Free Fedex?

[jpstephens]

I am doing research for my muse, and I see a lot of competitors offer free shipping. How do these people offer free fedex on orders, are they eating it or is there a way around it without passing it onto the customer.

Thanks

[TimW]

You can either factor it into the price you charge the customer, or eat it in your margin. There is no other way. None of the shippers will give you free shipping...someone pays.

If you eat it, you'll go broke. Factor it into your pricing.


TimW
Phoenix

[neuromancer]

It comes down to your margin. If you have a high margin on a light weight item eat it because shipping isn't that much on light things and it is a good selling point for customers. On low margin or cheap items charge shipping because it is expected.

If you are making a DVD training video that sells for $50-$200 don't charge shipping. If you are selling tee shirts for $20 charge shipping because $20 is a pretty standard price and shipping is expected.

Also, one of the things that some companies do is sell small cheap items at a loss and get your profit from S&H. I knew a guy that sold shirts on ebay for a penny and charged $10 shipping. he pulled around 50% profit on the items. Previewed movies are a good example of that. sell them for a buck and charge $10 shipping.

[TimW]

The only problem with charging shipping on some items and not others is that it creates inconsistency within the storefront.

I got tired of calculating actual shipping charges for my customers, so I created several tiers of shipping charges based on price. Not the best way, I know, but so far nobody has said anything and my business is up since doing it.

I tried doing free shipping before, either because I had a good margin or by building it into the item price, but that seemed to confuse customers even more...they just didn't get the 'the price you see is the price you pay' aspect of it. Since I was losing money, I abandoned that and started charging everyone for shipping, minimum $5 for domestic orders.

TimW
Phoenix

[ErikCox]

I ordered Tiesto's new CD yesterday from Amazon (because one cannot find good music anywhere in Dallas, but thats another story), and when I went to check out, the screen mentioned if I would just order a little more money, I would qualify for "FREE Super Saver Shipping." I then revisited the store and found another CD I wanted, and "qualified."

I like the idea of growing the margins with additional product, straight out of Tim's book. Thus "free shipping" comes out of a much larger margin, and will not bankrupt you.

Another variation of this I am impressed with is Buy 2 get one Free. 33% off of 3 is better than the full margin on 1!

[TimW]

Originally Posted by ErikCox

Another variation of this I am impressed with is Buy 2 get one Free. 33% off of 3 is better than the full margin on 1!

Not necessarily. It depends on the product's margin.

I will use standard "street" pricing of an item where I still get a reasonable margin even after discounting from MSRP. Some items will be discounted way too much to offer this kind of thing. Where it works is when the product's actual cost to create

Item = Cost $60, MSRP is $100 for a 40% dealer discount. "Street Price" is $90.00

Sell 1, $30 profit ($90 revenue - $60 cost of goods)

3 for price of 2 = $0 profit ($180 revenue - $180 cost of goods)

Factor in shipping, your time (for order pick/pack, order processing, etc.), and you've just lost money.

Even at full retail, the profit is minimal:

$200 revenue - $180 cost = $20 profit. Even assuming minimum Priority Mail postage of $4.60, you're left with $15.40 profit...before taxes and whatever other costs are involved like rent, your time, order processing, etc.

For things like CD's, e-books, vitamins, etc., that have a HUGE markup, you can still make money on this. But for those thinking of reselling "standard" retail items, do your homework.


TimW
Phoenix