by Sean Blanks
Postage and packaging is not sexy and no one wants to spend time discussing it. Trouble is, it’s vitally important to the success of any retail and distribution start up and it should be an ongoing consideration to big business.
We made an early decision to absorb the cost of packaging into our price. We felt that, when buying low-ticket items, no one expects there to be a delivery charge, or at least it should be very small. Larger ticket items, such as car parts and white goods, naturally involve logistical hurdles that incur cost, but try charging for postage to cover a printer cartridge, that shoppers could buy on the high street, and you’ll see a dramatic increase in abandoned baskets.
Sadly it’s not as simple as adding a flat rate on top of every single item; bulk orders would see a dramatic rise in cost, compromising our price guarantee. While the cost of single items would become prohibitive to infrequent customers, as a retailer we have had to develop a sophisticated model to manage this system, which has paid off in the shape of a huge increase in our conversion rate.
Before deciding one way or the other, you also need to consider how you manage bulk orders, and how to build this into your pricing model. For us, it made perfect sense to provide discounts on quantity orders. Customers are incentivized to buy more, and we are able to send out items as a single shipment, reducing costs and our carbon footprint.
Returns are also something you’ll have to absorb into your pricing. Consumer rights fairly mean that we, as internet retailers, must refund the delivery costs to a customer should they be unsatisfied with any goods. My advice is to make this as easy as possible; we’ve got an easy to find returns policy on our website, not only does it ensure we don’t exacerbate a bad situation, but it’s a clear sign to potential customers that we’re trustworthy.
Once you’ve decided, it’s crucial that you continue to assess what’s the best way to deliver your goods. We found, through correspondence with our customers, that they did not want signed-for packages, which we were paying a premium for. While they wanted their item to be delivered safely, recorded delivery was an unnecessary step for many that actually inconvenienced them. Nobody wants to wait in in order to receive a printer cartridge (an iPhone maybe, but not printing supplies).
In addition to finding the right way to deliver goods, then it’s important to assess and find the right courier. When we launched we sent everything by Royal Mail and as we have grown our spend with them has risen considerably to reach in excess of £30,000 every month, but this high spend doesn’t carry much weight or deliver a better customer service.
We’ve found that Royal Mail have not been easy to deal with at times, and when we began, and wanted to experiment with our cut-off time to see whether we could generate more sales, we were hampered by Royal Mail’s inflexibility. When all of our postage lay with them, they had a total monopoly on how late we could offer our guaranteed next-day delivery service.
For certain deliveries (near 50% of our volume) we found an alternative supplier that provides several value-added benefits in addition to a more cost-efficient service. Just a few hours of research found a courier service that integrates with our back-office systems to provide a one-hour predict function to our customers and also, it’s an entirely carbon-neutral service. What’s even more satisfying is that this courier delivers all this additional benefit at a better price.
Finally, while we may win on price, we keep customers on service and price combined, so we always keep an eye our cut-off order time on the website to manage expectations and ensure we do not upset any customers by failing to deliver ordered goods. Currently our promise is next-day delivery on anything ordered by 4pm. Previously it was 5pm, but as orders increased, we had to reduce this time to manage expectations. Where possible, however, I’d suggest that companies make ordering cut-off times to ensure your offer is as attractive as possible.
The shift in conversion rates we have seen when we tinker with our postage model demonstrates how important the price and service offer is above all else. A fairly distributed pricing model to allow you to absorb postage costs will deliver far higher return on investment than any gimmicky marketing tactic you can name.
Sean Blanks is the marketing director of www.cartridgesave.co.uk, a Sunday Times Fast Track 100 e-retailer.