Shipping Cost Analysis for E-commerce



Deciding which Shipping strategy to adopt is perhaps the trickiest question for e-commerce stores. The challenge lies in choosing and charging optimum shipping price to customers that makes customers happy and generates revenue for stores. Attractive propositions like free online shipping and almost instantaneous delivery has increased customers’ expectation even more. E-commerce merchants who fail to offer such propositions often struggled to get higher profit margin. The goal of shipping cost analysis is to help you identify shipping strategy that will bring you higher net profit.

Approach to Solution

We define important data metrics for the stores that will help in determining decision variable. Data points first will be collected for the existing shipping strategy which will act as a basis for all the comparisons. To arrive at most suitable shipping strategy, different shipping cost strategies would be implemented on the store for the duration of 10-14 days for each.

Once the trial period is ended, decision variable will be calculated for each strategy to check which new strategy brings highest 'Net Profit'.

Net Profit = Gross Profit + Shipping & Handling charges earnings – Total Additional shipping cost

Various shipping strategies are Free shipping, Threshold shipping (Free shipping above certain $ order), Fix shipping rate, Weight based shipping.


With the exhaustive analysis, you will be able to identify the shipping strategy that will bring max ‘Net Profit’ to your store.


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