Minimum orders and shipping charges

[george]

Thought I'd start a wee discussion on the above issues.

As it is we don't have a minimum order, just wondered if anyone noticed a difference in sales once a minimum order was put in place, any customers complain etc?

Also notice a number of companies offer free shipping nowadays, often when an order hits a certain value. Obviously a bit difficult sometimes when selling books, etc but maybe the increased number of orders makes it worthwhile?

Hopefully forum peeps won't be shy to contribute to the discussion...

Have a good day

[Legends]

Hi George

As such we offer "free" shipping on some products to help us compete with other companies and I believe that it does improve our conversion rates.

That said - there is no such thing a free shipping - post office still charge and we still have to factor that cost into the margin on the products so in effect because we don't charge extra for shipping the customer percieves they are getting it for free - but most companies (us included) have to take this into account when setting margins.

Like all offers - customers perception of value is what matters and I think that offering free shipping where practical is a good incentive for customers to buy, probably more than having a slightly lower price.

just my thoughts

[oldhasbeen]

Sounds like the "free" dishwasher you see on all those bank holiday kitchen deals - oh really!!

We have a minimum order value of a fiver which we don't think is unreasonable given the fact that somebody has got to pick, pack and despatch the thing and you also have to pay the VAT man and processing charges. Cripes even our local chinese and corner shop have "minimum" card or cheque spends of a fiver or a tenner! We brought the minimum order in about 2 years ago and it has certainly not affected sales.

We lose a few sales here and there where people just can't bring themselves to spend that amount, but this is negligible.

We also have a flat rate postage of £2.95 using royal mail business service. When we used to charge on a per parcel rate, our big spending and regular customers were getting penalised by higher postage and our wallet cramped or irregular customers were being rewarded with very low postage.

Under the flat rate shipping, this has reversed the tables and sales have greatly improved as a result and even the tighest order of £7.95 is now profitable.

We believe that as a mail order business your packaging and shipping costs are a genuine business overhead - in fact many much larger companies than us charge higher postage and their royal mail rates must be miniscule by comparison!

We have a lot of fierce competition who undercut us left, right and centre and a lot also offer free p&p (usually people running from home with no commercial overheads or staff and not VAT registered). However, ultimately most people do not just buy on price alone - speed of turnaround, actually having the items in stock, good choice, good prices and top notch customer service are just as, if not more, important.

We've never believed in getting into dutch auctions and never will - we need to make a profit to stay in business and pay everyone! (Isn't that word "profit" a dirty one in the UK?!!). I guess it depends on what types of products you're selling and whether you're looking to attract one off type sales (more price sensitive) or repeat business (where price is only one factor but not necessarily the most important one).

Oh and don't get me started on customers who want to place a "large order" and ask for trade discounts - then it turns out they only want to spend £20....perlease...!!

My tuppence worth for the day.

Regards - Helen

[fleetwood]

We used to have a minimum order of £5. This I dropped after we made initial enquiries with Froogle, who turned down our site due to our minimum order stipulation (apparantly, against their listing rules). Froogle accepted the site after we removed the minimum order (although I haven't actually taken Froogle any further than that first enquiry).
What we do now is simply set a minimum postage rate of £2.99 (the maximum being £4.99). This helps to make small orders profitable, as a single item order of say £2 worth of goods will only cost us say £1.50 to post. Before the cries of "rip off" echo, I justify the extra postage charge as cover for the very real additional and fixed expenses of processing each order (packaging, credit card fee etc).
What we found was an increase in small (sub £5) orders, and hardly any complaint about the £2.99 minimum postage.

I think free postage is a fairly high incentive to a customer to buy, and I am sure that we lose a percentage of customers who weigh us up against say Amazon, who both discount and offer free postage for orders over £20, but I have done my figures, and don't think the increase in business that free postage would bring would be enough to cover the cost burden of the postage I had to cover. Our products have limited to no price flexibilty upwards as many of the books carry a retail price, so we can't build the 'lost' postage into the price.

I do think that most of us are going to be facing increasing competition over the next few years, as more and more people realise the low entry point of internet trading, but firmly believe that as Helen says, customer service is the route to go, rather than price competition (unless you have a product that either has very high margin, or you can negotiate better margin as you grow your orders). There is no point in working for peanuts just to simply appear price competitive.

[jont]

Oh and don't get me started on customers who want to place a "large order" and ask for trade discounts - then it turns out they only want to spend £20....perlease...!!

So its not just me then some peoples idea of huge "trade" orders leaves a lot to be believed. I generally offer free palletised delivery on trade orders rather than specific quotations as a starter if they are emailing from a generic "Yahoo" or "Hotmail" type address.

I make extensive use of the price banding facility against certain products I want to push eg: buy 1 at £10.00 buy 6 at £7.50 etc which works very well for my product and saves time and money having to split boxes, repackage etc.

I also use a free shipping based on quantity (it is actually a weight based shipping table but it equates to a set number of products) which then encourages people to trade up and add more to the cart to get the free delivery - as I am getting such a sizeable order I can absorb the shipping costs from the additional sales

[oldhasbeen]

Ooh, I'm started now Jont! It's one of my pet peeves.

What makes me cringe is that these customers only want to buy one of this, one of that etc from a product range that originates from an array of different suppliers/manufacturers from all over the world.

If you explain to them that you as a genuine business have to spend hundreds of pounds PER supplier PER order and have to order in a minimum of X multiples PER product in order to get trade discounts, they still don't understand why you won't just give your profit margin to them! (There's that dirty word again).

Then they ask who your wholesaler/manfacturer is so that they can go direct!! After you've spent years researching, sourcing and doing all the leg work (not to mention taking all the financial risk in building the business, your brand, your website, your customer base and relationships with your suppliers to get best rates ad infinitum!).

All my staff are quite rightly instructed that if they are asked this question they are not authorised to divulge the company's intellectual property information as it's more than their job's worth!

The cheek of it all!

Anyway, I digress from the original topic of the thread so this might be food for thought (although it's great to find that I'm not the only peeved peep on the above subject !):

We were launching a huge new product range. Some of our competition were starting to stock a few bits and bobs from this range but not much as they were having to buy from a third party wholesaler who themselves didn't stock much. We've always dealt with the manufacturer direct from years back on other products and decided to launch their newest ranges. As we were buying direct and already had a good long term relationship, we got very good prices and were able to undercut the competition, offer the entire range and still make our normal margins.

We launched the range and offered free p&p on all orders for an entire weekend which is our busiest time (not just on products from this range - everything!). We have our own mailing list that runs into the thousands, and we also advertise on a targetted forum who'se members run into the thousands - we advertised the offer to both.

Additional orders from this mailing attracted a return of sweet fanny adams (maybe an additional 40 orders). Most orders came in after the free p&p offer was over and nobody objected to paying the p&p - and now several months later the range is rocking on big time (and since expanded again!). I will never offer free p&p again.

If we need to shift a slow range or get rid of stock we find it shifts better by giving genuine reductions and grouping them in our Sale/End of Lines section with a product count down of how many are left. This seems to focus the mind of shoppers far more than just giving free p&p. Only 2 left madam, do you want it, do you?!!

That's now my fourpenceworth for the day! GOOD subject though - look forward to seeing other's thoughts and experiences.

Regards - Helen (now off to climb the wooden hill to Bedfordshire!)

[kathynewman]

I've often thought of having a min order value of £5 - but think that we'd lose business. We have a number of ongoing necessary accessories to bigger products which come in at less than £5 and I don't want to loose these customers.

Regarding P&P - we do a mixture. Our standard rate is £3.95, but on some (but not all - mainly on the necessary accessories as above) of the very small low value and light items we do a P&P inclusive price - we decided no one is going to pay £3.95 p&p on a £4 item - so we build a little into the price of the item and this seems to work very well. Who is someone going to buy from when they want a small item only - a company who charges £4 plus £3.95 p&p or someone who charges £4.75 for it? Also we do this for some of our large expensive items. We think that people feel if they have spent £100 on one item they don't want to pay another £3.95 to have it delivered - and as the margins are higher on these items we feel we can give a little more to the customer.

As I said everything else gets charged at £3.95. However this is something we're constantly looking at. Is it best to charge p&p on everything or nothing or a mixture - very difficult - but after lots of thought I think we'll stick with the way we have it - well at least for now!

Interesting to hear how everyone else approaches this.

Kathy

[Miranda Stamp]

Interesting thread. Our shipping was set 6 years ago and has never changed, with free over £50, a lower under £15 = £1.20 bracket which encompases our heaviest cheapest products sadly, and £2.55 otherwise. However I've always offered free postage to first orders, manually taken off to start with, and also free locally (it's that 'buy local' environmental chestnut), all of which are now drop down options below the charging one - thus HAVE to be selected the default is normal shipping. Lately, as all the new copyetitors are offering free psotage and we were seeming to loose out - fora postings saying 'oh don't buy from there go to xx as its free postage', we've added a further 'special offer free postage' to the drop down list for those that don't want to pay, and let word get about! As a result although we are getting more orders, average order value has dropped considerably (30%) and our ££income from 'shipping' has halved. There is that saying about busy fools...

Not sure what to do next, but think I might leave as is.

[fleetwood]

Price competition, whether it be discounts or free/subsidised postage is a slippery slope. Once you start with free postage, there is no going back, as customers will not wear the implied price hike when you try to reinstate a postage charge having decided it wasn't such a good idea to do it free after all.

Thats why its imperitive to do the sums carefully, and calculate just how much extra business you need to do to at least cover the lost contribution from a postage charge.

I think that the only areas where you can justify 'free' postage (nothing is ever really free!), is either if goods are lightweight but not low price (eg DVDs), you are working with high margins (which is why so many people are trying the gift and gizmo shop route), or you are large enough to exert the muscle to get the wholesale discount which then allows you compete on price alone (Amazon - cheap prices, questionable service).

For the majority of us 'smaller' shops, I would always suggest trying to go the service route first. Its possible to compete by going that little bit further than your competitors service wise, without cutting your margins so wafer thin thats its hardly worth being in business.

Martin

[jont]

For the majority of us 'smaller' shops, I would always suggest trying to go the service route first. Its possible to compete by going that little bit further than your competitors service wise, without cutting your margins so wafer thin thats its hardly worth being in business.

Customer service is one of the cornerstone of small businesses. We respond to all emails within the hour and goods are usually with the customer no more than 2 working days later. There is nothing more annoying than placing an order for a regular stock line item and having to wait 14 days for it to arrive.

We can't and don't compete on price but maintain high levels of customer service and professional expert knowledge which ensures repeat custom and satisfied customers. Attracting new customers is down to locating exclusive products and not listing products available on the high street

[steveaich]

I'm not sure I totally agree with all of the above comments. As a smaller business/newer business you are going to have to compete on price to gain new customers. Punters will pay more to a company with a good (percieved good) reputation, therefore to get the customer to make that all important first purchase you have to compete on price. Once you have the customer and you have prooved that your customer service is better, then you can (very gradually) increase your prices, inc shipping fees. At present we charge £2.50 for UK orders under £16 and no shipping on larger orders. This encourages customers to buy a little more to get free shipping. This is very quite low in our market, and is hurting (a little) we plan to increase both the £2.50 and the £16 next april when Royal Mail introdue their new rates. (That way they hopefully get the blame). There is no point in giving free shipping on small orders if you don't make a profit, but it is sometimes worth cutting your profit to gain new customers.

[george]

Any updates to this (excellent) thread folks?

[Stereo Steve]

This is something I have experimented with extensively, both on Ebay and the website.

Free postage can make you look expensive, especially on heavier items where you have to price in more postage. Can also complicate issues if they also want to buy a large item as well which you have to charge shipping on...
Also, in our experience free postage leads to loads of single item orders with low profit per order.

You can go low price and high postage which will make you good on first contact but will lead to abandoned carts and low profits on big orders unless you add proportional postage which will look silly after a while.

We have a minimum postage charge of £3.49 for Royal Mail items which means on low margin stuff we still make a few quid. Justify this? Don't have to really, it's standard practice with most of the bigger firms.

We also have a top whack next day rate of £5.99 flat to UK mainland which is not too expensive for a moderate £20 order but the more people buy, the less it gets in proportion. We have found that this leads to bigger orders. We also price the 'per kilo' rate we pay our couriers into items so over 10kg, the extra shipping is paid for by them. Under 10kg, we make a little bit extra profit!

Whatever, we are not prepared to subsidise postage but don't profit from it apart from on tiny orders where there is no profit in the actual item.

We have also found that price competition seems to make no differnence to our sales! We have often cut prices to match the cheapest in our sector for a month to clear stock or boost cashflow. The result is usually no extra sales and a load of annoyed customers when the prices rise again!

[Darren B]

I had wondered about free delivery, it seemed to be what everyone promoted but i have to be honest i recon everything i have brought in the last 12 months i have had to pay delivery for.

Even the bigger chains charge, tescos, sainsburys, comets, dixons e.t.c

I know there are still some out there that dont but i also charge a fair rate (IMHO) for delivery, but i still have people complain that delivery is too much, they buy a sports kite for £15 and pay £3.95 delivery they complain that it is too much but will not accept that standard parcel cost me £3.85 the box £1.05 so i make a loss of 95p yet on a small order of a £10 or less and large orders of around £30 i make a £1 so i figure it balances quite well. Like wise for large orders charge around £9.95 but these cost me up to £18.00 for some

I did wonder do it put an extra £1 on every item? any then reduce delivery by a £1, i looked at abandond baskets and i have very few, they find the item and buy it so i figured "if it aint broke, dont fix it"

and unless something changes i decided to leave it alone

Cheers
Darren

[pinbrook]

We changed surf-wax from free postage to postage calculated by weight and charged more or less at cost about 6 months ago. The main reason for changing is that we were finding our prices were being listed in SE Result pages.

Thus when you glance down a page of results people could instantly compare our price inc postage to other sites where the price excluded postage- and thus move on before bothering to look at the end price. ie our price was £6, our competitor was £4 plus £2.95 postage. Which site do you look at the £4 site or the £6 site?

To be honest we didn't notice any real difference in order levels. We make it clear in T&C that postage is at cost. It was a pain typing in all the weights but nows its done I feel we have better control over pricing. We Sell loads of DVDs and can now offer them at 19.95 plus post rather than £22.

We don't have a min charge, we probably get one order a month for less than £5, to be honest we only have 2 or 3 items which are less than £5. We have alot of items between £5 and £10 so would not consider a min charge of £10.

As usual it is all down to the website and the type of product/order. There is no point in getting an order at any price, each business has to cost everything to make profit to cover costs, whilst also geting the balance right.

the question here is fiding the level which works for you. The age old question, do you sell 1000 of one item and make 1p profit on each one and spend all day packing and posting, or do you sell 100 and make a £1 on each one and take the afternoon off.