Forums: Discussions for entrepreneurs and small business.

After making my last post a friend in the retail industry said something to me that makes a lot of sense.  If a customer is at your site and sees your product for say $25.95 and they add it to their cart, they already know that it will cost $25.95 so that sticker shock is over.  Now if they continue to checkout and they come to the final total, shipping cost is usually the only thing added that is unexpected, especially for a single item purchase.  Therefore, if they abandon the cart at that point it was the item price + the shipping charge that made them not complete to order.  This gives you a quick and dirty way to prove that if you are seeing a lot of abandoned carts at your site on the submit order page, it is more than likely the cost of shipping that drove them away.

 

Interesting point when we are all trying to devise elaborate ways to determine the reason for lost sales.  Any thoughts on this?

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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...

First, customers always look at shipping and handling cost.  Most customers also know how to calculate shipping cost depending on the carrier service used.

Second, S & H charges should be reasonable.  How mush does it actually cost in man hours for instance to pull and pack the order. 

Don`t forget there is also and order processing charge.  For most businesses this is about $25.00 to $30.00 to process an order.  And yes, this processing fee amount has been researched.  That`s why a lot of businesses have gone to minimum order amounts or charge a surcharge on small orders. Hence, you can have a $42.00 S & H charge on a small order.

Finally, there is the actual shipping charge.

It`s also best to disclose these charges up front rather than on the invoice you send the customer.  The customer can then decide to buy from you or someone else.



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The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

Good points Patrick!

 

It is amazing how many web sites do not disclose these charges up front.  Some of our most successful business customers go a step further and use their extra charges as a selling tool to increase volume with economy of scale type offers.  To this day I cannot believe how many people say they don’t want to cheat the customer and only charge actual shipping charges.  The fact that this has to be done at checkout causes shopping cart loss on its own.  The truth is that business that does this is cheating themselves out of orders the further the customer gets from their business!

 

Nearly everyone that is old enough to purchase on line today, is accustomed to going to a store and purchasing something for a given price.  In our life time there have always been more people buying goods at local stores than on line or mail order.  I think one of the many reasons why more and more people buy on line is because the experience is getting closer and closer to what they are accustomed to.  The ways to display products is much better.  We are learning to be upfront with them about all costs.  I think this is one of the many reasons companies that are displaying total price at the time of “adding to the cart” have a distinct advantage over those that hide the additional cost and other details to the last minute.

 

One other point for thought, Amazon is an amazing business model that works, do you see any other costs being added to their orders at close out other than shipping and sometimes sales tax?

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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 buy online because I am an hour`s drive or more from any decent shopping (no Fry`s and the nearest Best Buy is a half-hour away).  Frequently from Amazon, so I subscribe to Amazon Prime and get free shipping on most of the stuff they stock.  Quite often, that tips the purchase in their favor over a cheaper price from a smaller seller.


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Steve Mann
Internet Videographer
MannMade Digital Video
My Email

Steve, I agree with your comments.  The cost of transportation is another good reason why people are turning to the web.  The reason this has been happening slowly, is because it is hard to figure out how much you spend when you drive to shop without a lot of work.  Now that we are looking at our expense closer, more are beginning to realize the savings of shopping on line.

Your example with Amazon demonstrates how successful retailers are using shipping costs to increase their sales.  Some of our customers that use Amazon to resell through have noted this problem when selling their products at Amazon`s site.  Many of those have been force to be creative and not just sell on the lowest unit price, but the best price when shipping costs are accounted for.

I feel that the economic stress, fuel prices and even higher fuel costs due to up coming federal taxes increases will be driving more to the web to shop in the upcoming months.  But these same issues are going to be problems for carriers and everyone else including internet resellers and there customers.  I think the best solution I have heard to date is being up front with costs and the cheaper you can make your shipping costs, the more competitive you will be at your web site when pricing your product.  This is true whether or not you use free shipping or charge for it.

 

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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...

To Patrick`s point:
I suspect most customers have a GENERAL sense of what shipping will be, depending on carriers. But I don`t believe most customers really know the number or have them.

For example, I would assume a USPS charge for small items to be around $5. UPS would probably be around $15.

Therefore, to me the term "reasonable" means within a dollar or two of what I "sense" to be the ordinary number. If I see USPS shipping & handling at $10.50, I want to know why. If I can`t find out why, I assume the seller is trying to make money on shipping.

It`s only when I`ve done some shopping at multiple places, getting pretty much similar items, and THEN find that a "typical" USPS charge is $10 that I change my "sense" of things.

All in all, I think it`s better and simpler to just lay it all out for the customer. We had a topic awhile back about how come people do what they do, and when will people step back or concede various things.

In my opinion, most people will modify their thinking and actions IF they have a rational explanation. If we sell a 10oz. item and charge $4 for the item, plus $10 for S&H, then there ought to be a pretty understandable reason for that S&H charge.

As always, Craig well thought out points!

The interesting thing I find is how many businesses still tell me:

“Shipping charges do not matter because customers will pay whatever we charge, they expect it.  I just want to charge the actual amount so we don’t look like we are taking advantage of them.”

Those business practices are opportunity for the right competitor…

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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...

Hi Graig,

Don`t mean to disagree, but most customers can figure almost to the penny what their shipping charges will be if the know the carrier, weight of the package, and method of shipment (normal ground, next day, truck).  They get the rate information on line from the freight companies and then plug in the other figures. 



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The older we get, the more excuses we make for not chasing after our dreams. But truth is, goals are attainable at any age.

Patrick,
I`m not doubting that most customers "can" figure out everything about shipping. What I`m saying is that most customers don`t want to be bothered. They have that general sense of "about" what it ought to cost (right or wrong), and compare the actual against their belief.

I`d also say that this particular point relates to the overall topical question about whether business owners want to make their customers work to shop, or make it simple to buy.

Patrick,

Even though what you say is generally correct, I agree with Craig that most shoppers will not take the time to figure this all out.  There are several reasons.  Many times the customer may not have enough information like actual weight.  Customers like to make decision quick with the information easily obtained when shopping on the web.  For ease of shopping they will compare several retailer prices between sites and buy the one that has the best price, before they will try to check the shipping amount at a single site.  At least that is what I have found and I have been told.

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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...