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.