A Scenic Tour of the Online World

How To Position Shipping Fees Online

Tuesday, December 21st, 2010

We’re nearing launch on another ecommerce site for a client and have been discussing how best to handle shipping charges.

The client had asked us to break out shipping from the product price and lower the product price slightly but keep overall pricing the same by adding a handling fee. So product price goes down, shipping price remains the same, we add a handling charge, and the total cost remains the same.

The client’s goal was to better compete with competitive Websites who offer the product at a lower price. Aside from the needless added complexity that most buyers would rather not deal with, we argued against this arrangement on two related grounds.

Better Comparison Shopping Tools
Comparison shopping tools (“Shopping results” listings in a Google search, for example) now frequently include not only the product price, but shipping and taxes based on your location. The total cost listings help buyers weed out artificially low prices that aren’t going to save them money in the long run.

This means that the total cost would need to go down in order to have any impact with these shoppers.

Buyer Attitudes Toward Shipping Costs

Our second argument against the client’s plan was that people hate to pay shipping. Never mind that the insurance, gas and maintenance on their car eats into their “savings” by driving to the local store, or the time they save. People just hate to pay shipping.  TechCrunch recently outlined the role that free shipping offers have had in boosting online sales this holiday season.

(Thanks In Part To Free Shipping Offers, Online Holiday Spending Up 12 Percent To $27.5B)

The comments on the TechCrunch post bear out the anecdotal evidence we’ve seen that buyers respond positively to offers of free shipping.

Relative Pricing: Product vs. Shipping
More anecdotal evidence suggests that as shipping approaches the cost of the product, consumers frequently abandon their carts. So on lower priced items, lowering the product price further while increasing shipping costs may increase traffic to your site, but it will probably not lead to additional sales.

We have also encourage our client to consider the kind of product they’re selling, which is frequently given as a fun, inexpensive gift and can be an impulse purchase. High shipping fees relative to the product price put a damper on “frivolous” impulse buys.

We’ve also suggested that their superior credibility in the marketplace, though legitimate, is not as helpful as they think since the overall cost is low enough for people to take a chance on an unknown vendor in a way they might not for a higher priced item.

It’s not just information that wants to be free on the Web – consumers expect everything to be free, and online buyers are particularly price-sensitive. You have to factor that in to your pricing not only with products, but with your shipping fees and your promotional offers.

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