Forums: Discussions for entrepreneurs and small business.

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Tracy Barnhart, Owner
Giverny, Inc. / Mini Me Geology
http://www.GivernyOnline.com
http://www.MiniMeGeology.com

This is a problem that most Internet retailers have to deal with and the solutions can vary.  If you use the wrong method you will see shopping cart abandonment increase.   On top of this, you are just getting started with basic shipping charges and at 35% fuel surcharges along with other accessorial costs can eat your profits alive.

There are all sorts of studies that now show free or flat rate shipping gives you the most bang-for-the-buck.    And just to make sure you understand what I mean by flat rate shipping - flat rate shipping is not by ZIP code, it is by the product, or for all the products you offer, no matter where the customer is located.  If you charge a rate based on the carrier tables by ZIP code or zone you are really not selling nationally.  This is because the further away your customer is the higher the price he will pay.  The higher the price you charge the customer for shipping, the more reasons you are giving them to look elsewhere.

If you would like to read more about handling shipping charges you might like to visit my company’s Blog on the subject.  I have also written a white paper on the subject that can be found at our BusinessShipper web site.  All this is free and I have had several SuN members now tell me that it has really helped them deal with these issues.

Good luck with your new site and if I can help further, just let me know.  Also, let me know when the site goes live, I am a big user of back packs and gym bags…

Bert

 

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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...

Bert (above) was instrumental in our decision to strategically change our entire concept of shipping charges. The first concept was to really understand what he`s talking about when he says "based on product, not location."

We sell one item--signal flags--in three variations. The flags aren`t unique, it`s that you can purchase them individually for messages. They`re also smaller than other standard flags, thereby being nearly unique. Our customers can`t get the product anywhere else, so we could go either way in terms of shipping.

Originally, we`d take a guess based on ZIP code as to how much to charge. Following a white paper on Bert`s site, we switched to averaging. We worked out how many orders were going to which parts of the country, took the average, and charged a flat rate.

Although people close to Illinois pay a slightly higher amount, people living on the coasts pay a lower amount. It took only two adjustments, and we reached the "magic number." It`s low enough that it doesn`t look excessive, yet high enough that *on the average* we make a small handling fee.

The handling fee we make isn`t on a per-shipment basis. Instead, it`s on a "per quarter," or "per period" basis. In other words, we sometimes lose money on a shipment, but over the period of 6 months, we make more than we lose on the combined shipping of all orders.

We`re now looking at UPS Ground, for closer tracking. It`ll increase our average shipping by $5 (we`ll call it $4.85). To make the change, we`ll make the "default" shipping method UPS, but we`ll offer a less expensive USPS rate. For that second option, we`ll offer a flat reduction of $4.85.

ALL of this rests on the fact that customers can only get these flags from our company. We don`t have to compete with the enterprise sellers since they don`t offer the same thing.

I forgot to mention an article I saw recently on this subject that also supports rethinking how we charge for shipping:

 

http://news.yahoo.com/s/ap/20080828/ap_on_hi_te/cheap_online _shipping

 

I found several things interesting in this article especially the following comment:

 

"We`re willing to take less for shipping because we think you`ll buy five more items from us — as opposed to if we got as much as we could from you, shipping this product, you may never buy again," said Enable Holdings` CEO, Jeffrey D. Hoffman.

 

His comments match what many have told me over the years after they have switch to a method of shipping that augments their sales.  The old way of thinking that we should pass the shipping costs to the customer is an out dated method now that Internet retailers must compete with all retailers locally and around the world.

 

I hope this has been helpful…

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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...

The only argument I have with not passing on shipping costs is that they would be built into the cost of the merchandisé. I`ve watched a couple of sites where I shop repeatedly, and when they go to flat-rate or free shipping, they increase the price of the unit items. I only notice it because I`m a "previous customer."

I hadn`t at ALL thought about the idea of customers buying more items than they`d originally intended, simply because it`s "Free Shipping!" :-D Excellent tip!

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Tracy Barnhart, Owner
Giverny, Inc. / Mini Me Geology
http://www.GivernyOnline.com
http://www.MiniMeGeology.com

Craig and Jamie it amazes me how many retailers have not seen the forest for the trees on this issue.  I guess it is because businesses have been told “just pass the shipping charges to the customer at the end of the sale” for several years now.  That this is what customer expects, right?  I don’t think so, as you have both found.

I know my thoughts are not main stream today but it is starting to surface as people are looking for better ways to deal with a depressed economy.   It is my opinion that one should use free shipping or whole order flat rates to increase sales volume or for competitive specials.  I also feel that one should use flat rate shipping per product when sales are generally single item or heavy product purchases.  To do this though, you must make sure you are shipping at the least cost for the service required to meet customer’s expectations.  You must also closely monitor shipping cost averages over time for the method you choose to keep your pricing at profitable margins.  If you check out our Blog article titled “Are you selling nationally or locally? Are you sure? (Part 2)”, you will see a sample flat rate shipping report for monitoring these types of costs.

At least this is what I am finding as my company is working for Internet retailers in today`s economy.

 

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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...

Tracy, I went to your two web sites and I have some questions.  At the site in question, are most orders one item per sale?  If this is the case, are you trying to sell more items per sale or is that what you are planning on?  Finally, how fast do the customers want the item(s) purchased and what is the maximum weight of an item?

Let me know the answers to these and I will be happy to let you know my thoughts...

Bert

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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...