Shipping Cost Sticker Shock

Return to: GROK Dot Com 8/01/2001

Shipping Cost Sticker Shock

Sure, folks perceive the Internet as an opportunity to shop more conveniently, but not at any price. Shipping costs are part of the total value proposition your customers are weighing as they decide whether to click on that Submit Order button. Listen! You can hear their brains working. "I really like those roller blades, but the shipping is going to cost me $14.95! Sheesh, I wouldn't have spent a quarter of that on gas to the sporting goods store! And look here. For just 25 cents more, these dudes would ship the same package internationally? Like because I’m in the next state, I'm next door to London? I don't think so."

Yes, I’m from Mars, so maybe that’s why I find this so bizarre: "Right now, about a third of U.S. e-tailers use shipping as a profit center."¹ That’s a business model? And a way to keep customers? Some people out there clearly need to know, "60 percent of those who abandon their online shopping carts did so because shipping costs were higher than they had expected."² And there’s no way to really know how many customers did complete their purchases, but were outraged when they discovered later they had been hit with outrageous shipping charges that were not disclosed A bunch of those folks won't be coming back, ever.

A friend of mine needed a special microphone line level adapter for a Macintosh and had to have it within two days. Nobody locally carried this $20 item, so she went cruising the Internet. She found several companies who would supply it, for roughly the same cost, within the two-day deadline. One company located only a state away wanted to charge her $30 for 2^nd Day Delivery. The other company, on the opposite coast, offered to send the item for just $12.60, the amount the carrier would charge them for the service. Guess who got the sale? And guess who is never going to see my friend as a customer again? Day Delivery. The other company, on the opposite coast, offered to send the item for just $12.60, the amount the carrier would charge them for the service. Guess who got the sale? And guess who is never going to see my friend as a customer again?

Your customers aren't fools, and it's a rare customer who isn't going to scratch his head when confronted with a shipping charge that looks way out of line. Folks expect to get charged something for shipping - after all, it's a trade-off for the convenience of not having to drive anywhere or hassle with crowds. That's worth something, and customers, for the most part, are fair-minded. But they’re not willing to get taken to the cleaners. When you pull this sort of sticker shock with your clients, your credibility isn’t just weakened, it’s destroyed.

What can you do? You certainly don't need to ship at a loss (although 50% of e-tailers lose money this way - another brilliant strategy). But you can charge at your cost, possibly with a nominal handling fee if absolutely necessary. You will make it up on more sales volume (assuming you’re selling your product or service at a fair profit, of course). Or, you can build your shipping charges into the price structure of your products. Another option is a "flat-rate" shipping fee, which represents the average of all your shipping costs. Naturally, you need some good historical data to set this fee wisely, but your prospects do perceive a lot of value in policies that promise "$3.99 shipping to anywhere in the U.S." (or wherever).

Equally, if not more important, don’t make your customers wait or guess about shipping charges. Most of them won’t; they’ll bail. Make shipping charges (and any other extra charges) clear before you ask for credit card information, make sure the charges are fair, and make the bottom line worth the convenience of foregoing a trip to the store.

Whatever you do, don't abuse your customers with unreasonable (or hidden) shipping costs. Do so and they'll quickly become customers of someone who doesn’t.

^{1
"Five Battle-Tested Rules of Online Retail."
Paul Kaihla, eCompany, April 2001. <http://www.ecompany.com/articles/mag/0,1640,9599,00.html>.

2
Paul Kaihla.}

Return to: GROK Dot Com 8/01/2001