Comments on: Flat Rate Shipping?

By: Jim Novo

Jim Novo — Tue, 14 Aug 2007 12:56:54 +0000

1. It’s much more difficult to do since margins are generally slim, but it’s possible to do if you have a good handle on shipping revenues / costs.

2. Yes, primary ship method only. Customers pay cost for upgrades.

3. The same math applies, but the variance is much wider when you start talking about different continents. Whether this works or not would depend on a more detailed analysis including average margin per order and so forth, but the idea is the same - you want to drive average margin per order higher by not tying shipping to average order value.

For example, if 90% of your items are light weight - say electronic components - then it’s much easier to estimate / control / manage a flat rate shipping program for international.

In the end, it’s all just math…if you have the data, and that’s where most folks run into trouble with an idea like this - they don’t have good data on actual shipping costs, average margin per order, etc.

By: sun818

sun818 — Sun, 12 Aug 2007 00:31:55 +0000

Hi, thanks for this post. This is exactly what I’ve been looking for! I have some follow up questions, if you don’t mind:

1) Are you recommending companies that sell commodity products not offer flat rate shipping?

2) In your flat rate shipping calculations, do you calculate only Ground orders (excluding 3 Day, 2nd Day & Next Day)?

3) Do you have any advice for companies that want to implement flat rate for international customers as well? Does the same math apply to international orders as well?

By: Jack Reeves

Jack Reeves — Thu, 18 Jan 2007 23:00:20 +0000

I’ve been trying to start a small business from the stuff I ship on eBay and mail orders and after reading you article I was looking for somewhere to compare the shipping rates and see if I could find a price for my frequent buyers that could stay constant without hurting my profits. I stumbled across http://www.shippingsidekick.com and it compares the prices of USPS, FedEx, UPS, and DHL and with that I was able to find a reasonable price for S + H that would make the buyer happier and allow me not to lose too much money. I would recommend all small business owners check out shippingsidekick.

By: Jim Novo

Jim Novo — Fri, 05 Jan 2007 21:11:18 +0000

Not sure if it a trend or not but it sure is a good idea if you understand the fundamentals of your business. Setting this threshold above average order size (but not too far above) is a good way to drive incremental profit. The higher you go above average order size, the less effective it becomes until it ceases to do anything.

Now, you can segment the offer, certain groups may have a higher average order size so can tolerate a higher threshold. For example, this promotion is one of the few you can use on Recent-Frequent buyers and actually make money. Typically, straight discounts are just subsidy costs for this group (if they normally spend $100 a month and you give them a 10% discount they spend $90 that month). But these “threshold” type promotions, when matched correctly to behavior, can make money.

In other words, it is suboptimal to make the same offer to everybody, but you knew that…:0

As always, practice safe marketing promotion and use control groups for any tests so you get at true lift (if any) and real profit.

By: Adelino de Almeida

Adelino de Almeida — Fri, 05 Jan 2007 02:14:36 +0000

Thanks for the great insight and for expanding on the topic. You make a great point: shipping charges should be viewed in light of the business model, the product and its weight.
I just noticed that Sierra Trading Post is announcing free shipping on orders over $75… would this be a trend?