Many e-tailers have lost sight of the forest for the trees. In some cases, they invest several million dollars in development and technology but forget to employ the basics of sound retailing.
Whether the purchase is offline or online, consumers take all costs intoconsideration when making a buying decision. What really counts is the finalbill -- whether they are paying the check in a restaurant, purchasing anautomobile, or buying a gold pendant online.
Let's say a shopper finds a product online that he or she knows is priced competitively.Once that person goes to checkout and enters his or her "ship to" and"bill to" information, the entire transaction can easily be scuttled by one very significant psychological barrier.
Shipping is $27.90? Forget it. And so goes the shopping cart.
Where's the Sense?
The bottom line here is that e-tailers cannot sell to online shoppers if theirshipping model does not make sense.
In the above example, a "catalog shipping model" was deployed -- wherethe shopper's shipping and handling fees are tied as a percentage of theprice of the product being purchased.
Such a shipping model simply does not make sense. Why should the shopper bepenalized with high shipping costs for spending more money at the onlinestore?
It should be the reverse. The shopper should be rewarded for spending moreduring their shopping session. If the shipping model is not rational, onlinemerchants risk the chance of losing their customers to another online storeor brick-and-mortar competitor.
Never mind the cost of gas and the time they save. Online shoppers arebecoming more intelligent every time they make a purchase. If the e-tailerhas enough volume to negotiate a flat-rate fee for each item shipped, itcan be a powerful marketing tool. However, most are not in this category.
Is Free Shipping the Answer?
Since e-tailers have problems employing a practical shipping model thatsatisfies online shoppers, many have decided to offer it free as anincentive. Free shipping can be the difference in acquiring a new customeror ultimately making a sale.
However, somebody needs to pay the shipping bill -- either the shopper or thee-tailer. In addition, a study conducted over the last holiday shoppingseason by Forrester Researchconcluded that e-tailers that promote free shipping could face problems if theyever change their policy -- because shoppers take shipping seriously.
As attractive as it may seem initially, shipping for free is ultimately alose-lose situation. It either inflates the cost of customer acquisition oris translated to the customer through the ticket price on each item.
Problems Continue to Intensify
One might have thought that online merchants learned their lesson after the firstwildly successful holiday online shopping season in 1998. However, back-endproblems involving fulfillment and shipping continue to this day.
After two years of online shopping with varied results, shoppers are farmore savvy about doing business online. They will not get fooled again bysurprise shipping costs.
According to another recent Forrester study, 60% of onlinemerchants lose money on each shipment, while at the same time, 75% ofonline merchants cannot calculate the total delivery cost of a givenshipment until after they get the bill. What is the mystery?
A Better Way
E-tailers can reduce abandoned carts, increase revenues, and enhance thecustomer experience by properly handling three information elements: thefulfillment zip code, the shopper's zip code, and the properties (weight, dimweight) of the SKU.
With the right software package -- and there are more than 50 listed on Yahoo! -- or third-party service, this information can beused to calculate multiple shipping alternatives, such as UPS ground ornext-day air by Federal Express. Shoppers can then be given the variousoptions during the checkout process.
By adopting this shipping model, online merchants can avoid the lose-lose offree shipping without pushing customers away with inaccurate shippingestimates. From all indications, customers will appreciate the honesttreatment.
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