Who Pays to Get It There?

One of the most delicate issues facing online merchants today is how much to charge customers for shipping and handling. Charge too much, and an online customer may decide that buying that bag of kitty litter at the local pet emporium is a much better bargain--why pay to ship gravel? Charge too little, and an online merchant may soon find itself the subject of its own business obituary at F***edCompany.com.

Online marketing analysts offer several suggestions on how to handle shipping and handling fees. Because the majority of consumers review these costs prior to making a purchase, it's advisable to consider these charges as a break-even proposition instead of a way to make more money. That tactic serves to minimize both the customers' distrust and a merchant's risk.

"Consumers are wiser to the true costs of shipping than retailers think," says Ken Cassar, a senior analyst at Jupiter Media Metrix in New York City. He recommends e-tailers base shipping and handling charges on the weight of packages, not on how much a customer spends. But studies indicate that not all business owners agree with that advice. According to a Jupiter WebTrack Survey of the top 50 Media Metrix online retailers, 54 percent of retailers based shipping costs on order cost, while only 30 percent based fees on weight. Experts admit the right policy for your business depends on the nature of the products you sell.

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