Forum Moderators: buckworks
To increase my margin I'm looking at both raising my products and lowering my costs.
Am I taking a risk by raising prices? Is it going to put people off buying? At the moment I mark most of my products up 100% from the purchase price. Many of my products are quite small value (e.g. only a few pounds) although I have some larger value items. Should I look at just increasing the prices on the smaller value items, since changes in these prices won't be too noticable?
Also, I'm looking at ways of cutting my costs. I used to send all my orders with a courier - I've started just using Royal Mail (I'm in the UK) for small orders. On that note, I'm still charge my customers £3.99 postage even though it probably only costs me £1 to send - is this bad? It seems a good way to make more profit from an order where I might only make 50 pence profit (don't forget transaction fees too).
Any other cost cutting ideas would be welcome!
Forget it! put your margin up to 75% I found that my cost of sales was around 30%. So a breakdown is as follows out of the 75%, one part 30%, cost of sales i.e credit card transaction costs currency exchange rate costs, 30% for me 15% for extras like errors in shipping costs, adverts etc.
Right the Royal mail, stuff em. Ive paid out nearly a thousand pound this week in postage. Can I find a helpful post office? No. Cant get a discount unless I send X number of parcels on a certain very expensive service.
So im stuck to, my UK orders, upto to 30lbs in weight, go for £7.50 by private carrier, but international orders go parcel farce... I mean force.
Shipping, only charge your true cost. Postage £3 box a £1 bubble wrap etc etc. Make what you need on the product, people will complain if you over charge on shipping, they feel ripped off.
I have found that people are price insensitive on increases up to about 15 % after that sales drop off. However 15% on £15 is not a lot.
Id love to hear who your using as a carrier, I can also give you details of a dirt cheap packaging firm, just sticky me.
I charge a flat $5 shipping in the US and most of my packages ship for $3.85 and the Postal Service Drops off free shipping boxes. I'm still thinking about raising the shipping fee after the holidays because of the time it takes to ship since we don't do enough to really justify pickups.
Post Offices are pathetic - I agree.
£1000 in a week? If you spend £15k a year, they'll come and collect your mail for free.
And, if you send over 5000 packets a year, you can have a discount. Search their site for PacketPost. (You can get a discount for under 5000 per year, but you need to take them to selected Post Offices, thus defeating the collection service).
Post Office Counters staff can be completely useless, some are great and really helpful, buy some haven't a clue. With the kind of postage you are paying out I would go straight to Royal Mail business services and bypass the Post Office completely. You'll find there are all sorts of ways they can help, especially with things like collections. You should find some useful info on their website to get you pointed in the right direction.
As far as profit margins go, I set 120-160% markup, and get about 40% profit at the end, after marketing costs and affiliate payouts. I find this to work out pretty good for me.
I've had letters of complaint for charging $2 freight on something that cost 90 cents to post, funnily, I never get thank you notes when I undercharge on the freight.
The best solution is to increase your average order value.
Calculate any package over 1kg and less than 2kg for both recorded and Special Delivery. On the heavier end of the scale it is cheaper to send it by Special Delivery, plus you get a signiture much faster, delivery is guaranteed next day or your postage money back and insurance starts at £250 minimum instead of £28. Wierd, but true!
And the other hint:
Don't ask the staff about their services (they have that many services that the staff can't be an expert in them all). Always check their website.
Think about it: pensions, benefits, car tax, UK mail, international mail, ParcelForce, stamps, collection services, business deals, licences, bill payments (gas, elec etc..), passports, medical care insurance, banking, money currency changes, Postal Orders and redirection services. Who can be an expert in all of the above?
Also, if you overcharge on postage and get complaints, the best way to handle it is the insurance cover (probably self-funded) and the packaging materials.
I find that if you use a small subpost office the staff are much more in the know about just whats what. Stands to reason really.
Yeah hear what you say on postage, yes most peolple dont seem to mind paying over the odds im just one of those people who think that you shouldnt overcharge in that respect.
Up to you really.
