Free Postage on Orders

[Bates]

Hello, I am new to the forum so please forgive me if I am being stupid. I have browsed as much as I can on here to get some insight and ideas. I was happy to register when I saw what a useful resource this may be.

I run an extremely niche business, I would rather not disclose as this topic would appear in google searches etc.

I have invested near to £30,000 developing a new product of which is made and manufactured here in the UK and is the only one of its kind. This is from my years of experience within the industry & is an ongoing project in which I am working on further designs & tooling for additional components.

I run a Magento website selling around 5 items, which are bespoke and seasonal. In this industry for these type of items customers do not blink an eye to paying £30 for next day special delivery via Royal Mail (whom are the only courier that are able to post this certain item). I probably sell around 3000+ of these items a year and the average sale price is around £120. These products do not attract VAT.

The product in question now costs around £8.50 to post inc vat & fuel (ish) using UKMail and has a volumetric weight (to UKMails /4000 equation) of 16.83kg. I don't charge any extra for picking & packaging and probably take a hit on the fuel charge too as it varies.

I have a lot of customers that will order more than 1 of these products and then expect free postage over around £200 order. The product itself retails for £37.95 inc VAT in which I only make around £10 on it currently. As it is early days I cannot market it too high.

Should I offer free postage on such a high amount with bulk volume discount I will basically loose my entire margin and it would make my product not a viable business model. I am constantly told our postage prices are too high. Other much larger competitors that have been in the industry for 100+ years are able to offer free delivery over £200 but they are companies with 500+ products in their range and are well established. We are a 2 man band and have only been working in the public eye for around 5 years.

The postage price is really killing our sales, I don't understand how other suppliers can offer free postage, even on trade pricing for pallet loads.

I have shopped around heavily before settling for UKMail on their rates. We have estimates for 1500-2000 a year but currently not meeting anywhere near that as we are out of season. Orders will pick up between April - August which is our peak times.

Any help or suggestions would be appreciated.

Thank you

 

[GraemeL]

I run an extremely niche business ........ is the only one of its kind. ......

Great USP's, so price should not be the barrier to sales that you are thinking it is.

Offer free freight and put your prices up.

Its always easy to reduce prices or discount prices.

Graeme

 

[NewGardenStyle]

Offer free freight and put your prices up.

I'd certainly echo that. From the information you have given, you should be charging more for your product.

 

[Mr D]

The postage price is really killing our sales, I don't understand how other suppliers can offer free postage, even on trade pricing for pallet loads.



Any help or suggestions would be appreciated.

Thank you

Other suppliers can offer free postage because its built into their pricing model. They are not offering the same as you so should not have any impact on what you charge.

 

[pelparc]

As you do not have a competitor for your product, i would increase the selling cost to at least easily cover the cost of fulfilment and then have a small £2-£3 postage charge and offer free postage when they spend over a certain amount and then have free postage events.

 

[lesliedocherty]

We raised Free Postage threshold from £50 to £75, then recently up to £100, conversion rate hasn't changed.

 

[Pish_Pash]

I recently signed up as an Amazon supplier - their Purchase Orders are surprisingly small - typically £300 - if I can't fulfil all their requested items (awaiting stock), then I could be supplying them with products worth about £150 ....in this instance, shipping costs become very key.

I'm happy to report that I solved this by opening up two Accounts with UPS - one is a collection account where they come a pick up the item from me (costs about a fiver + VAT) - but the other is a drop off (where I take the packages to a local newsagents). For this they only charge about £3.50+VAT ....for packages weighing the way up to 20kg - you'll not get cheaper for that weight .....whether your local UPS drop off point (typically a newsagent) will see the funny side of you rocking up with 3 x 16.5kg large parcels is another thing though!

But as others have said, crank up your selling price (it's not as if your customers can go elsewhere)

 

[ddmcmullan]

On top of other comments, simply based on your UKmail prices they are way too high.

You should be getting them for around £4.50/£6 inc VAT for weights under 25kg depending on your volume.

If you get prices from ukmail direct you don't get the best prices, your best with a courier broker, I can recommend one if you PM me.

 

[JamieM]

Maybe it's just me but I am struggling to make any sense of your post. What is the product that people happily pay £30 for postage? Is that another product? Is it relevant?

For the product that is £37.50 retail, you only make £10 on it? That is a very poor margin for your own manufactured product. Even a retailer wouldn't be happy with 32%. Also why are you talking about competitors when you say this product is the only one of its kind?

You also mention bulk discount. Are you selling wholesale with further discounts? What is the minimum order quantity and how much discount?

My suggestions are any combination of the below:

1) Get it manufactured for less, in the UK or more likely abroad
2) Put your prices up. Having a low price because 'it's early days' doesn't make sense. Price high because it's early days.
3) Get cheaper courier prices
4) Subsidise the delivery cost. For example, if you pay £8.50 charge your customer half and you pay half.

I'm sure some combination of the above will help.

 

[Bates]

Hello all, thank you for you replies. I think I should further clarify a few points, I may have oversold myself slightly.

In regards to the product, there are other similar products on the market but not ones that can do exactly what my product can do. There is huge competition out there for similar products in which I need to keep a similar price to compete. These suppliers will be selling 3000-4000 of these each year and are priced at around £35 inc.

I also trade from my base & attend Spring Trade shows in anticipation for the season to begin where I sell the product for £36 inc VAT. I should clarify this is the only product I sell that attracts Standard rate VAT whereas all my other products are zero rated.

I introduced an "Economy" option via Hermes in which I can send the product for £6.53 inc VAT fully insured on a 2-3 day by dropping at a Parcelshop. Whilst this is maintainable in the off season Parcelshop dropping is something I will really struggle to do during the season as the role becomes 12hr - 7 days a week. This has increased sales but still not overly ideal for the future - I really need them collecting from base. @ddmcmullan I have sent you a PM regarding brokers. In the past I have used guys such as P4D but I was not getting anywhere near that rate. I am currently direct with UKMail.

@JamieM
Sorry to confuse you, I was just giving an insight of what my business does to get an idea of how we work. The product where the customer pays £30 Royal Mail postage is a separate product, infact it is a living item that is produced to order. My business specialises in breeding & sending live creatures which is why Royal Mail are the only couriers that allow living items to be posted.

As to the margin, I apologise and made a typo. At full price we make around £14 on the item (43%), on trade pricing per pallet (32-40 to a pallet) we sell at £30 inc VAT in which we make around £8 each (24%).

1. In regards to manufacture - there are only 2 factories in the UK that are able to produce this product of which is injection moulded. The tooling is the size of a small car, whilst I am currently investigating an "off-shore" pricing a main selling point of my product is that it is made here in the UK. The generation I deal with like the fact we are supporting UK businesses but still the same generation that will have problems with the price - go figure.
2. As above I would potentially price myself out of the market.
3. Partially resolved but hopefully I can have further guidance.
4. I am considering experimenting with this.

Thanks,
Dan

 

[antropy]

I run a Magento website selling around 5 items

How do you find Magento?

 

[Bates]

A nightmare in all fairness, but I have so many extensions running to make it work for us as we are quite complex in our requirements.

 

[antropy]

A nightmare in all fairness

Doesn't surprise me one bit.

we are quite complex in our requirements.

Usually a good way to achieve this is to start off with an incredibly simple piece of software with a simple codebase like OpenCart and then use extensions or custom development to get it working exactly how you want.

In software development, complexity is the enemy, and Magento is very complex:
https://www.antropy.co.uk/blog/the-lure-of-magento/

Just for my own interest, what made you go with Magento in the first place?

 

[lesliedocherty]

Terribly one sided article, shameless plug, next time share something with a bit of genuine value.

How did we get from a question regarding postage to you plugging your site.

 

[1977]

How did we get from a question regarding postage to you plugging your site.

Again...

 

[antropy]

Terribly one sided article, shameless plug, next time share something with a bit of genuine value.

Factual, unbiased article, and directly relevant to the OP's ecommerce setup. The OP mentioned that they have had difficulties with a system, the article explains exactly why and suggests a solution, hence providing genuine value in my view but if the OP didn't find that to be the case I apologise.

 

[lesliedocherty]

If thats your version of an unbiased article then you should be writing for 'Russia Today', their outpout is unbiased as well, lol

 

[antropy]

If thats your version of an unbiased article then you should be writing for 'Russia Today', their outpout is unbiased as well, lol

RT is a pretty interesting news channel to be fair

If you can cite a specific statement my article makes that's incorrect I'll be glad to adjust it.

Despite posting the article on the Magento subreddit, asking for specifics and getting a tonne of angry comments and abuse, no one has been able to post a decent refutation of the article's thesis - and indeed they won't ever be able to because it's fundamentally accurate and correct.

Anyway, I do apologise because I don't want to turn this thread in to a platform debate. Let's get back to the original question of how the OP can optimise their prices and shipping costs to increase their profit margins ...

 

[pelparc]

I don't think RT is any different to the BBC, Sky, CNN etc etc. Just a different view and take on a story, all seem to have an over bias rather than report a realistic view, which is how i agree with lesliedocherty that your Magento bashing article might be factually correct (couldn't be bothered reading much i'm afraid) but has a overwhelming bias against Magento. Does it really matter how many files it has? its quite easy to find the file you need to change. It is structured differently and appears to be more versatile than most because of it. I am not a developer just a user who looked at quite a few options and Magento was the only solution that came close to what we needed at the cheapest cost.

 

[antropy]

I don't think RT is any different to the BBC, Sky, CNN etc etc. Just a different view and take on a story, all seem to have an over bias rather than report a realistic view,

Yep indeed.

Does it really matter how many files it has? its quite easy to find the file you need to change. It is structured differently and appears to be more versatile than most because of it. I am not a developer

If you're not a developer, your opinion on how difficult it is to do development isn't really valid I'm afraid. In fact it's a bit like not being a doctor or a scientist but being an anti-vaxxer

just a user who looked at quite a few options and Magento was the only solution that came close to what we needed at the cheapest cost.

It sounds like you were lucky that your particular requirements fell within the scope of what Magento could already do.

Anyway, let's get back to the original question:

My suggestions are any combination of the below:

1) Get it manufactured for less, in the UK or more likely abroad
2) Put your prices up. Having a low price because 'it's early days' doesn't make sense. Price high because it's early days.
3) Get cheaper courier prices
4) Subsidise the delivery cost. For example, if you pay £8.50 charge your customer half and you pay half.

1. In regards to manufacture - there are only 2 factories in the UK that are able to produce this product of which is injection moulded. The tooling is the size of a small car, whilst I am currently investigating an "off-shore" pricing a main selling point of my product is that it is made here in the UK. The generation I deal with like the fact we are supporting UK businesses but still the same generation that will have problems with the price - go figure.
2. As above I would potentially price myself out of the market.
3. Partially resolved but hopefully I can have further guidance.
4. I am considering experimenting with this.