin Packing Problem. Now, for me, this mathematical theory is complex, and difficult to fully understand. But I do get that there is just no easy way for a computer system to generate an optimal packaging solutions without a limited array of specifically defined variables. Essentially, the input data must include specific box size options, as well as dimensional specs and weights for each product available for shipping. In addition, input data would also have to include shipping rules and costs from the various shipping service options. And, even with all of that input data, the packaging calculation programming would be extremely complex. But if you want automated optimal packaging solutions, that's what it will take.

Most online retailers, frankly, don't have the resources to invest in such sophisticated solutions. It would take years if they were ever able to break even on their investment in such a system. So, there remains only two other alternatives: 1) manage packaging manually and bill customers after the order shipments have been assembled and calculated; or 2) compromise on per shipment accuracy while shooting for overall financial satisfaction.

If you are a very small store, you may be able to process an order, package it and determine actual shipping costs on the packaged order before charging your customer. In fact, I know of one retailer who currently does it this way. But for him, and for most, that approach essentially defeats the benefits of online retailing altogether. You might as well run a telephone or mail order operation. It just isn't a practical long term solution for online retailing.

The second alternative, however, can provide a viable long term solution. Drupal's Ubercart e-commerce software suite includes shipper API's for FedEx, UPS, and the USPS. Using these API's you can deliver shipping costs to your customer, real-time. This means the customer can see in check-out, and, if you choose,  in the shopping cart, what the shipping costs will be for various shipping options. For example, if you are using UPS the customer may be presented with the options of ground, 2nd day air, or overnight air. Each will present the related rate for the order's weight to the customer's location, allowing the customer to select the option desired.

Sounds pretty good, right? Well it is, but it isn't perfect. Let's assume that the weight entered for each product placed in the order is the actual product's weights. So, if I have a plaque that weighs 2 lbs. and a statue that weighs 15 lbs., then I have a total shipping weight of 17 lbs., which is the figure used to calculate the shipping charges. Notice anything missing? Right, the shipping container. In this case, I may have a sturdy box with packaging material that collectively weighs 5lbs. This means that the actual shipment, when sent, will weigh 22 lbs. Yet, the shipping calculation is based on 17 lbs. Consequently, I'm not collecting enough for shipping from my customer.

Now let's consider the idea of entering boxed weight for each product in its respective weight field. This will work perfectly if we ship each product in a separate box, regardless of how many products in the order, which is an option with Ubercart. However, the shipping costs to the customer can quickly become unreasonably high, costing you sales. The same is true, but to a slightly lesser extent, if you allowed combined packaging of an order but included multiple packaging weights in the order's total weight. Of course, this would be the case if each product weight has packaging weight included with it. So, unless your customers only purchase one product per order, using packaged product weight for your product weight is probably not the right approach.

This brings us to a practical solution that can effectively overcome these challenges. Ubercart provides the ability to add a markup to shipping charges. So, using this markup feature you could compensate for the deficiency of the packaging weight in the shipping weight calculation. This markup can be a fixed dollar amount or a percentage. and it can be adjusted as you acquire data from month to month sales. In other words, you could start with a small markup on shipping and at the end of the month evaluate what your actual shipping costs were relative to your shipping income. With that information you could adjust the markup as needed. The aim is to achieve your financial objective for shipping charges on a collective, rather than order-by-order, basis.

Using this last approach, you will ensure that your customers who purchase multiple products per order will not be unfairly charged for shipping, while those who only order single products are charged fairly. The markup will compensate for the added cost of shipping packaging material with each order, while spreading that cost more evenly across your customer base. Though some order shipments may be charged slightly higher than actual charges, others will be charged slightly less, and in the long run, you will be able to strike a fair balance for all.