Shipping 101

Shipping as Promotion

Periodically Small Dog will offer free shipping on certain items. "We like to keep things interesting on our Web site, so every so often, we'll pick a few special items and offer free shipping," co-owner Mayer notes.

Free shipping can also be used to reward good customers. "I'm a big believer in customer segmentation. If you have a loyal customer, give them free returns and give them free or low-cost shipping," recommends Ray.

The Planning Shop offers discounted shipping on large orders. "If customers buy more than one book, the shipping costs per book drop," Abrams explains. "We cut our profit margins for combination purchases, because we want to encourage multiples."

If you aren't sure what impact free or low-cost shipping will have on your business, try it out, suggests Ray. "Pick a period of time, say one week, and test market it. See what happens when you offer options like free or low-cost shipping," he says. "That's an inexpensive and fast way to find out if your customers will respond to this kind of offer."

Returns & Exchanges
Should customers be charged to return merchandise? What about to exchange it? These are questions businesses grapple with regularly. While it's perfectly legal to ask customers to foot the bill, is it smart?

That depends, say the experts. In the case of exchanges, where customers want to swap items for like items, perhaps in different colors or sizes, good customer relations dictates the business eat the shipping costs, at least when sending out the exchanged item, the experts agree. "It's a small price to pay to keep customers happy and shopping with you," Strauss notes.

Lishchuk agrees. If a customer wants to do an exchange, Ukrainochka will pick up the cost of shipping the exchanged item. However, the company will not pay for return shipping, nor refund the original shipping charges if a customer is unhappy with merchandise. "I'm very thorough in the information I post on the site so that people should know what they're getting," he notes.

Paying for shipping when customers change their mind about an order can get costly. "You can lose a lot of money, and if the margins are small, it can be detrimental to your business" Ray says. "Did the woman's son kick the couch and destroy it? Did the man decide he no longer likes the color red? Those aren't things you should lose money on."

Defective items are a different story. "Never hesitate to pick up all the shipping charges when a product you've shipped is broken," Abrams stresses. "What you lose in shipping costs you more than make up for in customer loyalty."

Abrams speaks from experience: She recently bought some outdoor furniture from a major catalogue retailer. After she'd had it for a short time, the furniture fell apart, so she called the company. "Even though I no longer had my receipt, they had my order on the computer," she says. "They immediately sent me all new furniture without charge or hassle to me. That's great customer service. They didn't make any money from me on this order, but they have a loyal customer for life."

Handling Charges
To charge or not to charge, that's the question when it comes to handling. Generally, handling charges include both the cost of packing materials and the cost of labor to pack items.

The Planning Shop charges handling fees. "Factor in the expense of packing materials and staff time because the costs are significant," Abrams says. "That doesn't mean you should view handling as a way to make a profit. If you do that, you have the wrong attitude."

Not everyone agrees that businesses should pass along these costs to consumers. "Packing things is just part of the normal course of doing business, like providing a bag and a cashier at a bricks and mortar shop," Strauss says. "You don't want to put off customers by charging extra for that."

Lishchuk doesn't build in the costs of handling or materials, although he acknowledges they can get pricey. "Retail packing materials are very expensive, so I deal directly with manufacturers," he explains. "I drive over there, stuff my car full of it, and save money that way. I wind up spending about thirty cents per package on materials, and a couple of hours a month, but I feel my customers are worth that."

Overall, it's wise to remember that shipping is the last transaction you make with customers. A bad final impression means you won't likely see customers return. A good experience is the equivalent of a warm smile and handshake, the beginning of a good relationship.


Andrea C. Poe is a freelance writer who specializes in business issues and is jointly based in New York City and Easton, Maryland.

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