The e-commerce site I manage has free shipping on orders over a certain amount, and a fixed price of $5 (CAN) on orders under.
Even though shipping to a customer is a small portion of the cost, it makes a huge difference mentally. ($2.99 or $3.00 - one is waaay better.) We’ve found that it’s well worth it to keep the customer’s shipping costs down.
Our on-line shop solution provides management console for shipping costs, which are calculated as a function of weight and destination of the package.
Evgeny Gesin /Javadesk/
For supplies we use ULine they have offices strategically positioned in the US: our supplies usually arrive next day. Their number in Chicago is 800 295 5510: they will be able to tell you who your nearest branch is.
We charge X for shipping up to $50, then free, but always add a $1.50 handling charge. Our biggest booboo was initially failing to set a weight limit: we now state “free up to 5#”. The NEXT biggest error was not making it clear that this was free only in the US: unbelievably, we had people ordering from Europe who thought they would get free shipping.
We initially used UPS, but charnged to FedEx when UPS refused to consider any discounts, even with our vastly increased level of business. FedEx, on the other hand. has an arrangement with our Trade Association which gives us a nice discount, on Ground, and a REALLY nice discount on Air.
So far we have been pleased with their service. certainly,m they haven’t broken as many of our bottles as UPS did!!
Hope some help here.
Wonderfully informative post there! Thank you so much!
Shipping is interesting. You must consider packaging materials and weight of packaging materials, something I see no one even thought about. The weight of the shipping carton may move your package into the next weight category. Cartons used for shipping can be ordered as 150, 200, 250 or mose PSI each weighing more and costing you more to buy and to ship. Some carton manufacturers sell overruns or rejects these maybe printed or plain and are always cheaper than ordering specials. However watch the psi you can save $0.15 per carton and spend $0.25 more on every package you ship due to weight.
We charge for shipping and handling. A set fee for the first item and an additional fee for each item after. We group multiples for some items so a package of three and/or six ships as one item.
No one has mentioned returns. There are 2 classes, a return for exchange of size or color and a return for refund. Without shipping/handling charges you are not charging for the handling of the picking and packing of an exchange. And the dreaded request for a refund. The card company (excluding AMEX) charges you their percentage on the charge and also on the refund. This point in itself makes free shipping impossible. Oh yes! Does everyone realize there are about 5% to 10% returns in apparel and footware products?
I hope this additional information helps everyone make a more informed decision.
A further point of interest. Between .5 to 1 % of the customers supply incorrect addressing information. Most of these are corrected by UPS and they will charge you a $5.00 fee for the correction. Or the customer is not home and reroutes the package to their business address also a $5.00 charge.
Pricing takes all this into account. What I mean by this is, you must charge accordingly to stay in business. Unless of course you feel your bricks and mortar shop should fund your on-line business. This of course is another story as to how do you stay in business.
If we are pricing to make a profit and each part of our business is run as a profit center. Warehousing, fulfillment and shipping all must be profit centers. (As an aside, I have a large amount of warehouse automation experience. I know intuitively how to pick consumer orders efficiently and my warehousing costs are lower than my competitor’s.) I assign a value to picking, shipping etc. I then work the profit I am must earn on each product and assign a value (%) to it. I sum all these values to arrive at my best sell price. Now comes the important part, I review this value and compare to competitor’s prices and usually adjust up to be just below their prices. (This is an important concept, you must get the most profit you can for your services. The market drives prices to this value, if you are better and smarter you want to profit for it, you charge what the market is willing to pay.) In summary my charge to the customer is for product, handling, shipping including supplies. This price model favors your best customers. Ah, why you ask. Because the customers getting free shipping and making all the returns are not using up profit margins for you. You can afford to provide better pricing on products that your better customers buy and keep.
USPS Priority Mail is probably the cheapest shipping for a “standard” shipping method. Even UPS or FedEx ground isn’t cheaper. And they will give you boxes, tape, labels etc. OTOH some customers perceive USPS shipping as “cheap” or lower quality than UPS or FedEx.
Frankly, I prefer USPS over UPS/FedEx just because the pricing structure is (for the moment) easier to understand and compute. So it’s easier to know what fixed shipping to charge the customer. OTOH, UPS and FedEx have all sorts of add-ons like fuel surcharge, weekend/holiday charge, residential charge, etc etc. Makes it very hard IMO to determine the actual shipping cost and therefore hard to know what to charge the customer.
Be careful!!! With consumers at least 25% will ask for a tracking number. The Post Office really does not have that service working at the same level.
I prefer sending books by USPS since it won’t cost me much to resend them if the package gets lost, and my customers and I will end up saving money in the long run. All other products need to go UPS because of the tracking feature. You don’t want to have to eat the cost of your other products because you can’t tell them that it was shipped correctly or not.
Also, I looked into ULine, but the cost of shipping was going to cost half of the product I was ordering. I’d rather spend money on actual items than shipping. However, when I called my local supply store, the cost would be 100% over the cost of the product from ULine. It’s too bad that I can’t afford to support my local store.
Do you ship your books at the media rate? Do the customers like that since it can take longer to deliver?
Very true. :mad: They can give you a tracking # that will show when shipped and when arrived. But inbetween it’s a black hole. Can’t understand why UPS and FedEx can scan a package at every twist and turn but the USPS can’t. That’s government for you!
Well, for one thing, the USPS isn’t in control of all of the packages that they carry at all times. Right now, FedEx Express is carrying a huge number of the USPS overnight packages. Plus, in order to keep their costs down, the USPS makes very few, if any, guarantees on their service - thus eliminating the need for them to be able to track packages internally (FedEx and UPS both were scanning and internally tracking packages long before customers started worrying about it because both have guarantees on delivery time and date).
On another note, to all folks out there shipping with FedEx, if you haven’t spoken with a sales rep before, give customer service a call (1-800-GO-FEDEX) and ask to speak with your account executive. If you’re currently shipping or expect to be shipping over $24.00/day with FedEx, you should have an inside sales representative available to help you (this is only for US based businesses - not sure about international companies, as it’s an entirely different sales group). Most, if not all, businesses doing that kind of volume should be able to get some level of discounts on Express, Ground, and International shipping (Ground and Home Delivery tend to be harder discounts to get, as the prices are already pretty low) with FedEx.
Ironically, FedEx also hands off some of their packages to more remote areas to the Post Office - and (ask me how I know) this can cause real problems if they disappear!
I agree. I don’t really think it makes sense to charge money for shipping, unless you have a strict price-leader strategy (which is as impossible as it it insane when you are a small business) or if you offer multiple shipping options.
I don’t agree… I think in certain industries it would make sense to offer free shipping but every situation is different. Take our company for instance. We sell large shoes… one pair of shoes for women could weigh 3 lbs or men’s boots could weigh 10 lbs. Offering free shipping would mean trying to figure those differences into the cost of the shoes, so we would always be either charging too much or not enough.
Also, in a niche business people aren’t as concerned with price, tax and shipping as they are about finding the product they need when they need it (and the level of service). We don’t offer discounts or free shipping… we charge exact shipping rates and never had any complaints.
Offering free shipping would mean trying to figure those differences into the cost of the shoes, so we would always be either charging too much or not enough.
That’s a problem pretty much no matter what you sell, as long as the weight varies in between orders (which it does for almost any industry).
Have you tried offering free shipping? If so, what were the results?
My prices tend to be lower then my competitors… Some very much lower (300% difference) and others just a few pennies. The individual orders tend to be low as well around $25.00. We offer both USPS and UPS shipping options and do not ship internationally, thought might add Canada and Mexico into the mix in 2005.
What I am thinking about doing is instituting a minimum order of $10.00 because some of my items are 50 cents or lower and it isn’t cost effective to ship those individually and on the high end of orders offer free or discounted shipping. We also offer local delivery for $1.50 on any order up to $25.00 and free for larger orders.
Can really hurt though if there isn’t much profit margin though. For instance an upcoming site of mine will sell video games. Some video games only have $1.00 or less in profit on them. Though I am looking for better suppliers.
Awsome thread and thanks for picking it back up TTD.
I have a few customers who charge exactly what it costs to ship according to the shipping companies and others who charge a flat token rate which makes no sense when the order is local or really long distance.
ie: Vancouver vs. Australia.
I wonder what a small markup and a free shipping promotion would do to the mix. I have a customer who will be changing their market from Canada only to Canada/US shortly. I’ll make the proposition to them. It might not fly but it would be an interesting exercise.
Cheers,
Andrew
I’d like to elaborate my thoughts on shipping a little. I don’t think it is so much the cost of shipping that is a detergent to people, as the fact that it’s such a elusive figure. You cannot really tell how much shipping will be before you go to the checkout, because it varies so bloody much depending on what weight the order is, and what kind of deal the merchant has with UPS/Fedex/Other. Sitepoint has a very interesting solution where they charge for shipping, but subsidize it, which means that shipping never exceeds $9.95 for anywhere in the world.
My computer parts supplier also does something like this - they charge $10 for the shipping (no matter how large the order is), and then they ship out the items as they become stocked. I.e. if they have one of the things in your order stocked, they will ship that out first, and the other items later, once they get those. Really sweet, since you always know beforehand what it’s gonna cost.