Jupiter argues that companies should base delivery charges on
order weight and distance, not order size, in order to gain their
customers' trust because most consumers look at these costs before
making purchases. To minimise both customers' distrust and
merchants' risk, Jupiter says retailers should view the charges as
a break-even proposition.
Ken Cassar, Jupiter senior analyst, comments that “consumers are
wiser to the true costs of shipping than retailers think” and “are
well aware of the fact that shipping costs are driven by weight,
rather than by the value of the package."
He added: “Retailers that believe that they're simplifying
matters for their customers by charging based on the dollar size of
an order or on the number of items in the order are making a
mistake that may undermine the relationship that they're trying to
build."
Other key findings include:
- Only 10% of consumers believe that price and order size should
drive delivery costs. However, 54% of major e-tailers base these
costs on order size, while only 30% base costs on weight.
- Companies that charge on any basis other than weight risk
either losing money or robbing their customers. For example,
Pets.com went out of business because it subsidised the high costs
of shipping pet food. On the other hand, Jupiter cites CDNow —
which charges $2.99 in shipping and handling for the first CD and
99 cents for every additional CD — as a company that has used a
dangerous per-item based pricing model. A purchase of 200 copies of
one CD would cost a customer $200 in S&H, while CDNow would
only incur about $28 in shipping cost.
- A Jupiter Consumer Survey reveals that 73% of consumers
evaluate the total price of products, including shipping and
handling, before making an on-line purchase. According to Jupiter
analysts, companies that are profiting on delivery run the risk of
increasing distrust among consumers.
