What is a per-order fee and how does it benefit merchants?

Shipping is the fundamental cornerstone of ecommerce with several approaches that merchants to consider. Whether a business is dealing with a high volume of orders or has many purchases that are roughly the same cost, a per-order fee for shipping and other considerations can make the process less complicated and more satisfying.

What is the per-order fee?

The per-order fee is one of the easier ways to approach shipping and sales for an ecommerce store. Instead of individually calculating the shipping costs associated with each and every order, a merchant can instead develop a single, uniform charge that is applied to all purchases, regardless of how much a customer spends. The major advantage of this method is the reduction in time spent dealing with the various aspects of an individualized shipping approach. Another advantage is that the per-order fee can be counted on as a source of revenue from every single order that passes through a store. Instead of trying to set shipping prices that may leave a store owner losing money or barely breaking even in many situations, the per-order fee offers a more reliable and regular approach to shipping.

How can this fee be calculated?

The per-order fee has to at least break even to be a successful strategy. If the charge falls below the average shipping cost, it will actually cost the store owner more money than would the calculation of a shipping cost per order. With that need in mind, store owners have to take information about their sales so far and determine the average shipping cost. A store owner will need to have some kind of data on the amount spent on shipping per order received. From there, the figure can be adjusted to the tastes of the merchant, to make sure that an acceptable margin is in place.

However, new store owners can assume these costs, erring on the side of caution, to develop a per-order fee. This approach requires that a merchant check back regularly to make sure shipping costs aren't exceeding the amount charged, and then adjust from there. Eventually, however, the number will stabilize and, except for an occasional verification, it can be left alone. While it requires some extra effort, such an approach can certainly still pay off for newer ecommerce store owners.

How can this fee be applied?

Although it's referred to as a per-order fee, the charge in question can actually be incorporated into the price of an order in many different ways. Additionally, some merchants may only apply it under certain circumstances.

One approach used by some store owners is to apply a per-order fee to purchases under a certain cost. This method is often used in concert with the offer of free shipping for orders above a certain value. In this case, the per-order fee is meant to encourage customers to add more items to their carts in order qualify for free shipping. This approach requires careful calculation of the free shipping threshold, but can be effective in encouraging a higher per-order cost, with the store owner also getting the per-order fee for smaller purchases made by customers.

Another method for applying the per-order fee is to add it during the checkout process. This is a simple approach that lets all customers see the charge in the same way, at the same time. The downside of this approach is the sticker shock that comes along with an additional charge near the end of a buyer's journey. The negative impact in this situation can be lessened by placing a notice on product pages and other locations that a per-order fee is involved in purchase. Another effective way to reduce the potential problems in this instance is to clearly and plainly explain why the per-order fee is being used, as well as the advantage of it - for the buyer, this is likely the fact that orders are shipped faster because shipping costs don't have to be calculated on an individual basis.

An additional approach is to incorporate the per-order fee into the cost of individual items. This method has the advantage of effectively hiding the per-order fee from view, while also allowing a store owner to say that there is no additional cost involved for shipping. The advantages of many of the strategies listed above can be realized to some degree, without many of the disadvantages involved. However, effective application involves some significant calculations related to the cost of individual pieces of merchandise and the splitting of the per-order fee into smaller pieces that are then incorporated into the cost of merchandise. Unless careful attention is paid in these situations, a store owner may find him or herself not making the money expected when the per-order fee was calculated in the first place.

Is per-order shipping right for my business?

The per-order fee is a valuable tool that ecommerce merchants should keep in mind and consider when initially planning or updating their shipping strategy. While it's not an approach that will work for every single store owner in all situations, it can certainly be useful at times, especially when a store is dealing with a high volume of orders or has to contend with many different shipping options due to a geographically diverse clientele or other concerns. Using a per-order fee frees up time that can be used in other areas, whether it's sourcing and pricing new inventory, handling customer service or even putting more time into the picking and packing of orders.