Forums: Discussions for entrepreneurs and small business.

Have any of the members of SuN ever thought about things we all assume to be accepted business practices, then find they are not when it comes to the web? 

Let me tell you why I bring this up.  In my industry, my company deals with businesses, including web retailers that ship products of all types.  When businesses come to us, most act like shipping costs are just a negative sales expense that customers will pay with no questions asked.   They assume this to be a fact because it has always been that way.

So, I ask you, have you ever seen a study or any other facts to supports the fact customers expect to pay shipping costs?  I am in the industry and have not found anything!

This makes me rethink this “accepted” practice.  Maybe it is not true that we should not worry about shipping costs just because they can be passed to the customers.   Yes, it is so heavily assumed to be a fact that the carriers even provide free API’s to make these calculations at our web sites.  But is this good for my business and my customers?  Is the web a different market that does not support these old ways of mail order catalog and business “freight plus” thinking?

The truth is shipping costs are a leading form of shopping cart abandonment.  There are studies that back this up.  Another fact is if the actual shipping costs are used, the farther away your customer is from your businesses, the more likely it is that they will not buy your product because of shipping costs.  So why do we spend so much time and money continuing to use the old outdated concepts and practices?

Has any one discovered better ways to deal with shipping at your web site?  I just do not understand why this has not been brought into question as we develop new retail web sites more.  What are your thoughts?

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

This has been debated for years - I remember debating this back in 1998 with several e-commerce shippers, and Jupiter Research did a pretty thorough study back in 2001.  Anyone who thinks that online purchasers don`t care about shipping costs should read up on what customers are willing to go through to avoid them - http://www.smartmoney.com/spending/deals/5-ways-to-save-on-online-shipping-fees-23480/

On the flip side, in the past keeping the shipping costs separate from displayed product costs were used to game shopping comparison engines.  However, the best engines now include shipping costs and taxes in their calculations.

Some of the best ideas I`ve seen - ones that clients have asked me to incorporate in their web solutions - come from a great research article from Wharton - "The Psychology of Free Shipping."  Offering discount coupons, referral discounts, promotional shipping discounts - especially when announcing them during the shopping cart interactive experience in stead of banners, pre-purchase promotions, etc. - can demonstratably affect abandonment.

I would, however, challenge your assertion that shipping costs are a major driver for shopping cart abandonment.  One older MarketingSherpa blog post references the huge difference between perceived abandonment rates and actual measured results.  A recent study by Opinion Research Corporation, "Consumers Sound Off On Online Shopping Frustrations: Survey, "  disclosed dissatisfaction (subtly different than abandonment I agree) with the online shopping experience as:

• 19% dislike learning an item was back ordered or out of stock after said item was placed in a shopping cart;
• 14% are frustrated by Web sites that malfunction as payment is being processed;
• 8% are confounded by unclear return policies;
• 6% don’t like unclear shipping information; and
• Another 6% dislike not getting an acknowledgment after an order has been placed.

In the end, what new e-commerce sites should consider is to find new and innovative ways to interact with the shopper - while browsing, when checking out, and even when abandoning their cart.  Explaining shipping costs up front - and offer ways for consumers to reduce those costs - will go a long way.  Amazon, for one, does a great job in educating consumers on shipping and providing various options for reducing those costs.  So much depends on the actual site construction, product, the shopper`s attitude, and the market climate.  Why guess - ask!  The good news is that with so much room for improvement, the site that gets it right should get well rewarded for their efforts.


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Phillip Barnhart
Web Architect / Managing Partner
SiteRiver: Web Applications Intelligence

LinkedIn | Twitter | Facebook |

I can`t tell you how many carts I`ve abandoned when I got to the shipping costs.  I am convinced that far too many web-based businesses are trying to make the shipping a profit center.  For example, a S&H of $30 for an item weighing less than one pound???  Especially when the second identical item doubles the shipping to $60.  Gimme a break.  I ship via USPS Priority mail flat-rate all the time and it ain`t no $30.

Steve Mann
(In the boonies - no Fry`s here)




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Steve Mann
Internet Videographer
MannMade Digital Video
My Email

Phillip,
That`s an excellent and reasoned argument you`ve put together. My only question is in terms of the fluid movement of online sales. By that, I mean that what happened even 5 years ago, probably isn`t the case in today`s market.

With the economy being in the current state, I would suppose that the way people perceive shipping now isn`t the same as it was in the past. With so many sites offering free shipping, wouldn`t that be an important change to existing data and studies?

Michelle Megna at E-Commerce trends recently summed it up

(Source: http://www.ecommerce-
guide.com/news/trends/article.php/3793346)

Videography`s posted example I think goes to the point of
studying shopping cart abandonment in general. We don`t
take "providing a quality experience" very seriously. We
make them mad. Greed and short-sightedness on the part
of the seller is not limited to the e-commerce field.
But have things changed in the past few years? I`m not
sure - I still give all my new web site clients the book
"Don`t Make Me Think" before we go over their web
designs.

As long as web retailers refuse to do usability studies,
refuse to apply heatmaps and other technical tools to
measuring the user experience, and fail to listen to the
consumer, shopping carts and web e-commerce sites will
continue to stumble along. With so many things still
done poorly, there are way too many independent variables
to control for to make a statistically valid study.       

Consumers don`t want us to charge $30 shipping and
handling to for an 8 ounce product. Consumers also don`t
expect 50 pounds of dog food to be shipped overnight for
free. They are intelligent - and we would be better off
simply explaining shipping fees than gimmicking our
customers.

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Phillip Barnhart
Web Architect / Managing Partner
SiteRiver: Web Applications Intelligence

LinkedIn | Twitter | Facebook |

I do get rather suspicious when I start seeing "handling" charges. You put the thing in the envelope and it cost me $20? Did it take you an hour to get it in there?

I also prefer sites that state shipping up front, or add it into your order as you go, instead of springing it on you in the end. I love shipping choices ... the Amazon model ... where I can weigh cost over how fast I want it.

Thank you for all this input!  These are all great comments and links! 

There are some facts that I hear all the time.  It seems like many times I speak with a web consumer about ordering something on the web, they tell me that they bought more from a site because they had free shipping or they took advantage of a flat rate for an order of a certain value.  Many times they bought more volume or items just to take advantage of the shipping offer.

I totally agree that free shipping on its own can be very bad.  Shipping is a cost that must be accounted for in some way.  One idea it to average your shipping costs so it can become part of your product costs when determining one price.  This is one way to offer free shipping and potentially expanding your market at the same time, without going in the red doing it.  I explored this concept a couple of years ago in a free paper found at:

http://www.businessshipper.com/whitepapers/Handling%20Shippi ng%20Costs.pdf

I also agree that adding shipping and handling cost to make it a profit center is a foolish mistake.  People do not like surprises at the end of the sales process let alone those they know are profit taking.  Today’s Internet consumer knows how much it costs to ship a product.  In the past, it was hard to get data in a easy fashion.  With the introduction of Internet this is not the case any more.  Heck you can get this and other pricing data right on your iPhone as you shop!

I definitely agree that things are changing so we all need to question everything we are doing.  In the current economy, people are doing a lot of price comparing and trying to stretch every dollar.  With increases in our taxes and necessity costs just around the corner, this could even get worse.  This was not the case even one or two years ago. 

A good example is many consumers tell me they are ordering the same product in multiple browser windows getting to the final costs and then choosing the store that comes up with the best price and abandoning the others.  In that case, how you know that they abandoned the cart because of shipping?  Because of examples like this I question if we really know the value of all the current studies I have read, especially when you take the current market conditions in to consideration.

The other thing I have noted from some of our successful business customers is that changing times require rethinking how we deal with everything we do.  If you care to read about some of them check out the following whitepapers:

http://www.harveysoft.com/cps_pgs/custom/AlibrisCaseStudy.pd f

http://www.harveysoft.com/cps_pgs/custom/NiagaraCycleHSICS.p df

I gave you these two examples just to show what I am seeing from some innovative thinking companies.  They are examples of why I think we all need to rethink what we are doing.  I also chose these two examples because I agree Amazon is a good business model and they are some of the many Amazon resellers that use our products and that I know are currently doing well.

I hope you now see why I question setting up our web sites using carrier based API’s, shopping cart provided ZIP-Weight tools or ZIP code-weight charts that could keep us from taking advantage of today’s market opportunities.  I have noticed the companies that re-think this process are doing much better in today’s marketplace.

In the past shipping charges were not significant enough to worry about.  We just passed them to our customers who did not really seem to care.  Some companies even got by with making a profit from inflating the shipping costs.  I think today shipping charges are large enough to kill sales.

What to you all think?

 

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...

I once received an email from a web firm.. "We recently saw you were interested in ....., and wondered why you left without completing the order."

They were polite about it, so I replied that the shipping costs killed the order.  The product was $30, weighed a few ounces, not fragile, and the shipping was $42.  A few weeks later I looked at the site again, and their policy is now "Free shipping unless otherwise noted".  (Of course the prices are slightly higher).The otherwise noted covers them for the things shipped FOB or requiring a fork-lift.

Steve Mann




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Steve Mann
Internet Videographer
MannMade Digital Video
My Email

From what I`m reading, and from our own experiences, I think it comes down to showing the shipping/handling charges right from the git-go.

I`m also fed up with having to do a pretend order, go all the way through the entire process, and only at the very end finding out what it`ll cost with shipping.

The sites I most appreciate tell you right up front, before you even go exploring the details of a product, what`s going to be the final, total amount.

Craig, I think you are dead on.  I find it almost insulting when I go to a retail site and they have surprise costs at checkout time.  Checkout is too much work for the buyer as it is without throwing in unexpected costs.  I think all sites should be up front about all charges if they do not want to lose buyers at checkout.  This definitely includes shipping.

 

I also think that each site needs to figure out what works best for them as was pointed out by Phillip.  A site that sells a one of a kind product can get by with more handling and shipping charges at the end of the process than a site that has a lot of competition.  I do feel that in all cases that shipping charges should be handled as an averaged rates rather than actual charges to maximize market size.

 

I guess, like I believe Phillip pointed out, we tend to misunderstand or ignore the facts and just go back to what we think we know.  I think it is time to be innovative.

 

I was recently at an awards banquet where Dr. Gene Landrum (http://www.genelandrum.com/), who originated the Chuck E. Cheese concept, spoke.  He is a very interesting entrepreneur to listen to.  In his new book and at the lecture he pointed out things like:

 

Innovators go where the pack fears; xenophobia is never a factor

Innovators think in Reverse, for them the end is the beginning

Innovators create by destroying; for them the new trumps the known

Innovators passionately pursue knowledge; they’re accidentally sagacious

Innovators are Zen Masters on a Trek to Shangri La

Innovators are Beach Bums; escaping the Real via treks to the Surreal

Innovators are Irrational, Illogical & Irreverent – antithetic to old dogmas

 

He also said you knew if you were an entrepreneur if your spouse was always asking when you were going to get a real job.  Boy did that sound familiar!

 

Well I think when it comes to shopping carts and these costs we have a long way to go before we get it right and it needs a lot of innovation.

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Bert at Harvey Software, Inc.
Multi-Carrier Shipping Software and Supply Chain Solutions for Internet Retailers

Also a provider of free shipping information and resources at Harvey Software`s Parcel Shipping Blog along with free tracking solutions at TrackingPage.com...