Deals, Deals, Deals...but at what expense?
In the last few months more and more customers are calling and asking for additional discounts. Everyone is trying to find a way to cut back. With so many jobs lost, and our economy the way it is, I’m not surprised. I want to help, but from a business perspective this is tough. I want the sale but I don’t want to break the bank to get it. I am in business to make a profit after all.
For 2009 we decided to offer free shipping for orders over a certain amount. I have found that this has increased our average daily sale and that customers enjoy knowing they received something for free. Our bottom line is hurt little by this adjustment, and our sales have increased. This is the good news.
The bad news is that as we move further into 2009, free shipping isn’t enough. More people want more incentives or more discounts. I can’t blame them, people on the news are telling consumers to ask for discounts saying that businesses are so desperate they will do anything for a sale. Yes, I want sales, but I am not so desperate that I will put my company in jeopardy. I am at a point that I just don’t know what to say anymore. If we discount our products even more then we will soon have to shut our doors and our employees will be out of work.
We are in tough times, and as a business person I hope that small business will survive this storm.
This post is filed under By Merchants, For Merchants and has the following keyword tags: ecommerce, sales, customer service, economy.
7 Comments
Assaf says:
I hear you Kara. My company, www.ycasolarlightstore.com, just did the same thing.
In late October/early November, things really started slowing down and we decided to offer free shipping on all items. Since then, things have picked back up and then some.
I really think that in today's economy, customers aren't thinking of free shipping as a plus, but a must.
Thanks for the great post.
Assaf Gal
John Lindberg says:
One way to approach the free freight issue is to evaluate each of your products in terms of sale price per pound and relate this to the fact that UPS or USPS cost of delivery drops quickly as the total package weight increases.
A one pound carton may cost $6 per pound to ship and a ten pound box may cost only $1.50 to deliver - volume shipping opens the door to discount sharing.
Likewise, some products may yield $50 per pound in sale revenue and others perhaps only $5 per pound -- the difference between free freight for coal vs. diamonds.
Using this simple technique you can quickly develop free freight offers that are good for both you and your customers.
John Lindberg - President
EFULFILLMENT SERVICE INC
1stMateTech says:
We did the same thing this holiday season in the boating/marine supply niche. In fact, we went as far as free shipping all orders (ground of course!) for the month of November to start the Holiday Season. The lesson there was small order value and lots of orders. Margins were minimal at best.
For December, we switched to free shipping for purchases of $99 or more (site banner and email blast). But also offered a few flat dollar coupons through email marketing. ex $25.00 off orders over $250.00. (email promo)
Lesson for December - increased order value by 15% but only 80% volume. I am not sure how to read the volume number yet... (reduced sales or economic down turn).
We had a good convert rate for the flat coupons but not for the free shipping (via email blast).
We attempt to stay flexible with new plans but always test, track, test more....
Bryan
1st Mate Technology
www.1stmatetechnology.com
altwire says:
I would test a bit more before staying with free shipping. Just like many, our sales were down considerably as well in Oct and Nov but sales did increased in Dec and January and we did not offer free shipping.
Our problem with free shipping is with returns. Some one returns an order and you refund the whole order so you lose the shipping cost. If returns aren't a problem in your business, than free shipping is one of the better discounts to offer.
I heard one shopping "expert" on TV saying he would not even buy from a site that did not offer free shipping. He didn't even say compare the total cost. "If they don't have free shipping, don't even go there." I guess it's becoming the norm.
Julia Stewart says:
I have a different type of business. It's a coach training school. Sales did fall for a bit until we rolled back our tuition to introductory levels. I'm actually inching them up now, since we can't give our students everything they want at the old price level. The teachers need to get paid! However, I find that I can bundle in other recorded classes into the coach training and that makes it more attractive to the students without costing the business.
But I agree, we can't lower prices forever. People begin to buy again when they realize the price isn't going to get any better. My 2 cents!
MMA says:
You're right--customers are looking for bigger and deeper discounts. And while promotions can help businesses attract more customers, this can also negatively cut into profits. But online businesses can offer discounts at little or no cost through purchase incentives from another company. TrialPay's purchase incentive program pairs online merchants with other companies who are willing to give their product away for free in exchange for valuable advertising space. This lets merchants increase sales and boost AOV by offering free gift cards, movie tickets, coupons and more.
webtao says:
I offer free shipping on orders over 150 and on items that are MAP priced by the manufacturers and so we have a larger margin. I won't sell at close margins- we work at about 30%, but in the end only 10% stays around. If I'm giving 7% (ave order 100, freight=7) on shipping, then I'm working for everyone else and not myself. Who wants to work for free? Price is not the only factor influencing a shopper. If your site is a resource for shoppers and an easy buying experience, they will buy eventually. If I don't make a fair profit, I actually resent the customer! I did all the work and they get it for close to my cost. I would think that other merchants feel the same.
