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Jeff and Rich Sloan, I am really happy to see you are going after this issue. It is time for Internet Retailers to rethink what they are doing. The Internet Retail has always been assumed to be a mail order catalog type company of days past. Experts and business advisers for Internet Retailers have also assumed that they should sell using the same methods. I think this is wrong. Our world is changing. Global competition, global customers, inflation, outsourcing, energy costs and much more are changing how every business must bring their goods to market. It is affecting every type of US business even if they don’t think they deal in a global market. Many times customers are comparing Internet purchases with those of brick and mortar stores, not just other web sites. They are considering everything. Brick and mortar have been offering free shipping for years now. You just don’t think about it that way. It is just part of the formula they use to come up with their prices to reach their profit goals. That should be the case for Internet Retailers if they are competing with brick and mortar companies too.
The secret is not automatically switching to flat rate or free shipping and the profits will flow. Sorry to disappoint everyone. Instead, successful Internet businesses look at the market and determine how the products that they plan to sell are currently being sold and at what price. Then they should do the math and figure out how they can bring their product to market making it look better. When this is done right, it should be done without causing unnecessary barriers from how the customers currently obtain similar products.
How one handles shipping charges is only one of the tools they should use as part of the formula for success. Even though I am a big supporter of Amazon, I think current Amazon’s offerings will be short lived. Any business that uses this type of offering will need to be preparing for that day that it changes. One thing I have learned over the years is shipping costs seem to do nothing but go up.
If an Internet Retailer is selling against other mail order and/or other Internet companies that are charging actual or inflated shipping costs, then they should consider flat rate shipping and rate shopping across carriers during shipment processing to lower their costs to make them more competitive. If they switch to free shipping they may not be competitive. This is the case for most of today’s Internet companies.
If they are competing against brick and mortar companies or other businesses using free shipping, they should be considering free shipping too. Most Internet companies have much less overhead than brick and mortar businesses. Therefore, offering free shipping can be done and they will still be price competitive. It all depends on your market and customer perception of your offering. Even if the price one must charge to offer free shipping comes out to be the same, or more than the brick and mortar business, they may still get the sale by being in tune with their market. One must know their customers’ demographics and expectations. The convenience of ordering the product on-line, the quality of the Internet Retailers product, or something as simple as the cost of gas to go to the brick and mortar store may be all is need to make the sale.
I did it again, too wordy! Sorry about that. I caught a cold on my last air flight and I may regret getting involved with this thread but I felt I needed to put in my two cents. I hope it all makes sense.
Regardless of all my verbalization, I think this is a good article and I am very happy to see SUN go after this topic. 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...
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