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Getting the Most from Your Online "Shipping" Dollars
by Jim Haggerty


Online shopping is finding its way into more and more homes every day. People are jumping into all kinds of "dot-com" shopping environments from small personal sites to huge corporate sites. As part of that online shopping experience, one of the most confusing, misunderstood and overlooked aspects is the shipping charge generated during checkout. Public opinion and understanding of shipping charges runs the gambit from shipping charges being completely disregarded to the belief that all shipping charges are evil and should be free.

Shipping is not only difficult for consumers, but is also one of the most difficult functions to setup for website owners and online retailers. Or I should say, it is difficult if the retailer cares about providing a fair and conscientious shipping system. Anything can be done easily if is done with minimal thought. Good shipping systems require a LOT of thought.

With a little basic understanding of how the various systems work you will find that you can drastically increase your shipping cost efficiency and save a lot of money. If online shopping was going to be a one-shot experience for you, then little of what I am offering below would be of much consequence. But chances are, once you discover how easy and fun online shopping can be, you are going to want to know how to make the most out of the experience.

The purpose of this article is to shed a bit of light on the various systems and show how you the consumer can make the best use of your shopping and shipping dollars within those systems.

The Basics

As a consumer, there is one single concept that will be the most help in getting the most from your online shopping dollars. The concept is; "Your goal is to pay the least amount for each item you are shipping, not necessarily the least amount of shipping overall". That may at first seem like a strange way to look at it, but this really is a case where a lower bottom line is not always better. To put it another way; "The more you buy at one time, the more efficient is the shipping cost."

So, how do you take advantage of this concept? By asking yourself two questions each time you shop online;

1) "How much am I paying to ship each item?"
2) "What do I have to do to reduce the shipping cost for each item?"

The answer to question 1 is easy. Just divide the shipping cost by the number of items in the order. The answer to question 2 is what this article is all about and varies according to the shipping system being used.

Letís take a simple case as an example. For the example weíll use purchase bracket shipping. Weíll talk about the other shipping types later.

Example 1: Letís say you add one "consumable widget" to the shopping cart for $1.95 and then head to the checkout system. The website you are using has a purchase bracket based shipping system and your purchase falls into the "$0 to $9.95" bracket, and the shipping charge for that bracket is $3.49. So if you ask yourself question 1 above, the answer is $3.49 per item, or 179% of the item cost. If you were buying a flat panel TV for $1,000 and the shipping charge was $1,790, then the inefficiency would be obvious. Itís not so obvious on smaller items, but still just as inefficient.

So now, on to question 2. With a little thought we can see that in the above bracket system you can buy up to $9.95 in products and still pay only $3.49 for shipping. So how do you increase the efficiency of your purchase? Thatís easy. Divide the $9.95 bracket maximum by the $1.95 widget cost and youíll find that you can buy five widgets and still pay the same $3.49 for shipping which is only 69.8 cents per item or 36% of the item cost instead of the original 179%. Much more efficient, yes? That flat panel TV shipping cost we talked about above just came down from $1,790 to $360; something anyone would consider a massive savings.

To look at it from a "total spent per item" viewpoint, buying one widget means that you spent $5.44 for each widget, while at five widgets in one purchase you spent only $2.65 for each widget. Thatís less than half the cost per widget.

Thatís really all there is to it. Itís simply applying a little forethought on the shipping costs instead of concentrating strictly on the purchase total. Letís look at another example, this time using weight based shipping.

Example 2: Letís say you add the same consumable widget to the shopping cart for $1.95, but the website you are using has implemented weight based shipping. In weight based shipping there is normally a behind-the-scenes realtime lookup of the shipping rate with the US Postal System or United Parcel, plus the addition of a handling charge. For the website you are using weíll say that the shipping charge for one widget comes to $3.09. So if you ask yourself question 1 above, the answer is $3.09 per item, or 158% of the item cost. A little better than example 1, but still inefficient.

So now, on to question 2. With weight based systems the shipping cost increases gradually as the total weight of the items shipped increases. The weight of one widget is small compared to the overall weight of the widget(s) and the packing materials so as we increase the number of widgets the percentage of total weight increase gets smaller and smaller. That means that each additional widget shipped adds less and less cost each time. So to follow the numbers in example 1, if you ship five widgets instead of one, the shipping only goes up to $4.11 which is only 82 cents per item or 42% of the item cost instead of 158%. Again, much more efficient. You can also see that if you continue to add more widgets, each widget costs successively less to ship.

To look at this example from a "total spent per item" viewpoint, buying one widget means that you spent $5.04 for each widget, while at five widgets in one purchase you spent only $2.77 for each widget. Thatís almost half the cost per widget and again the result is similar to example 1 even though the shipping system is completely different.

So how do you accomplish all this analysis without inadvertently committing to a purchase? Most all websites have a page that details the shipping cost structure used on the site. Look for a policies page, or a shipping terms page, or an overall terms and conditions page. If the site does not have such details published, then you can use the shopping cart itself to estimate the shipping. Just add items to the cart and look for a button that says, "Estimate Shipping". It may ask for a zip code to complete the estimate. Keep changing the quantity and re-estimate the shipping to see the changes in rates. If there is no estimate button, then follow the checkout process until the shipping amount is displayed. Carts normally ask you to confirm the purchase after all amounts have been displayed. To try a different quantity, back up in the checkout process until you can change the quantity and then go forward again. That should give you the numbers without forcing a purchase.

Allow me to anticipate your next question, namely; "Why wouldnít free shipping be the most cost effective of all?" The answer to that is; "Sometimes it is Ö and sometimes it isnít." That brings us to the next basic concept discussed in the following topic.

Free Shipping and When You May Not Want It

I hear you asking, "Why would I ever not want free shipping?" The answer is pretty straight forward. Generally speaking, if the website offers free shipping for every single purchase, then watch out. Yes, I hear the next question, "How is that applicable if I am not paying anything for shipping?" Therein lies the catch. Actually, you are paying for shipping. You just donít see it because the shipping is now buried in the cost of each item and as such you no longer have any control over it, nor can you do anything to minimize the shipping cost.

Online merchants are not in business to give away products and services. Like every other business they are in business to make a profit. If a website offers free shipping across the board for all purchases, then they have simply moved the cost of doing business completely into the product prices. And when they do that they will most likely calculate and add the shipping costs based on a purchase that is assumed to be at or near the worst case, namely a single item purchase. Therefore, given our examples above, is it likely that you will find a website offering the same widget with free shipping for the same $1.95 per widget? Not really. It costs what it costs to ship regardless of what the merchant charges so will we see a merchant ship one widget for $1.95 when it costs them $3.49 to ship it? Not on your life. Instead you will most likely see that same widget offered for $4.95 with free shipping.

The bottom line for this type shipping system is that if you buy one item with free shipping then you have also paid the shipping for one item within the price. If you buy ten items with free shipping then you have just paid ten times the single item shipping cost. Although the allure of free shipping may be attractive, when it is offered for all purchases it is the least efficient shipping system of all.

Free Shipping and When You DO Want It

So when is free shipping a good thing? That answer is also straight forward. Free shipping is a good thing when it is offered for total purchases above a given level. An example of this would be a website that offers something like "Free Shipping for Purchases Over $100." The threshold for free shipping will vary from one merchant to the next, and it may vary during promotional times, but given a fairly high threshold, the indication is the same. A merchant who offers free shipping over a relatively high threshold is showing you that they are primarily vested in covering their shipping costs in a visible manner that can be used with varying efficiency, and it also indicates that the merchant is willing to offer what amounts to a significant discount on your purchase if you buy over the threshold amount. The discount is the amount of the saved shipping charge. They figure that if you are buying at that level then they can afford a little loss of overall profit.

So how do you take advantage of this system and increase the efficiency of your shopping? The same way as in the examples above. Buy more items at the same time. But in this case there is an added option for savings. If you find that your purchase is approaching the threshold for free shipping, then by all means, go ahead and add products to exceed the threshold. That means that you get the most efficiency for your shipping and you end up paying exactly the marked price for the item and no more.

Are there any times when threshold based free shipping may not be a good thing? Certainly. If the threshold is too low, such as with an offer like "Free Shipping for Purchases Over $20", then beware. That tells you that the merchant expects a very large portion of their shipments to be free of shipping charge. That means that the merchant must create a split shipping system that covers the shipping costs in both the item prices and the shipping charges on low end purchases. This can be a nightmare for both consumers and merchants to figure out and the math rarely comes out in favor of the consumer.

So to recap, the higher the free shipping threshold is, the more the merchant is vested in a fair and visible shipping system, while the lower the threshold is, the more the merchant is vested in a less fair and visible shipping system. When the threshold becomes really low, then the merchant is basically the same as when free shipping is offered on everything, except now the merchant has added more shipping charge on top of the charges embedded in the item when the threshold is not met.


The bottom line of the above examples is that it is more efficient, and therefore less expensive in the long run, to focus on the per item total cost (item plus shipping) than it is to focus on the total outlay of the purchase at hand. It is also true that although the examples used one specific product cost to illustrate the concept, a similar benefit is available with multiple different products and costs purchased at the same time. Generally speaking, the more you buy at once, the more efficient the shipping cost is per item, and the less you pay overall per item.

We have also seen that free shipping is not necessarily free or even cost effective. It really depends on the website and how they are offering the free shipping.

I hope that this article has helped you to see how your online shopping experience can be improved and made more cost effective. Itís always more fun to get more stuff for less money.

Happy shopping!

  Jim Haggerty ©2011. All rights reserved.
Author: Jim Haggerty
Website: www.ResonantEnergies.com
View the Author's Bio

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