Delivery Charges – it’s a topic that’s guaranteed to generate a hot debate.
One the one hand, customers resent them. On the other, ecommerce store owners complain that customers just don’t understand how much it costs to send that package.
But it’s essential for every ecommerce shop to get its delivery charges right. Too high and you’ll lose sales. Too low and your profits will suffer.
It’s not simply about costs – it’s a marketing issue.
There’s been plenty of research over the years and delivery charges have been clearly shown to have a big impact on conversion rates.
Look at the big players in ecommerce (ASOS & Amazon for example) there’s almost always a Free Delivery option. This means that buyers are now expecting free delivery just about everywhere.
So how can a small ecommerce retailer, without the courier buying power of the big boys, compete?
Stop thinking about it as a “Postage and Packing” charge.
And start thinking with your marketing hat on.
I see too many small online shops trying to cover every eventuality with their delivery charges. Complicated tiers, charges based on weight, surcharges for remote areas of the UK. All these things make it complicated for customers and are designed for the retailer’s benefit.
None of the major online retailers does it and neither should you.
Try this 5 step “Marketing” approach to setting your delivery charges.
Step 1 – research
Do some market research and look at what your competitors are doing. Pay particular attention to where they are offering free delivery. Is it on every order? Orders above a certain value? Is there a choice of free standard delivery and a premium delivery service?
Ask your customers what they think. Do they consider your current charges high, reasonable, low? Would they be interested in paying more for a faster service?
Step 2 – understand your costs
Look at all your postage and packaging costs including the time spent packing items. Is there a wide spread or do the majority of orders cost around the same?
Step 3 – understand your products and buyer behaviour
Do customers generally buy single or multiple items at a time? Where are they located? What’s the average order value? How sensitive are they to price increases?
Step 4 – model a few options
Now take your data from the above steps and use it to check out the impact of different p&p charges.
Start with free delivery – how much would you need to increase item prices, would you need to have a minimum order value?
Then look at how things would work using your competitors p&p charges until you get some ideas which could meet customer expectations without ruining your business.
Also think how you might change buyer behaviour – if you offer free p&p for orders over a certain value, would that increase your average order amount? Would you be able to improve conversion rates?
Step 5 – test and measure
Once you decide to implement a change, monitor it’s impact carefully. Has buyer behaviour changed in unexpected ways? Are you still making a good profit? Keep adjusting and measuring until you find the right answer.