What Should your Online Store Charge for Shipping and Handling?

Is your shipping and handling fee driving sales or driving customers away?

To begin, there are many possible methods for charging shipping and handling, some of which include:

• Product weight
• Customer location
• Product Price
• Actual carrier charges, plus a margin
• Flat rate
• Free Shipping (where S&H is built into your product's profit margin)

Regardless of which metric for shipping and handling you use, there is a fine balance between charging enough to cover your own fulfillment costs and charging too much, thereby losing sales. In either case, be honest with your customers and charge a fair price, especially in light of recent lawsuits that have put online shipping and handling charges under heightened scrutiny.

Over the last 16 years, Rush Order has processed and managed millions of online orders and related customer service contacts. This experience not only includes daily service but also involvement in multiple projects such as surveys, customer comment cards, focus groups, and industry average analyses. Based on this extensive experience, here are a few of the most important factors a customer consciously and subconsciously evaluates when he or she views the shipping and handling (S&H) charges associated with their potential purchase.

• Perceived Value
  Have you ever willingly paid $10 in shipping and handling for a $2 product? Probably not. What about $10 in shipping and handling for a $100 product? As a customer, this seems much more reasonable, even if the $2 item and the $100 item have the same weight and size. Both surveys and empirical data show that the retail price of your product will likely be the most influential factor behind customer perceptions of your shipping and handling fees. Feel free to contact Rush Order for ideas on heightening the customers' perceptions.
• Speed of Service
  How long is your lead time prior to shipment? What will the time in transit be? A simple stock message in your shopping cart is a great way to convey this information. For example, you may want customers to know that “Most orders ship within 24 hours”. Also, can the customer expect the shipment to arrive via mail, UPS, Fed Ex, DHL, or other carrier? Shipping via UPS, Fed Ex, and DHL will likely drive a higher perception of the value behind the S&H fee. Offer a variety of shipping methods for your customers to increase their control over the speed of service.
• Known Proximity
  Do you run a regional marketing campaign? Is your brand supported by the location of your business? For example, if I am selling a product branded with a particular city like “New York Gadgets”, my customers in New York may not expect to pay S&H for a cross country shipment. In this case, it may be wise to charge S&H based on customer location.
• Packaging
  The size of the box, the quality of the packaging, and the overall design of your packaging can drastically influence customer perception. As such, relay this sense of quality packaging in your online store. One option is to put up an image of a packaged product on your main website, online store, or shopping cart.
• Fragility
  Customers ordering fragile items online are more likely to expect a higher S&H fee. Good examples of fragile items may include artwork, giftware, consumer electronics, computer hardware, and computer software. Conveying a message about your careful packing will go hand in hand with this point. Setting this expectation with your customers may help your effort to squeeze a bit more out of your S&H charges.
• Disclosure
  Are you clearly communicating your charges to potential customers? Give them the exact dollar amount they will be charged for shipping and handling. Customers are more likely to buy when they believe they have all the facts in hand. One way to evaluate this communication is to analyze the pure drop off rates within your shopping cart. By moving the shipping and handling charges to the early steps of the ordering process, you can evaluate the affect of this change along with long term data on your drop off rates, free of the shipping and handling variable.

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For additional assistance on determining the exact dollar amount you should charge for shipping and handling, please contact us at 1-800-522-5939 or 408-848-3525 or info@rushorder.com.