Forum Moderators: buckworks
I have thought about offering free shipping and eating the costs with the hopes that it would increase sales. I have also entertained the idea of running a promotion of $1 shipping on all items, which I believe would also increase sales and not eat as much of the costs.
I know a lot of sites also choose to overcharge their customers and turn a profit on the shipping costs; however, in this case, im guessing it would most likely drive away potential customers, especially because my market is flooded with competition.
Can someone please let me know, which of the above 3 options sounds good and provide examples if at all possible. Does the $1 shipping on all items sound like a decent idea?
Thanks a lot,
SportsWorkout
WBF
I'd suggest you offer a trial for free shipping - a 2 week promotion - see what kind of response you get. Then sit down at the end and work out if you have reduced your CPS.
I like the idea of 1$ per item, but can't say that I have ever seen that in the mainstream.
H
i think the most important thing is having the shipping cost very clearly stated..
personally if i can't see the shipping cost quoted without having to start a checkout then i move on.
If your product lends itself to multiple orders, you might try something like free shipping when you order two or more.
As a consumer, after free shipping, I like flat-rate. I hate having to go deep into the shopping cart to figure out what the total price will be. Overtock has always done a good job of promoting their flat-rate shipping as a sales advantage.
I believe that shipping costs can be a deal killer. We get a lot of people putting stuff in the shopping cart and abandoning the cart during the check out process. I suspect some of those abandoned carts are because of shipping costs. So I believe shipping costs can have a negative impact on sales.
Amen, very true.
Of the three options, I'd recommend the free or flat-rate ($1 seems low, though it's a nice promo idea) shipping. Trying to make a buck by overcharging for shipping has been shown to turn off shoppers. Avoid that at all costs.
Ask any eBay seller who knows how things work and you'll hear that bids go up substantially for items when free shipping is part of the offer. This is well-documented at eBay seller forums and mailing lists. I think the same can be said in the non-auction world -- free or low, flat-rate shipping is a definite enticement to complete the sale.
Same reason I don't like flat rate shipping - most of the sites that do flat rate shipping picked the most expensive zone to make sure they never lost money on shipping. Everyone who isn't that far away ends up having to pay extra.
Same goes for eBay... I used to never pay attention to it, but when I see "shipping $5" on the site and when I get the package I see it was $1.50 on the sticker you're going to try to tell me I just paid $3.50 for a cardboard box? Come on. :)
I think the amount of business generated by "free" shipping doesn't outweigh the costs your eating.
You have got that right!
What is the old saying.... nothing is for free.
Irregardless of how pricing and shipping/handling is broken out, you still pay a specific amount and that what you should pay attention to when purchasing online. If I can buy a new digital camera for $100 less than the competition, what do I care if the item is based on free shipping, flat rate, or actual? You limit yourself from buying if you have these hard and fast rules about what site you will and will not buy from.
Those of us on webmasterworld are not the typical web surfer. We might not mind clicking a few extra links, we don't worry our credit card will be charged before the final ok, etc. For the average surfer these are concerns that free shipping overcomes.
IMHO, the psychological advantage of the word "free" is a secondary benefit.
I've always charged the actual shipping costs - I wish more sites would. I avoid sites that offer free shipping because I know all they're doing is marking up the price of the product.
That's a generalization that isn't necessarily true. A lot of our clients cannot charge actual shipping costs. They may sell oddly sized or oddly weighted widgets, and they don't have the budget to integrate UPS and USPS zone and weight / size databases into their commerce sites. The best they can hope for, no matter what shipping cost method they use, is to make money on some orders, lose money on others, and have it all balance out in the end. And it doesn't involve marking up the widget.
If they're in the same state as me why should I have to pay the same rate as a guy on the other side of the country?
How come some of my in-stage long distance calls are more expensive than my cross-country calls? :)
Same goes for eBay... I used to never pay attention to it, but when I see "shipping $5" on the site and when I get the package I see it was $1.50 on the sticker you're going to try to tell me I just paid $3.50 for a cardboard box? Come on.
I recently sold a high-end antique on eBay. (High-end to me = several hundred dollars.) Very fragile item. Almost 400 years old. Several smaller pieces in a larger piece, all of which sat inside a thin, wooden box. In order to encourage bidding, I charged actual shipping costs, plus $5 handling fees.
I spent $4 on a perfectly-sized box. I bought new bubble wrap. I spent about 90 minutes total wrapping each little piece, placing them precisely inside the item, then that inside the wooden box, then wrapping the wooden box in about 10 layers of bubble wrap -- about 6-inches thick on all sides when I was done, and taped up beautifully. I was damn proud of myself at the end. :)
Add up the costs of the box, bubble wrap, etc., MY TIME ... and the winning bidder ended up getting a bargain where shipping was concerned. I ended up getting higher bids. Everyone wins. My point: the postage cost you see on the box doesn't necessarily reflect the sellers' real cost of shipping.
Similar example: I have a favorite music collectibles retailer and they're based in the UK. They have far and away the highest prices out there. They offer some amazing collectibles. And each time I order from them, the item arrives at my door in perfect condition -- no matter how delicate or fragile it may be. Their shipping costs are standard, but I'm willing to pay the higher price for what they sell because I know what I'm ordering won't be bent, broken, chipped, etc., when I get it. Great shipping is worth every dime it costs, and then some.
If you're selling items that have built-in high margins, so what if you lose a dollar or three on shipping. If you're selling widgets with razor-thin margins, that dollar or three can spell doom in the end.
Although we will be experimenting with free shipping, coupons, lower prices, etc. Things are working fine for us but we should experiment to see if approaching the business from a low price/free shipping approach is more profitable....
If what you were saying were true for all merchants, or even the majority, I would be more likely agree with you. The fact is though that there are more merchants that charge the shipping rates for the HIGHEST zone than merchants who charge the middle-rate. Their mentality is that they'll never lose money on the shipping - they'll either break even or profit.
I also agree that there are valid reasons where a handling charge to cover extra packaging costs and time is perfectly acceptable. This comes into play on ebay. With a web store it doesn't work that way though. That would be like dirt-world merchants tacking on a $5 "shelf space" fee when you get to the cashier because they had to pay stockers to put the item on the shelf. Packing and/or displaying the item is the cost of doing business and should come out of your profit margin. The cost of hiring a third party company to DELIVER it to me should not be something else for you to profit on.
I was very clear in the Auction I had like 30pt Red bold all caps letter that said $12.50 shipping first class.
I add the cost of the box plus $3 on to the minimum price and then charge shipping at cost or near, people always say thank you. They can see a new box and that they only paid for the postage.
With Ecomm:
I charge a handling fee of $3 plus postage at cost - I ALWAYS make it clear that the item is coming from the UK and will go out via the fastest possible method.
I get one complaint in around 200 orders about the cost - so I send them a link to the royail mails website showing the cost of shipping.
Seems to work, one thing I will say though is that I always use NEW boxes people seem to be impressed by those. Never mind....
We charge what it costs to ship the goods. But... it does not come close to covering the actual shipping costs.
We have to employ people to staff the shipping department, we buy boxes, packing material, tape, tools and have to heat or cool the area. We pay taxes on the employees, taxes on the property and all kinds of insurance. So we never really cover the shipping cost, not even close. Do the customers realize that.... no way. They all want a deal on shipping.
We charge what it costs to ship the goods. But... it does not come close to covering the actual shipping costs.
We have to employ people to staff the shipping department, we buy boxes, packing material, tape, tools and have to heat or cool the area. We pay taxes on the employees, taxes on the property and all kinds of insurance. So we never really cover the shipping cost, not even close. Do the customers realize that.... no way. They all want a deal on shipping.
The point of my last post was to say that this is stuff you have to do ANYWAY ... getting the product ready to deliver to the customer is part of the cost of doing business and should be worked into the price, period. If you weren't shipping anything and had a retail storefront you would have those same employee costs in the form of stockers and cashiers, and boxes/tape would be replaced with shelves and endcap displays.
Like I said, it would be like having extra charges tacked on when you get to the register. I understand that shipping is done through a third party and I expect to pay that third party - your profit should come from the sale of your product, not a third party delivery service.
That's just a matter of opinion. There are other models out there, none of which is any better or worse than how you would like it.
Can we get back on topic though please. And that is if shipping below cost is a good idea. Personally, I think not.
But you just said on your ecomm site you charge a handling fee of $3 plus postage. Which is it? I would also put out there that individuals with ecommerce sites are far more educated about carrier rates than other online consumers or just feel they are entitled to complain about a business practice they don't agree with.
We have just started to advertise a special rate for next day delivery of about £2 and have found that about 25% of our customers choose this option.
The £2 covers just under half of the price we pay, but is a nice extra option to offer our customers for more urgent orders.
To summarize, IMHO make sure your margins cover you to offer free shipping. People like to know what the rate is from the outset and the word FREE is always powerful, even if the customer knows the shipping is built into the price.
Over the past 4 years,we raised our shipping rates several times and never saw any resulting drop in business or adverse feedback from customer.
The free shipping model started in the late 90s when Dot Bombs had to pump their quarterly figures to make the stock market happy. Virually all of those firms are gone now.
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Mail order catalogs usually make some money on shipping. Some of them have 100 years of experence. I'll copy them, rather than "dogfood.com" or whatever.
Darn it, I ways seem to get myself in a pickle.
