MBA1619 Should You Charge For Shipping?

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Hey oh. Welcome to the $100 where businesses get built every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zed home. I'm also the co founder of the $100 MBA, a complete business training and community online. And in today's episode you will learn should you charge for shipping? If you run an e commerce store or sell any kind of physical products, even paperback books, clothing, equipment, whatever it is, getting it to your customers has a cost. Many people are losing money with their business because of shipping, because they want to include free shipping. Well today I want to share with you some really interesting information that I've found when it comes to shipping as well as share my own experiences when I had my own e commerce store and how I was able to make money on shipping. I use shipping as expansion. Revenue actually will also bust some myths when it comes to what people are used to paying and what they're willing to pay. Some people think that people just want free shipping. Shipping no matter what. Is that really the reality? We dive deep into this topic to make sure you come up on top when it comes to charging for shipping and your shipping policy for your business. So let's get into it. Let's get down to business right out of the gate. I want to talk about how some business owners think that customers are just used to getting free shipping and that they must include it to be competitive. Well, I'm here to tell you that's just simply not true. Let's take a look at the largest e commerce store in the world, Amazon. You cannot buy anything on Amazon with free shipping. Anything you order will have a shipping charge. You're gonna pay for shipping and if you're getting prime delivery, free delivery, you're paying it through your prime membership. So this doesn't really free shipping. You're paying for it some way or the other two. Shipping is pretty much the same thing as delivery. If you got anything delivered, whether it's Uber eats or your groceries, shipping is not included for the most part. There might be some offers where you spend an X amount of money and then you get free shipping. That's a separate concept. That's an incentive and pretty much that's just a discount. That's a bundle. You can say 10% off if you wanted to. In fact, studies have shown that a percentage off actually converts better than something for free. So if I say to you, order up to $100 or more and get 10% off, that converts better than say free shipping for orders over $1. The word free psychologically automatically makes you feel like it doesn't have much value. It's just like a bonus. It's like a give me like a free trial or a free sample. It's not really seen as an attractive offer versus 10% off or $10 off. 10 has value. It's a number so people can receive that. But free doesn't have much of a perception, especially when it just seems like a give me kind of an add on bonus. I'm here to tell you that you should be charging for shipping. And now this obviously really relates to the type of product you ship out to your customers. Some products are heavier than others and will cost you more money to ship out. For example, a T shirt is less expensive to ship than a bottle of cologne. It's just heavier. It's going to cost you more to get it to your customer. So having a blanket shipping policy, no matter what product you sell, especially if you sell a variety of products in your e commerce store, is just a bad idea. How do I know? Well, had a very large business in the retail space. I had an e commerce store, men's clothing. I sold dress shirts, I sold cufflinks, I sold outerwear, all different types of weight. And what I learned in that Experience is that shipping is an afterthought. People don't really worry too much about shipping because really they're just looking at the prices of the items. If they feel like the items were a good value, they say, oh, that's not that bad. I'll add it to my cart. That's a good price for that item. Add it to my cart. When it's time to check out, they'll look at the total and say, okay, why is the total this much? Okay, this item, this item. Oh, plus shipping. Okay, that makes sense. They don't feel bad about the actual purchase because each item is at a price that they expect or they find valuable and shipping is something they see as a necessary thing to bring it to their house. I actually did some surveys about people that abandoned the cart in my ecommerce store to find out why they abandoned a cart. And was it because of shipping? I did actually, I sent them an automatic email when they did this. And from my recollection it was less than 5% because of shipping. Most people abandoned a cart because of other reasons, like they got busy, they wanted to just put it in the cart for later use. They were ordering a gift and therefore they needed to just think about it for a while, see if it's a good gift. All other kinds of reasons. Shipping was not one of the major reasons. So people are willing to pay for shipping, so you don't need to bundle it in and have you absorb the costs. One of the times I did charge a flat rate for shipping was for international orders. So when I first started on my E commerce store, I only had one warehouse in the U.S. i didn't have other warehouses around the world. So therefore all my products are shipping from the U.S. so if somebody ordered outside the U.S. i would charge them a flat international shipping fee. Now, how much to charge for shipping? Well, that's going to be up to you. Some E commerce stores I know that, like Shopify, there's settings and plugins where you can plug it into UPS or the United States Postal Service and they can actually give you an actual quote for how much it's going to cost to deliver each item based on weight and location. And then you can choose how much you want to charge based on all those quotes. Or you can just say mark it up a certain percentage. Like say just whatever it costs to ship, mark it up 20%. Therefore you make a profit on shipping. You should be making a profit on shipping because this is a service. This is part of getting it to their door. The Packaging costs you money, the handling costs you money. So there's no problem with you passing that on to the customer. This is something that I really believe in. Especially if you are selling unique products, products that you create. You're not selling products that can be found elsewhere. Like you're not selling, you know, Nike T shirts that can be found on other stores. You're selling your own unique products that they have to kind of buy from you. Now there is a type of shipping I recommend you do pay for and that's returns. Offering free returns really lowers your risk and allows customers to really feel the confidence to buy from your online store. According to Shopify, on average ecommerce stores have a 20% return rate. That means 20% of all orders on are returned, whether for an exchange or for a refund. Now the cost involved for you is having them ship it back to your actual place of business where you can reinventory it. Now you might be saying, wow, that's a cost I don't want to absorb. Well, you don't have to absorb it, but you should offer it. Why? Because it's going to encourage more customers to buy. So if 20% of people are going to return, just factor in that percentage and increase your overall shipping from everybody by that percentage. So if you charge $10 for shipping, make it 12 because that's going to cover you for the 20% of people that will return. Now of course you want to do this within reason and you have to make sure that you have the things in place to make this happen. So you may want to do it on a local level or a national level before you go international. Many ecommerce stores, they do like a self addressed sticker where you pay for the shipping because you have an agreement with ups. It's a sticker used with your account and it's pretty straightforward and you can work with UPS on that. And of course if they don't use a self address sticker to return items, you don't pay for that shipping. But this really lowers the risk on the customer and allows you to bring.

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To wrap up today's lesson, shipping is something you need to make a part of your business model in e commerce. More than cover your costs. More than cover for return shipping. And don't just give it out for free for no reason. I personally think you should be giving out a discount or even store credit for their next purchase as an incentive before you think about giving away free shipping. Not sure. Why don't you split test it? Don't take my word for it. Split test it in your checkout page or even just in your banner of your website. You can offer free free shipping to half your customers and offer 10% off to the other half. So you can say free shipping if you're spending over $100 or 10% off to the other half. Give a coupon code to each. See which one converts better. Let me know how it goes. Just email me over@omar00nba.net I have a funny feeling that the discount over the free shipping will win. Thank you so much for listening to the $100 MBA show. Don't forget to follow us over on Instagram. If you want to get our latest updates, some extra content exclusive to our Instagram followers, as well as previews of our next upcoming episodes. Just go to instagram.com the100, NBA before I go, I want to leave you with this. Be careful with discounts. Be careful with free. Don't give away something that you can easily charge for. If you want to add value to your customers experience, give them a better experience shopping on your store. Give them a better customer service experience. Give them better value in the product itself. Improve the product that you're actually giving them they're buying. They look at the stores that I frequent online. If I look at the stores I frequent in person, I shop there because their products are great, their service is great. Not because their prices are the lowest or they give the best discounts or they give free shipping. You go back to a place to a place of business because they delivered on their promise. Thank you so much for listening and I'll check you in tomorrow's episode Q and A Wednesday. I'll see you then. Take care. Of.

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