Setting Shipping for Online Stores

At Kona Impact, we work with a lot of online stores. One of the most important conversations we have with our clients is how they want to set up shipping rates for their products.
The tendency for most is to say, “I want the shipping cost on the website to be what shipping costs me.”  Our answer is always, “do you mean the postage or FedEx cost, or do you mean your total costs—packaging supplies, packing the item, going to the post office, waiting in line and the actual cost of the postage?”  “Hmmmmm” is the common first response.
We look at Kona Impact from the perspective of the consumer. After all, the consumer is the only person who will make the website profitable. It is the consumers’ feelings and perceptions that will lead to a sale or an abandoned shopping cart.
From a consumer’s perspective, here are, in the order of preference, three ways to set up shipping:
1)      “Free Shipping” If at all possible, do this. By taking shipping costs out of the sales equation, you have removed one, if not the one, biggest obstacle to making an online purchase. Remember that we’re dealing with perception here, so if your item price includes shipping, it is perceived to be a better deal. This is tru even if it is more expensive than a similar item that does not have free shipping. One only has to look at how dominates  e-commerce to see the power of free or low-cost shipping.
2)      “Flat Rate” This is where all orders, sometimes those just over a certain dollar amount, have one rate for shipping. At Kona Impact, we recommend this over per item shipping rates (see below) as it encourages the buyer to buy more. This is an important part of shipping rates: they should encourage more spending.
3)      “Per Item or Per Weight” This, unfortunately, is what most sellers prefer, but it is certainly not what buyers prefer. The problem is that these rates are neither transparent nor readily available (without searching) to the website visitor. In the worst case scenario, buyers have to create an account before this information is available. What a hassle! No wonder shopping cart abandonment is high with this type of shipping policy.
We came across an interesting shipping rate that is intriguing. It’s based on a percentage of the total sale, with decreasing percentages with higher dollar amounts purchased. For example, for items totaling less than $15 the percentage is 100%–the shipping is the same as the purchase amount. For purchases over $100, it decreased to 22%, so $22 on $100 purchased. The incentive to place higher dollar orders is certainly there, which is a good thing. It does, however, discourage small orders, which might discourage 1st time buyers.
Whatever you do when setting your shipping rates, always look at it from the perspective of the buyer. If you see a large “free shipping” graphic on every page, consider how that might increase your customer base and encourage larger dollar orders. If you make it hard for customers to figure out shipping for what they want, how can you make it easier?
If you are thinking about opening an online store, give us a call at 329-6077. We can help you avoid some of the big mistakes and we’ll help you find solutions that work best for you.