In the previous installment we discussed some of the costs associated with delivering physical products to your customers.
Be careful to study the numbers and understand exactly what it is costing your business on a weekly, monthly, and annual basis to send out your goods.
In most instances, it is best to charge your customers about what it costs you to handle and ship their purchase.
The amount can vary a little from your exact cost so that you can standardize and simplify the shipping cost structure you present to your buyers.
But be careful that you don’t overcharge or undercharge your buyers significantly from what it costs your business.
Such a practice can slow down your sales greatly (if you charge too much), or eat into your profit margins unnecessarily (if you charge too little).
Most online buyers expect to be charged some fee for the shipping and handling of an online purchase. It makes sense, right? They want to buy an item and have it sent to their home . . . and there is a very real cost associated with that delivery.
But buyers are not stupid and have most likely made other similar purchases.
If your cost is too out of line, they will recognize your overcharge as a “rip off” and it could very easily cause them to back away from the sale.
I would say that you have a justifiable reason for offering free shipping when:
1. It is a cost effective way to differentiate your business from many other competitors that offer exactly the same products plus also charge for shipping. Be sure you can afford to make this offer in a “cost effective” way.
The only way you’re going to know if it is cost effective is to have an excellent handle on all your costs and the margins of all your products. Tracking your costs, record keeping, and optimizing your shipping system will help you to understand your numbers.
2. Shipping becomes less expensive when you can include several products in one shipment.
So if you can make additional product sales and cut down the “per item” expense, offering free shipping becomes more of a bargain for both the customer and the business.
3. If you have small or very light products and don’t need to send them at the fastest speeds, it may make sense to offer free shipping simply because the benefit you gain from this incentive may outweigh your reduced cost associated with sending the small item.
Other ways you will have reduced costs include: selling items that don’t need special packaging, scrounging shipping boxes and packing materials (don’t go overboard here), making deliveries to the shippers as part of “another trip to town” that you are making anyway, and employing computer software that quickly and automatically prints order confirmations, packing slips, mailing labels, etc, all at the same time. Sometimes, if you are fortunate, delivery services will stop at your door to pick up your shipments (you may need to satisfy some minimum level of outgoing shipments) for this to happen.
4. Your profit margins are so large that the free shipping “perk” becomes the expected bonus for the expensive purchase.
Let’s face it, if you can sell a 1,000-page mega course delivered on a CD at a purchase price of $897, you can probably afford to produce and ship the CD without further expense to the customer.
What seller in his right mind would pass up making such a sale because a buyer was “put out” by a $3 shipping and handling fee?
5. You include the cost of shipping and handling right into the product itself.
In most circumstances, I don’t recommend this strategy.
I think it is almost always better to keep the two costs separate so the customer understands, in advance, exactly what each is costing him.
But in a situation like the following, you may choose to just cover the cost of shipping in the product cost itself.
Say you’re selling a service that includes multiple shippings at various times – like the “Jelly of the Month Club” made famous by Chevy Chase in the movie Christmas Vacation.
Why make your customers fork over 12 shipping charges as each product is delivered over a year’s time? Just include the cumulative cost of shipping into the overall cost of joining the club.
There’s no reason to make your life or your customer’s any more complex than it has to be.
Remember too that shipping amounts not only vary by weight and time-to-delivery, but also by distance.
If you offer shipping to foreign countries, there may be some pretty hefty charges that you need to know about up front and you should alert your customers to in advance.
I have a friend that does a booming eBay business, but she refuses to deal with customers outside the U.S. and Canada because of the expense and hassles with shipping abroad.
Often the expense makes the price of the product skyrocket out of reality for the customer.
In addition, she has had way more fraud attempts from foreign customers and it is nearly impossible to “track down” or “go after” these dishonest folks.
In addition, there are still many countries worldwide that have very poor mail delivery security.
My friend is tired of getting irate phone calls at 3 a.m. by an upset, barely understandable customer complaining of getting ripped off because a purchased product had not arrived.
Unfortunately, the product did arrive but someone else in that country is enjoying its ownership.
In this case, seller beware!
To your online business success,