Sixty three percent of consumers say high shipping and handling charges are a deterrent to making purchases, while 45% of electronic channel merchants say they lose money on fulfillment activities, according to Jupiter Media Metrix.
There doesn’t seem to be agreement regarding how to handle shipping costs. According to the New York-based Internet analysis firm, 30% of the top 50 online charge based on weight, while just over half base their rates on either order purchase price or the number of items purchased.
Online marketers don’t seem to be following the precedents set by paper-based catalogers: Jupiter’s research quotes Direct Marketing Association figures in which 90% of all catalogers base handling charges on the dollar value of an order.
The highest percentage of online consumers surveyed (45%) indicated that charging shipping and handling by weight was the most reasonable way to do it, according to Jupiter. Only 10% said that basing the cost on order value is preferable.
The problem is that under the charge-per-value method, on heavy, low-value items the merchant incurs shipping losses, while lighter, expensive items such as CDs can become prohibitively expensive if a consumer orders a significant quantity of them.
While some online retailers using a sliding scale approach to shipping, dropping the costs as consumers increase the total value of their offer, Jupiter’s research shows that only 3% of online buyers regularly increase their order size to get a better deal on handling costs.
Consumers are sensitive to the impact of shipping and handling charges on their purchases. According to Jupiter, 73% of all consumers surveyed look at the total price when comparison shopping across sites. Roughly equal numbers of online merchants make money on shipping and handling as lose it, but Jupiter cautions that trust between consumers and retailers is an important aspect to doing business, and warns retailers to reconsider before making shipping a profit center.
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