Target and Toys R Us posted overall sales declines during the holidays.
Retailers charge for shipping by dollar value or by the piece; customers prefer by weight, says a new Jupiter study.
Catalogers have pick, pack and ship operations down to a science by dint of long experience. But that doesn’t mean they have all the answers on shipping for Internet retailers, according to new research on shipping and handling charges from Jupiter Media Metrix.
In fact, catalogers follow some practices e-retailers should avoid, Jupiter says. Most catalogers base shipping and handling charges on the dollar value of an order. Likewise, 54% of web merchants base shipping and handling charges on order size, either the total dollar value or the number of items the order contains.
But only 10% of online shoppers surveyed believe that’s the most reasonable way to assess shipping costs. And almost half, 45%, say they want shipping and handling charges to be based on the weight of the product.
The bias, says Jupiter analyst Ken Cassar, likely stems from consumer’s familiarity with paying by weight when shipping packages through the U.S. Postal Service, UPS or other commercial carriers. And it’s a consumer view likely to become increasingly entrenched. When Jupiter segmented experienced users from newer online users, the experienced users were even more likely to prefer shipping charges based on weight, suggesting that online consumers’ preference for paying by weight will grow stronger over time.
“Online retailers should not assume that catalogers have optimized this system from years of experience,” says Cassar. Catalogers still charge mostly by dollar value rather than weight because some orders-about 8%-still originate with the paper forms in the catalogs, where asking consumers to calculate weight-based charges is logistically impractical.
Order value versus weight-based charges aren’t shopper’s only beef with online shipping charges, according to the survey. Jupiter found that about half of online retailers make money on shipping charges, a practice it says merchants should abandon as it could damage customer loyalty.
Jupiter says merchants can address both issues by basing shipping charges on weight. Besides being the most intuitive method for pricing for the customer, it also erases the competition between merchant and customer inherent in any other pricing method.
When merchants base the charges on product price, for example, consumers win if the order is heavier than orders of similar value, but lose if it’s lighter. Likewise, if merchants assess shipping on a per-item basis, consumers win if the product is heavier than others of similar value, but lose if it’s lighter.
“Customers perceive shipping and handling as a necessary evil,” Cassar says. “Merchants that exploit this perception may well push consumers to their competitors, or back to stores.”