Wednesday, 4 April 2012

Postage rise - how will I handle that ?



Virtually all my products go through the postal system, specifically Royal Mail at some point in their journey to their owners and like many small businesses who sell on line or even to retailers, postage is a considerable cost to the business.

Anything I say here is from the perspective of someone who pays counter prices. I don't have a franking machine or a business account. As yet. So I'd love to have comments from those of you that do as to how you see things.

Most of my orders come through Notonthehighstreet.com on which I do charge postage but once the commission has been taken on top it doesn't actually cover the cost of postage, oh and the packing materials too, (if you consider the time spent packing each item then forget it)!

When I started my own shop Moobaacluck.com I did have postage in line with the actual weight of each item but of course it is hard to tell whether having postage charges separate to the item price has ever resulted in lost sales.

For the last month or so I have had free postage on my site and I have had more orders. Now whether this is simply the result of more people finding me or the free postage I will never know.

I was chatting to someone who is very successful on Noths about this on Twitter and she doesn't charge postage on Noths or her own site. Interestingly both she and Noths say that sellers without postal charges are preferred by buyers - that its the biggest reason for basket abandonment. I am so slow to catch on sometimes.. I've tried to make the price of the actual item as cheap as I can without having no profit at all and then a small amount of postage.

The way I am thinking now is that it might be better to charge more for the work I do and give free postage across the board. This would make it a lot more simple creating prices for third party websites too. At the moment I add on postage that is more of a contribution, knowing full well that these websites usually have fixed price delivery charges to their customers. It seems daft to me that I am charging - for example, £14rrp + free postage for a fairy star when another site charges £20.95 for my work once postage is added. And they do sell well. Which says a lot. It's a big job to comb through all my costs again but it should be doable by the end of April.

You can see some of the new postal rates on the Royal Mail site  and lots of waffle. More detailed downloads can be found on the Royal Mail site too. I printed out my own prices chart last night to refer to.

Most of my items are in the 50 - 150g weight - nearly all large letter but occasionally I have packets - probably 20 % of the time - particularly if someone orders more than one thing at a time. This is where it seems to get silly. The price of a 101g parcel is the same to post as a 750g one. Clearly if your parcels are 750g usually this is going to be a bit better for you - but not if they are at the lower end.

There are various things you could do:

  • build costs firmly into your prices + offer free postage
  • offer free postage for second class speed/postage and more expensive optional 1st class - effectively fast tracking someones order - which may or may not be practical depending on whether you hand make items to order
  • have a fixed price like many successful websites do of £4.95 per order. This is less attractive if you have low priced items however  - certainly doesn't appeal if you sell greeting cards!
  • have free postage except for heavy or bulky items that need very careful packing
  • increase your postage per item according to the price rise
  • absorb the cost and do nothing. Not something many of us could do I would imagine. It may happen with apathy of course!
  • find an alternative postal service - if your business is large enough to justify that maybe its worth investigating?

I know which appeals to me. What about you?  What appeals to you? What is a no-no for your business? Have I missed something obvious?

15 comments:

  1. I haven't even looked yet at new charges as I prepare to launch a new biz htat will involve posting via Royal Mail! Another thing on the to-do list.

    But as a customer I know I prefer free postage & pay more for the product. Silly I know but I hate paying £4.95 on one item for postage.

    Anyway I hope you can work it out Gabs.

    Zoe
    xx

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  2. I belong to a group called "Gransnet", which is an offshoot of "Mumsnet" for us slightly older ladies, and they are proposing to offer an alternative postal service, as they have members nationwide with time on their hands. I intend to keep a eye open for this, and may even participate, so I'll let you know how it comes along.

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  3. Same issues as me Gabs. £1.58 becomes £2.70 even my local PO ladies were horrified. I think there are a few products I may just drop altogether as they are bulky rather than heavy.

    I pride myself on posting everything out asap first class but I may have to move to second class. I shall bulk buy 1st, 2nd normal and large letter stamps but inevitably prices will have to go up eventually.

    On the issue of free postage, I know that I like it and I moved to free p&p some time ago. With notonthehighstreet I think it makes a real difference because the end basket can include a number of items and if yours happens to be the only one without free p&p it may be the one that gets dropped?

    Thanks for the great post, at least it's some comfort to know we are in the same boat! x

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  4. Hi Gabs,

    Thought I would join the debate! My noths shop is too by far my most successful. Most of my things I sell are mirrors and personalised cards, which I charge £1.45 delivery on (it may seem quite a lot for small items I guess but after commission and packaging costs, I only just cover my costs).

    I have not wanted to increase my product price and offer free postage, as I personally am the other way round to lots of people and prefer to pay a small postage charge on items - so I know how much the item is and how much the postage is (a bit like ebay when postage is often tailored to suit the product). The £1.45 isn't ideal, I think an option somewhere between the useless £0.50 option and the £1.45 would be good. 90% of my orders are large letters, unless people order a lot at once, (or lavender bags which are now my only 'bulky' item really - may have to stop selling them due to £2.70 postage!!) I am planning to bulk buy hundreds of large letter stamps this month to get me through to the end of the year, but then not sure what I will do.

    No one yet has complained that my postage charges are too high for my items, but I don't of course know whether it has resulted in lost sales having postage added, would be really interesting to know!

    I think if my items were more expensive, eg over £15, then I might do free postage as it would be easier to absorb it in to the cost of the item. I just sometimes don't think customers realise how much postage is unless they have to pay for it separately, especially for cards, which still have to go as a large letter as they are too thick.

    Anyway, wow this was a long comment :D sorry!

    Jenny x

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  5. What an interesting article. I've been pondering this topic myself for a while now.
    As a customer I know I do love free postage and packing and agree with the comment above about preferring to pay more for the product.
    But for some strange reason do charge postage for the things I sell.
    I'm going to change this forthwith.
    Thank you for the kick up the bottom.
    Henny xxx

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  6. This is interesting, I think I might trial the free postage option on my Etsy site and include postage on all prices on my web site (for UK mainland, I'll have to add extra for overseas)

    The vast hoik in UK postal prices is a good reason to review this and change to what suits your products.

    The different opinions above and in the comments are really useful.

    Thanks Gabs for sparking the debate
    Celia
    xx

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  7. As someone who buys online, rather than sells, I think your comments regarding building postage into your overall costs are very interesting.
    Certainly I am almost always attracted to products with free postage, although if there is more than one option I do compare the combined prices.
    However on the whole I would say that built in postage and packing is the most attractive option, especially as a lot of companies seem to bulk up postage prices to gain extra profit.
    Regardless of which way you though, I'll be back for another funky chicken for the kitchen soon.

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  8. Hi Gabs

    (As you know) I run the 'back end' of dots and spots and have become a bit of a 'postage nerd' over the last year or so.

    The Royal Mail price hike is significant - the biggest blow being the loss of several weight/price bands. And the prices have gone up significantly, too. Before the 30th April price rises, as a rule of thumb, anything under 2Kg was cheaper to send Royal Mail, much above that weight it was cheaper to use our courier. With the price rises, it'll now be cheaper to use our courier for most items over 1Kg.

    We have always sent out via Royal Mail 1st class - we are now considering using Royal Mail 2nd class, it will be interesting to see the difference in delivery time.

    This price change will impact on lots of e-commerce sites: if you can send your products as large letters then your postage costs can be kept reasonable, similarly if your items are above 750g, but if you send packets (i.e. too fat to be a large letter) that weighs, say 200g, postal charges are going to add significantly to the cost of the item. Perhaps we'll all go back to buying from the high street ...!

    And I haven't even mentioned VAT - as a VAT registered business, VAT being added to post doesn't affect our bottom line, but for lots it will add to the big hike in prices.

    My advice: try and make your (smaller products) such that they can be sent as a large letter (353mmx250mmx25mm)

    Jeff

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  9. Hi Gabs,
    A while ago, I spoke to some NOTHS customers who said that their biggest bug bear with NOTHS was all the added P&P that appeared when you got to the checkout. If they had brought from 5 different sellers and they all charged postage of £2.45, they would get a £12.25 postage charge at the end. This caused many of them to cancel their purchases.

    I decided to make some of my products on NOTHS free postage and my sales increased. So now, all my products are with free postage.(Apart from cards, which have a 50p postage cost on them, as I felt that this wouldn't put any buyers off)

    As a buyer, I know that I am attracted by free postage and I feel terribly ripped off when I have been charged postage that is way more than it actually costs to post. I once brought something from a seller, I was charged £4.95 postage, when it arrived, the postage actually only costed £1.96. I totally understand that the seller included packaging & time to package the item in with the £4.95 cost, but I felt very ripped off. I would have preferred to have paid more for the item and less for the postage.

    Anyway, I've got to go and work out how the Royal Mail increases will effect my prices. Ta ta for now.

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  10. Hi,

    When the Royal Mail price changes came in my first thought was - I'm glad I sold my ecommerce business!

    It's always been a tricky one - particularly selling items like craft supplies where the norm is for people to buy multiple items at a time. Adding the postage into each item price can make individual items uncompetitive.

    I adopted a mixed approach - charged a reasonable flat postage amount but didn't expect it to cover all my costs. And I added a bit extra onto the price of those items which were particularly heavy or expensive to post. But we seem to be moving more and more towards "free" postage as standard which makes the Royal Mail increases even harder to manage.

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  11. Yep I agree with Ali above, we made our products free p&p to see if it would make a difference...and it did. We increased the price a little, but without doubt we are still not covering all the expenses when noths take their 'fair' share, esp if I actually worked out exactly how much time it takes me to package up each item. We will have to re-evaluate the whole thing when the postage prices increase, but that is likely to coincide with us revamping the store anyway - still gripes me massively though as postage is already so expensive, in my opinion.

    Customers might think some postage is overcharged, but I genuinely think they just see the price on the stamp -they forget about the cost of jiffy bags/boxes/cello's/ribbons/stickers/bakers twine etc which helps to make the overall presentation so lovely to receive. Yet actually, they are crazily expensive when all added up! But we believe it's these little things that add to the brand & overall presentation. Its a fine line though as it begins to eat into our (small) profits.

    Great article, its nice to hear others opinions on it and think out loud about possible options.

    Long live snail mail :) x Penny

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  12. Hi, What an interesting debate, I'm in the same boat. Most of my sales are through Notonthehighstreet too (re:made)and most of them are small packet posts which seems to be increasing massively. I love to offer free gift wrap but that can make a simple brooch go up from a large letter stamp to small packet so it makes that rather costly too! I was considering making everything free postage before this price increase but I sell quite a lot to Northern Ireland and areas of Scotland that are classed as Highlands and Islands and the free postage doesn't apply to them which seems rather unfair! - I'm based outside Glasgow and can post to someone a few miles away who gets charged £3.95 for their little brooch! It's very difficult to know what to do...

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  13. really helpful comments here - thank you so much to all contributors.

    One thing I shall do now is hunt for a plastic or wooden cut out proforma of the atandard/large letter hole so that I can physically check or test parcels.

    Its going to take me a while to work out the impact of all this on individual product costs but I want to move to free postage on Noths as soon as possible simply to test whether this is a sensible option.

    My other site currently has free postage but doesn't get much traffic so its impossible to judge whether this has an impact. Ultimately you want people to want what you do enough that postage isn't much of a consideration in the buying process ;)

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  14. "... One thing I shall do now is hunt for a plastic or wooden cut out proforma of the atandard/large letter hole so that I can physically check or test parcels. ..."

    You need to get something like this:

    Size Guide

    from ebay.

    Jeff

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I love to have comments and read every one.. thank you!