Shipping and handling charges, ever the contentious pair, raised their heads again in a Jupiter Media Metrix study last week. Forty-five percent of online retailers lose money on S&H charges while a similar amount make money. The other 10 percent? They break even, and that’s what e-tailers should strive for, Jupiter concluded in its report. And traditional catalogers? They should do the same. Instead, 60 percent make money, according to respondents to the Direct Marketing Association’s annual State of the Catalog Industry Report.
“Catalogers used to base their shipping charges on weight,” says catalog consultant Bill Dean, who co-authors the DMA study. “Somewhere in the late ’70s or early ’80s, someone got the idea to charge by price. Then it became a crutch. People began making money off list rentals and shipping and handling to subsidize marginally profitable products.” Now, too many have built S&H in as a profit center. Remember how free shipping was the “in” thing online a year or two ago? Too bad the days of venture capitalists footing the bills are now history. In December ’99, back when the Net was really rocking, Forrester Research analyst David Cooperstein said customers would head back to stores if shipping charges returned. “To increase their control over shipping giveaways, [e-tailers] must offer it selectively according to purchase size and customer loyalty,” he wrote. A year and a half later, it appears shipping charges are here to stay. And they should be.
For years, traditional catalogers have been upfront about posting their shipping charges – something online retailers should do earlier in the transaction – though too many companies still charge by price. Shipping remains the biggest concern of online shoppers and is the No. 1 reason for abandoned shopping carts, according to an Ernst & Young report earlier this year. Online or offline, the best answer is to be honest and fair with the customer. “The better you treat your customer, the more likely they’ll come back,” Dean says. Good point to remember.