Deciding on a postage pricing strategy

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BeautyStartUp

Free Member
Mar 6, 2019
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  • #1
    So I need to make a decision...postage is costing me soooo much of my margin right now it's having a big impact on my bottom line.

    I've been offering free postage on all UK orders for the past 6 months in order to stay in line with my (larger) competitors. But I think I need to create a minimum order spend now, probably around the £15-20 mark. Customers are placing small (around £10 orders) which is crippling and on a couple I have actually made a loss once postage is taken into account!

    But what should my considerations be at this stage? I am in Yr 1 and still in start-up/customer acquisition mode and am not taking a salary etc from the business. So I don't mind it being cost neutral. Has anyone got any guidance or tops on how they tackled this?

    I'm using Royal Mail btw as my order quantity is too low to be able to economise with the bigger ones at this stage.
     
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    Mr D

    Free Member
    Feb 12, 2017
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    Stirling
  • #2
    If offering free postage you are adding your postage costs onto your item price? So an item that would have been £10 plus £3 postage would instead be £13 with free postage?

    Or are you trying to fund the postage out of your £10?

    If doing a thousand orders or planning to do a thousand orders a year its worth looking at royal mail online business account. If not doing that volume then look to see if franking will work for you (though has its own additional costs).

    Don't set up a product for sale with intention of making a loss - so what if someone much bigger than you is selling it cheaper? You cannot win a price war, only the buyers can win.

    You can however bankrupt yourself trying.

    Instead focus on making a profit on each sale.
    Sure, some stuff you may just make 50p or a pound profit - and make a lot of sales. While other things may give £10 profit and a lot less sales.

    Turnover is vanity, profit is sanity - don't just go for the sale, go for the profit on a sale. Many idiots around who cannot price their stuff, who think they are doing well because they get thousands of sales. But not profit per item.
     
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    SustainableKate

    Free Member
    Apr 5, 2019
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  • #3
    I would agree with Mr D - its important to not be making a loss.

    But I think it is great to try and offer free delivery as there is alot of evidence to show this is really important to consumers when making purchases online - especially when competitors are.

    But yes, I think I would add a minium spend which should help increase basket size too - I think £15/£20 as you mentioned shouldnt be an issue for most shoppers - I know I will always add something else to my basket if I am near a free shipping amount.
     
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