Should You Charge Extra for Shipping or Include it in the Price of Your Products?

Women signs parcels in post office

 

Running an e-commerce business involves difficult decisions that require an exhaustive analysis of all possible scenarios, this is particularly true for logistics. One of the most common questions is whether to charge extra for shipping or include it in the price of your products. This article is going to help you make the best decision, in order to maximize your chances to attract more people to become your paying customers.

Compare with Your Competitors

The first thing to do is to compare the shipping costs to the purchasing power of the people in your target market, and to the price of the product itself. If the shipping fee appears to be too high, your potential buyers may be tempted to choose one of your competitors who offer free or very cheap shipping. In such situations, it may be wiser to include the shipping costs into the product price, and promote your e-commerce as offering free shipping to all its customers. Nonetheless, you have to be very careful about the downsides of this decision, because they can be extremely daunting to your bottom line.

If, on the contrary, the shipping cost is within the market average, most buyers are going to be absolutely fine with paying it, so there’s no reason for you to include it in the product price. This will save to from having to refund it, should some of your clients return their purchases.

Consider Your Return Rate

If the specific of your e-commerce implies a high returns rate, you shouldn’t include the shipping fees in the price of the most sensitive products, because you’ll lose a lot of money in case of a refund. This is another angle you have to examine your dilemma from. Selling shoes and clothes will inevitably trigger a lot of refund requests, because many people order the wrong sizes, knowing they can return the products and get their money back anyway. Such industries aren’t a great fit for increasing the prices of your products in order to cover the shipping costs.

How High Are Your Shipping Fees?

In case your shipping fees are too high to be displayed as such, you should seek for alternative shipping methods that may help you decrease these costs a little, in order to make them more affordable. You may also want to hide only a fraction of these costs in the product prices. As you can see, this isn’t an impulse decision. You should do your homework properly, and develop profit and loss scenarios for each of the situations mentioned above. Your ultimate goal should be to maximize the profit of your e-commerce, while maintaining a good sales volume. As you may have to conduct some split tests, it’s a good idea to start by doing a market and consumer research, in order to understand the risks involved by each pricing variant. This will save you from applying too many changes to your pricing policy on your live website. Last but not least, if you implement a change and you notice a drop in sales, you shouldn’t be afraid to revert to a previous version of your pricing structure.