This article provides rate-setting considerations and information for shipping and returns.
Last Published: 5/22/2017

Shipping and Returns

Like tariffs and other taxes, shipping costs can affect the price your customer pays for your products significantly. In this section, we will discuss ways to reduce costs associated with shipping small packages by air. You can find information about larger shipments (e.g., those sent by ocean-going container load) at export.gov/logistics. 

Setting Rates

Your shipping rates will be based on one or more of these factors:

  • The value of the item, its dimensions, its weight, and your profit margin.
  • When selling small, lightweight items with high margins (e.g., jewelry), you might choose to charge the customer a flat rate or no shipping fee at all. When selling an item with a low margin (e.g., consumer electronics), you’ll need to find inexpensive shipping options and calculate the cost accurately in order to preserve your profits.

 
When calculating your shipping fees, shipping companies can be valuable partners; many offer real-time tools that can be used on your website. Shipping fees typically fall into three categories: flat rate, in which the seller charges a set rate per item purchased or a set rate per order; percentage, in which the seller multiplies the total purchase price by a set percentage; or real time, in which the seller calculates shipping charges at the time of purchase based on the item’s weight and dimensions. If you’re familiar with shipping items domestically, then you know that a package’s weight typically determines its shipping cost. However, when shipping internationally, the package’s dimensions are just as important, so you’ll want to pack your products in the smallest container possible. Also, you’ll need to enter each item’s weight and dimension in your inventory-management system so that you can accurately calculate its shipping cost.  

Choosing a Provider

Like any supplier, a shipping company will take into account your volume when setting prices and agreeing upon which services to provide. Sticking with one vendor rather than spreading your orders among many could help keep your shipping prices low. Keep in mind, though, that the shipper you want to work with might not be able to deliver to every country. Try to anticipate where you’ll be shipping, and ask the company about its resources in those countries; for example, does it have employees on site, or does it outsource to a subcontractor? You’ll probably want to build relationships with both a primary shipper and a reliable backup. That way, you’ll be covered if your primary shipper encounters workplace or customs problems in any given country.
 
The U.S. Postal Service provides excellent value on international packages weighing less than 70 pounds. The USPS does not bill for duties and taxes, so buyers must pay them at the post office in the country where they live. Expedited service is available for an additional fee.
 
Some online services offer to shop the best freight rates for you. You give them your package’s parameters (e.g., size, destination, preferred delivery time), and they tell you which carriers have the best price  

Tracking

Some shippers allow you and your customer to track packages in transit, which is a major benefit to both of you. When choosing a shipping provider, find out what tracking services they offer and the cost for those services. If the cost is high, you might want to increase your shipping charges on international orders accordingly. 

Alternative Delivery Locations

Some international buyers, especially those in Asia, prefer the flexibility to ship to an alternative delivery location (e.g., a local store or a neighbor’s home). Some U.S. freight companies gladly provide delivery to these locations and may also have storefronts that will hold packages for pickup. As you plan your fulfillment strategy, keep these customer preferences in mind, and select service providers that can accommodate them. Some providers’ apps can fit seamlessly with your checkout page; in some cases, they offer comprehensive checkout solutions in which the buyer can select payment method and shipping options, including alternative delivery locations.  

Communicating with Buyers: Returns

When your customer places an order, you must specify the exact terms (shipping, returns, insurance costs, etc.). Be particularly careful when identifying who’s responsible for paying tariffs and other taxes (as well as any other fees that might be incurred), and clearly state how your company handles returns.

  • Returning an international package is costly and time-consuming; clear communication about returns could save you money.
  • State your returns policy in plain language and specify who is responsible for shipping charges and restocking fees.
  • Be sure to make clear in your sales terms that any customer who wants to return merchandise must first request a return authorization (RA), which will contain specific information about returning merchandise.
  • List the e-mail address and/or phone number the customer should use to request an RA. (To see how other retailers handle RAs, conduct an Internet search on “return authorization.”)
  • Finally, keep in mind that sending a replacement might be cheaper than paying for return shipping; you can weigh the various costs when reviewing a customer’s RA request.

 
The best way to avoid returns is to provide your customers with the most comprehensive product description you can. Your online description should contain everything you know about the product, as well as several clear photos. Also, be aware that warranty laws differ from country to country. If you’re shipping directly to consumers, you might be required to honor a longer warranty period.  

Insurance

If you want to insure your packages, you can buy insurance from either your shipping company or a third-party insurance company. You can purchase insurance on each individual package that is sent, or you can arrange to be charged a monthly fee based on your shipping volume and your loss history; do some research to determine what would be most cost-effective for you. If you want to give your customers the option of insuring their purchases, your shipping provider or shipping-insurance company can help you develop a formula that will set the insurance fee for any order.

Extra Fees

International shipments entail additional costs, including document preparation, broker’s charges, etc. To defray these expenses, some sellers add a flat handling fee to every international shipment.