What the carrier (FedEx/UPS/USPS) charges you on average.
What you plan to charge the customer.
Simplifying shipping costs often increases sales. Estimate the lift.
Monthly Projection
Projected Order Volume:0
Total Shipping Costs (Paid to Carrier):0
Total Shipping Revenue (Collected):0
Net Shipping Loss (Subsidy):0
Additional Product Profit (from Sales Boost):0
Net Monthly Profit Change:0
function calculateShippingStrategy() {
var avgCost = parseFloat(document.getElementById('avgShippingCost').value);
var flatRate = parseFloat(document.getElementById('flatRatePrice').value);
var orders = parseFloat(document.getElementById('monthlyOrders').value);
var aov = parseFloat(document.getElementById('avgOrderValue').value);
var margin = parseFloat(document.getElementById('profitMargin').value);
var boost = parseFloat(document.getElementById('conversionBoost').value);
if (isNaN(avgCost) || isNaN(flatRate) || isNaN(orders) || isNaN(aov) || isNaN(margin)) {
alert("Please fill in all required fields with valid numbers.");
return;
}
if (isNaN(boost)) {
boost = 0;
}
// 1. Calculate Baseline (Calculated Shipping Scenario)
// Assumption: In calculated shipping, customer pays exactly what carrier charges (or close enough that Net Shipping P/L is 0).
// Baseline Profit = Orders * AOV * Margin%
var baselineProfit = orders * aov * (margin / 100);
// 2. Calculate New Scenario (Flat Rate)
var newOrderVolume = orders * (1 + (boost / 100));
// Shipping Financials
var totalShippingCost = newOrderVolume * avgCost; // What you pay carrier
var totalShippingRevenue = newOrderVolume * flatRate; // What customer pays you
var netShippingPL = totalShippingRevenue – totalShippingCost; // Usually negative (Subsidy)
// Product Financials
var totalProductRevenue = newOrderVolume * aov;
var totalProductMargin = totalProductRevenue * (margin / 100);
// Total New Profit
var totalNewProfit = totalProductMargin + netShippingPL;
// Net Change
var netChange = totalNewProfit – baselineProfit;
// Additional Profit purely from increased volume (ignoring shipping loss for a moment)
var addedProductProfit = totalProductMargin – baselineProfit;
// Display Results
document.getElementById('results').style.display = 'block';
document.getElementById('resVolume').innerText = Math.round(newOrderVolume).toLocaleString() + " Orders";
document.getElementById('resTotalCost').innerText = "$" + totalShippingCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotalRev').innerText = "$" + totalShippingRevenue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resShippingLoss').innerText = "$" + netShippingPL.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resProductProfit').innerText = "+$" + addedProductProfit.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var netChangeEl = document.getElementById('resNetChange');
netChangeEl.innerText = (netChange >= 0 ? "+" : "") + "$" + netChange.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
if (netChange >= 0) {
netChangeEl.className = "result-value highlight-positive";
document.getElementById('recommendationText').innerText = "SUCCESS: The increase in sales volume outweighs the cost of subsidizing shipping.";
} else {
netChangeEl.className = "result-value highlight-negative";
document.getElementById('recommendationText').innerText = "WARNING: The cost of the shipping subsidy is higher than the profit gained from new sales.";
}
}
Flat Rate vs. Calculated Shipping: A Strategic Guide
Choosing the right shipping strategy is one of the most critical decisions for an e-commerce business. It impacts your conversion rates, your profit margins, and your operational efficiency. While Calculated Shipping ensures you never lose money on postage, Flat Rate Shipping is a powerful marketing tool that can significantly boost sales volume.
What is the Difference?
Calculated Shipping connects your shopping cart directly to a carrier's API (like FedEx, UPS, or USPS). When a customer checks out, the system uses the package weight, dimensions, and the customer's address to generate the exact shipping cost, which the customer pays.
Flat Rate Shipping involves charging a single, static fee for shipping regardless of the order size or destination (e.g., "$5.00 Flat Rate"). In this model, the merchant often subsidizes the cost, paying the difference between the collected $5.00 and the actual $12.00 carrier fee, in hopes that the simplified pricing will drive more sales.
Pros and Cons of Flat Rate Shipping
Pro – Increased Conversion: Customers love transparency. Knowing the shipping cost upfront prevents "sticker shock" at checkout, reducing cart abandonment.
Pro – Marketing Simplicity: "Everything ships for $5" is a compelling marketing message that is easy to advertise.
Pro – Higher Average Order Value (AOV): Customers often add more items to the cart to "get their money's worth" out of the flat fee.
Con – Margin Erosion: You will likely lose money on shipping for heavy items or distant deliveries. If your product margins are thin, this subsidy can eat away your profits.
Pros and Cons of Calculated Shipping
Pro – Cost Protection: You pass the exact cost to the customer, protecting your margins entirely.
Pro – Accuracy: Useful for businesses selling items with vastly different weights (e.g., selling both pencils and dumbbells).
Con – Cart Abandonment: High or unexpected shipping costs at the final step of checkout are the #1 reason for cart abandonment.
How to Use This Calculator
This tool helps you determine if the marketing lift from offering a Flat Rate is worth the operational cost.
Avg. Actual Shipping Cost: Check your carrier bills. Total your shipping spend for last month and divide by the number of orders.
Proposed Flat Rate Price: Enter a competitive rate (e.g., $4.99 or $9.99).
Current Metrics: Enter your monthly order volume, average order value (AOV), and product margin.
Est. Conversion Increase: Conservative estimates for switching to Flat Rate range from 5% to 15%. Enter a percentage to see if the extra profit covers the shipping loss.
When to Choose Which Strategy
Choose Flat Rate if: You have high profit margins (>30%), your products have similar sizes/weights, or you are in a competitive market where free or cheap shipping is the norm.
Choose Calculated Shipping if: You sell heavy/oversized items, your margins are very tight (<15%), or you ship internationally where rates fluctuate wildly.