As a business coach (and someone who also operates an online store) this question comes up quite a bit. I’ve argued both sides of the question, but at the end, I’ll share my personal preference and that which I share with clients.
Why you should not charge shipping
- The psychology of value. Let’s talk about a $1000 painting (with free postage). It is perceived as more valuable than a $800 painting which has an additional $200 added for postage. Sure the end price is the same, but the perception of value is quite different. This same philosophy applies to garments, jewellery, homewares, IT items … just about everything which is not ‘cheap’ or considered to be an essential or exceedingly competitive in pricing.
- The $800 painting with $200 for P&H means the cost is 25% of the value. I know myself if I’m considering buying an item where the cost is almost as much as the original price, I will invariably abandon the cart; the shipping cost is seen as exhaustive and too much.
- People are becoming expectant of not paying postage. Everywhere, free shipping is being offered, so that many don’t expect to pay for it. Even from overseas, shipping is frequently NIL and buying apps often allow you to filter your choice with the lowest price and lowest shipping coming first; it’s recognised that this is what people want.
- Having free shipping reduces cart abandonment because there are no nasty surprises at the end. If you are doing free shipping then make sure it’s super clear on your website and if there is shipping, then be clear about it upfront. Adding a large price at the end just breeds non-trust with your prospective customer.
- Good shipping experiences (and pricing) gain new customers and keeps them.
Why you should charge shipping
- If you have smaller priced items and pricing is better for volume, then it makes sense. The price point may encourage more buying because your customers figure they are paying shipping, so perhaps getting a few at a time will make the shipping fee worthwhile.
- You can also encourage more buying with ‘free shipping over $XXX’ so if they buy a bit more, then they will earn free shipping, thus encouraging some additional purchases. A person might happily spend an extra $50 to save $15 on postage.
- If you sell multiple items, some of the tiny ones might absorb shipping fees, but the larger items where shipping is more expensive will have shipping.
- It’s more difficult where people are in multiple shipping cost zones, so some might be local and are essentially subsidising those who are distanced. Being clear around your shipping charges and zones is a fair way to charge. If you are including the cost of shipping in your pricing, then you’ll have to average things out. You might say “Free Shipping Australia Wide” and then have relevant charges for overseas purchases.
- You are in a very competitive market and there is no difference from your product and a thousand others, bar price. Whilst ‘free shipping’ will be appealing, if the price is the first thing they see/consider/check out … then you may have priced yourself out from your competition if your price is a little more because you’re factoring in shipping.
Some important things to remember
- Don’t scrimp on your shipping services. Slow budget services might save you a dollar, but customers’ expectations are not being met. Your customers may not be prepared to wait 10-12 weeks for their purchase to turn up. It certainly doesn’t make for a great buyer experience.
- Be honest what your shipping fees are. I hate giving up all my details, including email etc, only to get to the shipping page to discover the fee is ridiculous and not worth it. In fact, if people are busy (which we all are) then often we don’t even bother to proceed.
- If your shipping is free; shout it from the rooftops; it’s a great marketing plus – so be sure to share that piece of information far and wide.
- The critical thing to remember here is that you are not absorbing the shipping cost, you’re making it all part of your sale price. Your price is fully inclusive, the materials, your labour, profit, packaging, any import costs, customs, GST AND postage. Which means, it’s not really truly free, but that is the reality of how business works.
So, I promised at the end to disclose my viewpoint, and that is – unless you’re selling a very small item or super competitively priced item, then make your price fully inclusive, so that it’s essential free shipping. If you’re interested in business coaching for your online or e-commerce business, reach out to me at my contact page. Make a spectacular day!