Many handmade sellers are skeptical of free shipping, because free shipping isn't free for the seller. This attitude though ignores the psychological aspects of how you set your prices. Here are the two most common scenarios for free shipping:Always Free - The seller offers free shipping all the time. In this scenario the seller has to build the cost of shipping into the price of the items.
Free as Sale - The seller occasionally offers free shipping as part of a sale or promotion. In this scenario the seller needs to have a high enough profit margin all the time to afford to run discounts*
However why offer free shipping when you still have to pay for it? For the same reason that a seller would offer 10% offer or run advertising: as a promotional tool. "Free" is a very powerful word and for online retailers an easy and affordable way to bring in extra business. In fact at least one consumer researcher has shown that shoppers will often pick free shipping over a discount even if the discount would save them more money.
For the time being I'm only offering free shipping as an occasional discount but with the prices for my raw materials and postage going up I'll soon have to revise my prices and I'm debating whether I should build the shipping costs into my prices. Regardless of what I decide in the end, free shipping will remain a valuable promotional tool for me and other online retailers.
* In my opinion this should be all sellers. If you don't have a high enough profit margin to be able to afford to discount either for a sale or for wholesale buyers then you don't have enough profit built in to adequately reinvest in the business and pay yourself a reasonable amount for your time.
always good stuff! thank you Noadi :)
ReplyDeleteThat's very interesting for a smaller business to know. Thinking about it, I don't normally even look check if paying shipping with a cheaper item works out cheaper overall.
ReplyDeleteVery intressting topic and a good post. The behaviourals of consumption are in fact fascinating. In Commercials stores in the US, sales with 60, 70 or more percent are very common. I moved to Germany a couple of years ago and found it almost comical that people were almost killing themselves for a 10 percent sale. I think the biggest sale that I have seen here was 30, maybe 40 percent. Shipping is sometimes free if the amout purchased is somewhat higher. I suppose it is also what the pople are used to. Another intresting topic, although not so much related to this post is: what are hand made things worth?. I am a heavy crafter myself and thus know exactly how much time something takes to make and its potential worth. Or so I thought. Recently I saw a wonderful felt cuff on etsy for 83 USD and thought: ugh, that is expensive. After making one for myself and calculating the time and materials and upcharge, I realized that the price was more than right. Thinking about it more, I came to the conclusion that many people make up their preis based on a feeling, without any calculation. This means that they are earning just a couple of cents per hour of their work. I wrote a post about it. Please take a look under:
ReplyDeletehttp://designsbykasia.blogspot.com/2012/01/emboidered-felt-cuff-bracelet.html