Home – New Forums Logistics Shipping Costs – Incorporate in the product or separate charge?

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  • #986928
    simstace
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    Hi,

    I run an online baby gift hamper and nappy cake store for the past 3 years. My target market is in the whole Adelaide metro area and Adelaide Hills area but I also deliver Australia wide.

    All of my products listed have shipping added on top at checkout (this is transparent and is explained on the website. I also have a shipping calculator in the cart area so most should know before hitting the checkout they will be paying shipping costs). I do this so I can keep the cost of the product looking lower on the website and charge a fair price to my Adelaide clients.

    However for a marketing strategy I was wondering if I should shift tactics and include my standard shipping fee in Adelaide which is $11 into the price of my products – and advertise FREE Shipping in the Adelaide area. I could then lower the shipping fees for the interstate deliveries (which fees are currently based on postcode).

    On the down side – this will make my products look like they cost a lot more and those that are willing to come pick up will be paying the shipping fee as well.

    On the upside – I could potentially win some extra customers with the FREE shipping and more interstate customers as I would be able to charge a reduced shipping fee. Essentially shipping to Melbourne for $10 instead of $20?

    Does anyone have any theories on this strategy or should I just continue on the way I have been?

    Thank you for your time.

    #1160220
    Anonymous
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    simstace, post: 184917 wrote:
    Hi,

    I run an online baby gift hamper and nappy cake store for the past 3 years. My target market is in the whole Adelaide metro area and Adelaide Hills area but I also deliver Australia wide.

    All of my products listed have shipping added on top at checkout (this is transparent and is explained on the website. I also have a shipping calculator in the cart area so most should know before hitting the checkout they will be paying shipping costs). I do this so I can keep the cost of the product looking lower on the website and charge a fair price to my Adelaide clients.

    However for a marketing strategy I was wondering if I should shift tactics and include my standard shipping fee in Adelaide which is $11 into the price of my products – and advertise FREE Shipping in the Adelaide area. I could then lower the shipping fees for the interstate deliveries (which fees are currently based on postcode).

    On the down side – this will make my products look like they cost a lot more and those that are willing to come pick up will be paying the shipping fee as well.

    On the upside – I could potentially win some extra customers with the FREE shipping and more interstate customers as I would be able to charge a reduced shipping fee. Essentially shipping to Melbourne for $10 instead of $20?

    Does anyone have any theories on this strategy or should I just continue on the way I have been?

    Thank you for your time.

    Hi there,

    You won’t know until you test it!

    I’ve done both for an ecommerce store I owned in a past life.

    The best explanation of what I found was that it depends on your pricing thresholds.

    In theory, the first threshold is $50. Once you raise your price above $50, you’ll often see a noticeable drop-off in your customer numbers. The same goes for $100. And $500 etc.

    For example, if your product sells for $80, I’d be inclined to include postage in the price because at $91, it’s not above the next pricing threshold. If your product was $95, including shipping would push your total to $106, which according to my hypothesis would perform worse than adding in shipping later.

    Of course this is just my experience combined with some basic pricing strategy.

    In either case, make sure that you’re turning your shipping into a clear benefit for your customers. If it’s FREE, then make sure you’re emphasising the benefit of this to the customer – i.e. what you see is what you get, no surprise upon checkout etc.

    If you don’t include shipping in your prices, you can still turn this into a benefit by providing flat rate shipping or making sure that your shipping calculation is perfectly clear from the onset.

    I hope that’s of some help!

    Cheers,
    Kieron

    #1160221
    simstace
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    Hi Kieron,

    Thank you for your time, this was helpful and I will definitely take into consideration the pricing thresholds.

    Cheers
    Stacey

    #1160222
    arrowwise
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    If your products are relatively light weight we are a very big fan of packaging everything together with FREE delivery. We have always operated a FREE delivery all inclusive of GST pricing model. Not surprises or confusion and a much easier shopping cart experience.

    Yes you need to factor it in, but unless you’re offering pickup in person its no different to whether you display GST or not in your price.

    #1160223
    saffrondust
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    Hi Simstace

    Do your customers tend to buy just one thing or they buy a range of items ? Also, is the product a commodity are very price sensitive, or can you charge a price premium ?

    If most of your sales are single item purchases, and you have some uniqueness in your value proposition then I would include the shipping in the price and make it free shipping. If your customers tend to browse and purchase a basket of goods and are seeking lowest cost then a simple flat rate shipping, or free shipping over $X would be my preference.

    On my website it is 100% free shipping and most purchases are single item purchases. The product range is fairly unique and difficult to price match. The downside is that it becomes expensive for a customer to buy a range of products, and no incentive to bulk buy to reduce shipping cost. The upside is that I think we pick up more transactions than we would without the free shipping offer.

    It is very rare for us to lose a customer in checkout since there are no surprises.

    The GST is the same I would put the price on your website the same price as the customer would pay in checkout. It gets a bit difficult if you are selling internationally as you would need to display a different price to international customers but if you are targeting local customers then it doesnt really matter just include it.

    #1160224
    ITCrazy
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    Hi mate,

    This is a very interesting topic.
    I’ve done quite a lot of experimentation with my store. My store has a strong focus on a single, low cost electronic item.

    This particular item costs just under $20. When I started operating, I was charging the $20 for the item + $3 shipping. The $3 covered the padded AusPost bag, and the shipping cost of a large letter.

    I decided I would try to increase my cost of my item to include shipping, but this didn’t really work as the price was more or less the same give or take a few cents.

    For the last few months, I have lowered my item price back to the original $20, and included shipping for free. Since making this change, my sales have essentially doubled. The increase in revenue has easily covered any money I would have lost by paying for shipping out of profit.

    Obviously, it’s going to be different for every store, every niche etc. etc.
    but this is a fantastic way to increase your sales without having to change too much.

    I would definitely recommend creating two checkout pages and A/B testing them to ensure you’re moving in the right direction.

    A decrease in sales, or not meeting your projections can be any number of things, and changing your pricing scheme may not make any massive difference, especially in the very short term.

    Anyway, good luck! If possible, keep us updated. Would be great to hear how you go.

    Thanks mate,

    Dylan

    #1160225
    Steffen Daleng
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    simstace, post: 184917 wrote:
    Hi,

    I run an online baby gift hamper and nappy cake store for the past 3 years. My target market is in the whole Adelaide metro area and Adelaide Hills area but I also deliver Australia wide.

    All of my products listed have shipping added on top at checkout (this is transparent and is explained on the website. I also have a shipping calculator in the cart area so most should know before hitting the checkout they will be paying shipping costs). I do this so I can keep the cost of the product looking lower on the website and charge a fair price to my Adelaide clients.

    However for a marketing strategy I was wondering if I should shift tactics and include my standard shipping fee in Adelaide which is $11 into the price of my products – and advertise FREE Shipping in the Adelaide area. I could then lower the shipping fees for the interstate deliveries (which fees are currently based on postcode).

    On the down side – this will make my products look like they cost a lot more and those that are willing to come pick up will be paying the shipping fee as well.

    On the upside – I could potentially win some extra customers with the FREE shipping and more interstate customers as I would be able to charge a reduced shipping fee. Essentially shipping to Melbourne for $10 instead of $20?

    Does anyone have any theories on this strategy or should I just continue on the way I have been?

    Thank you for your time.

    It has been mentioned above, but yes, this is something you really need to test out and measure.

    I have seen huge differences in results when working with clients, where we tested out different theories and global tendencies, like one-step-checkouts and freight etc. Don’t swallow global tendencies, it can be an expensive assumption, but absolutely worth using for test scenarios in conversion rate optimization.

    A lot of things depends on the results. Overall design, target group, added value proposition etc. You could easily and up with a version of free freight that gives you a lower CR, than your current freight scenario, but you could also end up with a free freight model that outperforms your existing.

    So do yourself a huge favor and make sure to test it out and analyze your conversion rate changes with each model, and variables to these.

    #1160226
    Qinnie(OzFairTrade)
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    Hi all,

    I had the same question when I started Oz Fair Trade, my e-commerce based charity. After some experimentation, I settled with a threhold based shipping charge model. I offer free shipping for domestic orders above $50, and free shpping for international orders above a higher amount depending on the region. I’d say that it’s more the generous side and in time I will probably have to raise that threhold, but because I’m a new business I need to attract customers. It has worked fairly well, as I notice that half of my customers order just above $50 to get free shipping. They probably wouldn’t have ordered that much otherwise. When I shop online, I would usually do the same.

    Just recently I started a new category of products which offers free worldwide shipping. I think I can do this becaue these products would be able to be sent as large letters. It’s an experiment and I’d be interested to see if I get the desired results.

    I also offer 365 day free return. I found that this guarantee helps new people to give me a try, and that’s all I need.

    Hope I have been helpful!

    Cheers,

    #1160227
    Jenny Spring
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    • Total posts: 597
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    simstace, post: 184917 wrote:
    Hi,

    I run an online baby gift hamper and nappy cake store for the past 3 years. My target market is in the whole Adelaide metro area and Adelaide Hills area but I also deliver Australia wide.

    All of my products listed have shipping added on top at checkout (this is transparent and is explained on the website. I also have a shipping calculator in the cart area so most should know before hitting the checkout they will be paying shipping costs). I do this so I can keep the cost of the product looking lower on the website and charge a fair price to my Adelaide clients.

    However for a marketing strategy I was wondering if I should shift tactics and include my standard shipping fee in Adelaide which is $11 into the price of my products – and advertise FREE Shipping in the Adelaide area. I could then lower the shipping fees for the interstate deliveries (which fees are currently based on postcode).

    On the down side – this will make my products look like they cost a lot more and those that are willing to come pick up will be paying the shipping fee as well.

    On the upside – I could potentially win some extra customers with the FREE shipping and more interstate customers as I would be able to charge a reduced shipping fee. Essentially shipping to Melbourne for $10 instead of $20?

    Does anyone have any theories on this strategy or should I just continue on the way I have been?

    Thank you for your time.

    Free shipping is becoming the ‘norm’ so as much as you can offer it, you should. I wouldn’t worry about covering your shipping costs. I’d focus on increased revenue through selling more products that should make up for the cost of shipping.

    #1160228
    Steve the Bartender
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    • Total posts: 48
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    Jenny Spring, post: 187232 wrote:
    Free shipping is becoming the ‘norm’ so as much as you can offer it, you should. I wouldn’t worry about covering your shipping costs. I’d focus on increased revenue through selling more products that should make up for the cost of shipping.

    100% agree with you Jenny! Offer free shipping and combine with other promotions to get the spend per head up.

    Otherwise, a capped shipping is also great to encourage people to buy more to save on freight :) just my 2 cents worth!

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