Shipping charges vs. Adding Shipping to Price

Business
1

I’ve decided that this winter (which is our off-season) we’ll begin offering $9.99 flat shipping on all orders and free shipping on all orders over $199, opposed to our current system of charging price + shipping. Our items are heavy and on average cost about $25 to ship. Subsequently, we’ll simply be adding the shipping cost into the price. Our actual overall prices, will in effect, not change at all.

We’re the price leader on most of our products. However, I’m worried that now we won’t appear to be so economical, despite our prices not having changed. We also have at least one major competitor who prices shipping separately as we currently do.

Currently
US $99.99 + $35 shipping
COMPETITOR A $145 + $7.99 shipping
COMPETITOR B $110 + $37.99 shipping

New Format
US $125 + $9.99 shipping
COMPETITOR A $145 + $7.99 shipping
COMPETITOR B $110 + $37.99 shipping

I’m sure we’ll compare more favorably to competitor A now. However, I’m worried that competitor B will now appear to be the price leader. At the same time, I think consumers may be more quick to dismiss companies with high shipping and therefore we’ll compare more favorably to both companies.
What’s your opinion?

2

You might as well just list the price as $135 under the guise of free shipping. The buyer is going to pay that regardless.

3

The rule of thumb is that free shipping is expected and downright demanded at the $99 plus level. People will pay more to not have this tacked on and will abandon if they see it.

But don’t assume any rule applies to your business. It’s easy to test and that’s exactly what you should do.

4

Agree, level of abandonments at shipping charges page goes up the higher the order total.

5

I have found if you just make shipping a flat $10 almost regardless of value of cart people dont mind. Means you can then use free shipping as a promo item as opposed to simply giving it away.

6

I can’t speak for AU specific market dynamics but the rule of thumb for US shoppers, backed by a ton of research, is that people will pay a few bucks more for an item with free shipping and abandon in droves without it… A big part of shopping cart abandonment is in fact people going through to validate fees hence why Amazon was able to use free shipping as a marketing campaign rather than ads or offers.

7

You might well be right. I thought it was more about when they get to the checkout fees are considered exhorbitant and so they abandon. If you have a flat rate stated in your header and carry it all the way through the site “$10 shipping Australia wide!” then there is no checkout shock… ? Sounds like something we should AB test further, but what I do know is when people use a comparison engine and you are $10 more on the base product because of built in freight costs, then your site doesnt get the first click…

8

Test it and I bet you’ll find that even if your traffic sources drop, your CVR increases as long as you are in line with competitors.

Hence why most CSEs have built in the total estimated cost…

9

I would second everyone else. Factoring in your shipping cost and offering free shipping is the way to go.

10

So for what it’s worth we switched over to the model mentioned above (free shipping over $150, $9.99 other wise). Our overall number of sales is almost unchanged from the same period last month (up around 1%). Overall revenues per order is up about 7% (including shipping or lack there of).

I think it’s too early to judge performance one way or the other. The overall revenue per order number is encouraging but again, it needs some more time to make a clear assessment.