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How shipping prices affect sales and 4 postage pricing strategies to try in your handmade business

23 November 2018

4 Postage Pricing Strategies to Boost Sales

In the lead up to Christmas, there’s usually a dramatic increase in online shopping traffic, but how do you remain competitive with all the other online retailers & ensure that you you’re your browsers into buyers?

The answer to that question would be multi-faceted of course, and no doubt dependent on your products, business model, competition, and a range of other factors, so today I just wanted to talk about one important aspect of your listings: shipping costs.

How shipping prices affect sales and 4 postage pricing strategies to try in your handmade business

A 2018 study of consumer behaviour has showed that 60% of Australian online shoppers who abandon their carts, do so because of postage costs. The same study revealed that more than half of all Australian shoppers abandon their online shopping carts, so postage costs are turning off nearly 35% of local buyers from finishing their purchase. That’s a lot of lost sales.

You might assume that if nobody has said your shipping costs are expensive, that reducing them or offering free shipping won’t help you get more sales, but how many times have you abandoned your shopping cart online, and then contacted the store to let them know what the problem was? I’d venture a guess that 9 times out of 10 you’d just close the browser and keep shopping somewhere else.

Just because nobody has complained that your postage prices are too high, doesn’t mean you aren’t missing out on sales due to shipping costs

Having said that, free shipping, and even reduced shipping rates, are no magic pill and offering them may not increase your bottom line, even if it does increase your conversions. The only way to know what impact different postage pricing strategies will have for your business, is to let the experience of other businesses drive decisions on what to test, and then try some of their tactics within your own business, to see what works best in your particular circumstances.

Bear in mind when testing, that if you’re using different platforms, you may see different results from the same tactic. For example, the consumer behaviour study referenced above showed that abandonment rates in the US (47%) and Europe (41%) are significantly lower than those in Australia (57%). Madeit’s audience is primarily based in Australia, so if a good portion of your sales on other platforms go overseas, then you may need to adjust your shipping strategy across the different platforms because “different strokes for different folks”!

So what approaches might you consider trying in the lead up to Christmas? Here’s a few ideas:

”Try

Offer FREE Shipping on every purchase

Why? Because of the psychological power of the word FREE. I think we’ve probably all experienced the joy of scoring a ‘bargain’ when we receive something for ‘free’ with a purchase, even though we know that freebies in most of their forms, are factored into the price of the goods or service we’ve purchased.

In fact, free shipping was found to encourage 93% of shoppers to purchase more online, according to CPCstrategy (via Barilliance).

According to Crazy Egg, when Amazon started offering FREE Shipping their sales increased in every country, except France. Why? Because the French website offered 20c shipping instead of free shipping. Despite the tiny shipping fee in France, people were much more willing to purchase when free shipping was offered.

”Try

Offer a Free Shipping Promotion

Another option is to offer free shipping as a promotion rather than altering your postage prices. You can create a coupon code for free shipping and promote it in your store and on your social media channels rather than putting your products on sale or offering a discount code.

One of the problems with regular discount promotions is that they can decrease the perceived value of your products. There are some designer brands who burn unsold stock rather than offer it at a discounted price, because discounting stock makes their brand less valuable in the minds of their customers. Crazy, but true!

Free shipping promotions, on the other hand, don’t risk devaluing your brand because you’re simply removing an extra cost that customers place little value in. That’s not to say customers don’t care if you deliver their goods or not (obviously) but the emotional value is in the product, and how the product will make them feel. Those same emotional values don’t generally apply to postage.

According to Thee Design, your audience demographics play a role in whether a free shipping promotion will be more effective than a price discount. Women and those over 46 years old are more likely to identify shipping costs as a deterrent to a sale, and thus more commonly prefer a free shipping promotion, whereas under 35s typically prefer percentage discounts. So knowing who your buyers are will help you identify the best promotion to offer.

”If

Offer Free Shipping Thresholds

Free shipping thresholds set a minimum spend value, which when reached, removes shipping costs from an order. This approach has a couple of benefits. It still offers ‘Free’ shipping so people feel like they’re getting something for free, so it can increase your conversion rate, but secondly, encouraging customers to spend more to attain free shipping often increases the average order value.

Usability Geek offered a case study from skin-care brand, NuFace, who increased their order values by 90% after they added a free shipping threshold of $75.

The key is to get your threshold right. Set it too low, and you won’t see the order value increases, and set it too high, and you are unlikely to see increases in the number of sales.

The other benefit of a free shipping threshold, is that by increasing order values, the free shipping offer eats into your profit margins less than if you just offered free shipping across the board without adjusting your product prices.

How to Offer a Free Shipping Threshold on Madeit

Until now, offering a threshold on free shipping wasn’t possible on Madeit, but we’ve just amended our coupon codes to allow sellers to set a minimum spend for Free Post Aus coupons, and Free Post All coupons. To use this feature, set up a free shipping code as you normally would, and enter your minimum spend value in the Amount field to the right of the coupon type

Be mindful that free shipping threshold coupons work the same way as our regular free shipping coupons, in that;
- Customers will have to enter the code to claim the free shipping. They can enter the code at any time and when they reach the minimum spend the discount will automatically be applied.
- The codes don’t distinguish between shipping types, so if you offer express, or registered shipping, the code will apply to all, rather than just to standard shipping.
- Free shipping codes can’t be used in conjunction with another discount code on the same order.

”There

Lower your shipping prices

Even reducing your shipping prices can help to encourage more sales - even without using the F-word (free)!

Here are some ways you can reduce your shipping prices:
- Look at alternative packaging and shipping options. Couriers may be cheaper than parcel post. Also consider the long-term costs to your business, for instance you may be able to ship your products as a letter, but as they come without tracking, signature or insurance, have you factored in the cost of replacing products that go missing into your product pricing?
- Absorb some of the cost as a business expense
- Factor the cost into your product price. Ie. Increase your product prices in order to reduce your shipping prices. If you’re frightened that increasing your product prices to absorb postage costs might make you to expensive, consider this from Thee Design: “Perceived value is defined as the worth of a product in the mind of the customer – and it is a worth that may or may not be grounded in reality.” Oftentimes, increasing product prices results in increased sales because buyers perceive your product as more valuable with a higher price tag. We tend to correlate higher prices with better quality, so a higher priced product is often more appealing than the same product at a lower price.

While you don’t need to completely remove shipping costs (for some products this wouldn’t be feasible for a small business to absorb the costs), absorbing at least some of the cost of postage may see your sales increase, even if the total cost to the customer is the same.

Hopefully this has given you a few ideas to try out in your own store. I’d love to know how your trials go, so feel free to leave a comment with your own experiences.



Words by:
Madeit Editor, Louise
Editor,

Louise (a.k.a. “Mrs Madeit”)

Wordsmith, art & craft enthusiast, and grand-visionary.

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