Should I Offer Free Shipping?Written by Chris Malta
"Should I Offer Free Shipping?" Boy, it's tempting, isn't it! Free Shipping! People will see your proclamation of Freedom from dreaded SHIPPING CHARGE (imagine agonized screaming here), and flock to your site to take advantage of THE INCREDIBLE SAVINGS! (Fanfare, people cheering). Well, it’s true. In my experience, shoppers will check out an offer of free shipping before they commit to your competitor. Yahoo Shopping even lists Free Shipping sites as a category on their home page every once in a while, when they’re promoting their Shopping area. Do those sites get hits? You can bet they do. Are they doing better than you are? Probably not. Internet Shoppers, as a rule, are not dumb. Although Internet Shopper tends to be an instant-gratification junkie (like me), they will check around before pushing that all-important Order button. They’re going to go all way through your order process, until they get FINAL price. Then they’re going to cancel order, and do some checking. What are they going to check before they push your button? The same product on other sites. Now, let’s assume that life is perfect, and you get best possible wholesale price on items being drop-shipped for your site. Naturally, life being perfect, Shopper is going to be comparing prices on other sites that get same great wholesale price that you do. What’s going to happen? Remember, somebody’s got to pay for that shipping. Unless you are personally related to Shipping Fairy, you’re going to have to deal with shipping charges in all their sneaky little forms. Ground shipping, air, motor freight. Residential delivery surcharge. Shipping insurance charge. Signature release charge. They get you coming and going. (Literally!). So what’s going to happen? Your price is going to be higher. It has to be. When you offer free shipping, YOU pay for shipping. So you have to raise your price. You have to include estimated shipping in your item price. (Unless, of course, you want to take a hit below belt…right in profit margin). Ok, ok, I know logic. Maybe your price is higher, but with free shipping your final price will be about same as a site that has a lower price, but charges for shipping, right? Six of one, half a dozen of other. After dust settles, you both make about same profit. So Shopper will buy from you, because you have free shipping.
How to Ruin a Perfectly Good Product MarketWritten by Chris Malta
"How to Ruin a Perfectly Good Product Market" Those of us who own retail Ecommerce sites are always looking for wholesale pricing from suppliers of products we want to sell.
Unfortunately, many people don’t know what a wholesale price IS, or even what to DO with it when they find one. By definition (Merriam-Webster's Dictionary), word "Wholesale" means "the sale of commodities in quantity, usually for resale (as by a retail merchant)". That definition has been around since 15th century. It does NOT mean "the absolute rock-bottom most dirt cheap price ever so that you can beat everyone else's prices no matter what". There are some very good wholesale suppliers of brand name products out there. We publish a Directory of those who are willing to Drop Ship those products directly to your customer from warehouse, one at a time, at wholesale. It’s an excellent way to do business without spending a ton of money on stocking an inventory. However, to be successful in business, you need to understand what "Wholesale" really means. A Wholesale distributor is a company that owns their own warehouse (no middlemen) and supplies you with products at prices that are significantly lower than Manufacturer's Suggested Retail Price (MSRP). That's what wholesale means. So why do you sometimes find wholesale prices on some products that may be very close to RETAIL prices for that same product on Internet? So close, in fact, that there is not enough of a profit margin to make it worth selling? Here’s one very big reason: Chopper Bob has opened a store on Internet. He thinks he's come up with an original idea. He's going to chop prices right to bone on products he sells. He thinks that because his prices will be so low, EVERYBODY will buy from him, and he'll make lots of money by selling large numbers of products. All those small profits will add up to a lot. Chop, Bob, Chop! See Bob Chop! Chopper Bob is essentially chopping his own throat, although he does not see that yet. Chopper Bob finds his first product to sell. It's a brand name VCR. This VCR has a Manufacturer's Suggested Retail Price of $149. This is retail price that manufacturer suggests it be sold at in order to make a good profit. Chopper Bob has found that wholesale price on this VCR is $69. At that wholesale price, profit margin to be made by selling it at MSRP (Manufacturer's Suggested Retail Price) is 54%, which comes out to an $80 profit on each sale. That manufacturer has made a pretty good suggestion, wouldn't you say? However, Chopper Bob believes that he is first human being in history who has decided to sell at dirt-cheap prices and make money on volume sales. Because he is Chopper Bob, he's going to Chop price on that VCR on HIS web site all way down to a mere $79. People are going to flock to his web site, and buy thousands of VCRs for $79. Chopper Bob is sure that he will get rich from all those $10 profits, once they begin to add up. Internet Retailers will tell stories of his success for years to come. Pretty soon, some people DO start to come to his site, and they start ordering VCRs for $79. Chopper Bob is happy. He was right! However, people who want to order VCRs are not ONLY people coming to his site. There are also people coming to his site who want to SELL VCRs. You see, Chopper Joe has also decided that he is going to undercut everyone else and make big money on volume sales. Surprising? Not at all. Most people who decide to open a business entertain this idea at least once. Chopper Joe searches Internet for absolute lowest-priced competitor, and finds Chopper Bob selling VCR for $79. Chopper Joe puts it on HIS site for $78.98.