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"We have no control over what the post office charges "
It is not as simple as that.
Sellers do control the type of shipping service they want to offer. Too often we see eBay sellers requesting a very expensive shipping method because they suffer from paranoia. They are afraid someone may attempt to rip them off and will only ship with tracking and signature for relatively low value where the extra cost - passed on to the buyer - is wasted.
Yes, those sellers may charge exactly what the post office charges but it does not make it right.
"The advice to roll shipping cost (or at least a substantial portion of it) into selling price, in my opinion, is not a workable solution for a great many sellers,"
That may be true but Canadian sellers are competing with American sellers who offer "free shipping" in over 50% of their listings.
Not easy to compete with them unless you make your price and terms competitive.
Canadian sellers are trying to get a piece of the American pie. We can only do it if we compete in their territory on their terms.
"sellers should reduce (or completely eliminate) shipping costs and accept lower margins, not try to have their cake and eat it too by "hiding" shipping costs in item price. "
When you think about it, it is the same thing. Shipping costs come from the gross margin one way or the other. Like eBay does when charging fees, a seller should look at the total value of the transaction, not the sale before shipping charge.
On an item that costs me $50.00 with a $15.00 shipping cost to send to my Canadian/American customers (on average), my selling price is not determined by my cost or my shipping cost, it is determined by the marketplace - my competitors.
If the marketplace tells me the price should be in the $85 to $95 range (including shipping) and I decide $90 is what I am willing to sell the item for, then my profit will be $25 (or 28% gross margin). Considering eBay/PayPal fees, I will be left with about 15% net margin.
Is that acceptable to me?
If I want a quicker sale, I would need to price the item at the lower end of the range ($85) leaving me $20 profit (25%) or about 12% after fees.
Is that acceptable to me?
In both cases, my answer would be no. I do not wish to work on those low margins. I want at least 50% after fees.
So, if the marketplace tells me $85 is the right price (about $74 after fees), I need to lower my cost of the item to $37 or less to make the 50% margin I am looking for.
And that is the problem for many sellers. Their costs are too high to properly compete with other sellers who may have lower costs of goods (they buy better) and - in most instances - benefit from lower shipping costs.
Now, in some categories where the turnover is quick, lower margins are acceptable as they are the norm.
If you turn your inventory once a year, you need much higher gross margins than if it turns over every month.
And, like femme would say, do not forget to cost the value of your time. There is little point in working on margins so low that you only end up making $3 or $5 an hour on a net basis.
You are correct. Each seller should do what works best in the circumstances. However, we all need to be aware of what our competitors are doing.
This message from the "Ultimate Guide to Increasing ecommerce conversion":
Charging for shipping is a conversion killer
Do you know how many merchants offer free shipping? Half of them! Some offer always free, some have conditions. Amazon and JCPenney offer free shipping if you buy for at least $25 or $50 respectively. Nordstrom offers free shipping for all purchases. All of this has gotten people used to the idea of free shipping.
An E-tailing Group study revealed that unconditional free shipping is #1 criteria for making a purchase (73% listed it as ‘critical’). In another study 93% of respondents indicated that free shipping on orders would encourage them to purchase more products.
High shipping costs were rated as the number one reason why consumers were not satisfied with their online shopping experience. In fact, shipping costs are the main reason why people prefer brick and mortar to online.
People want free shipping, no surprise there. But how attractive is it? In fact, orders with free shipping average around 30% higher in value those that charge a few bucks for transport. Makes business sense.
When 2BigFeet introduced free shipping for orders over $100, their conversions went up 50%.
For whatever reason, a free shipping offer that saves a customer $6.99 is more appealing to many than a discount that cuts the purchase price by $10.
If you’re afraid that offering free shipping will erode most of the profit in the order, watch this video for a useful strategy to use.
What about charging very little instead of free?
In the book “Free“, the author Chris Anderson shares the case of Amazon. Once Amazon implemented the free shipping offer, sales went up in each country except for one – France. Why? France charged 20 cents instead of free. While 20 cents IS almost free, it sure didn’t seem that way to people. Once they changed it to free, sales went up also in France.
Moral of the story: free is in a league of it’s own. The difference between cheap and free is huge.
If you charge for shipping
If you decide to still charge for shipping, you have to do this one thing: mention shipping costs up front. If you can, charge a flat fee (simple pricing is best) instead of per item.
Nothing kills conversions like a surprise shipping fee revealed at the very end. According to this study 47% of people indicated they would abandon a purchase if they got to checkout and found that free shipping was not included.
