I believe this is a topic that concerns everyone: businesses setting their prices and customers ordering online.
Lately, I've been seeing social media posts from business owners questioning delivery fees.
Carrier prices have risen in recent years, and entrepreneurs don't understand how it's possible to charge less than $10 for shipping a package when it costs $20 to send it.
On the other side of the screen, customers also have the right to question the subject, as delivery fees vary greatly on the web. For the same size/weight, shipping an item can cost $25 on one site and $8 on another. How is this possible?
Several factors come into play, but essentially, delivery fees may or may not include certain charges. Either the company:
- Charges both delivery and handling fees to its customers.
- Charges only the delivery fee to its customers and incorporates handling into the price of its product or margin (as fixed costs).
- Adds all or part of the delivery price to the product price.
- Absorbs all or part of the delivery cost into its margin (as fixed costs) without affecting the product price.
Bateau bateau uses the second strategy, but each company can shape its own. In addition to this, there is variability in the size of the package sent and the prices of carriers. Let's see how it works behind the scenes!
WHAT ARE "HANDLING FEES"?
Handling fees include the materials used for shipping (the box or envelope, the label, sometimes there is also paper or packing peanuts to protect the items inside), as well as the time in wages for the person handling the shipment. It may also include storage of items if they are sent from a 3PL, an external company that handles shipments for the business. Some companies also include gifts in their packages!
In short, for the shipping of a small package, a basic shipment costs a minimum of $2-5 to the company. Handling fees may be added to transportation costs on some sites. For example, if shipping is $15, it can increase to $18-20 with handling fees.
CARRIERS
Then, there are the highly variable fees from external carriers used. We're talking about Canada Post, Purolator, CanPar, Nationex, UPS, GLS, FedEx, DHL, and so on... It could even be bicycle couriers like Chasseurs Courrier for a shipment from downtown Montreal to Montreal.
In short, there are many offers on the market that allow access to more competitive prices than our national carrier Canada Post. Sometimes companies still use Canada Post for the simplicity of the consumer service. Despite the price and generally slightly longer shipping times, the package can be dropped off at the nearest post office. We're talking about average rates of $15-20 with a basic account. Better rates are possible if shipping volumes are very high every day.
Idhésion in Quebec, Machool, Flagship, and even ShipStation are options available to get better prices from carriers. It's then possible to have shipping rates around $10-12. Obviously, weight and size play a significant role in the price. Above 3lb, we're in a different price range.
It's also worth knowing that the shipping location affects the cost of transportation. When Purolator with idhésion used to charge a fixed fee of about $10-12 pretty much everywhere in Quebec and Ontario, they now charge "Destination Beyond" fees for cities that are not even far! So if a shipment costs $10 for one destination, it could cost $13-14 for another. The company never knows until it makes the shipping label.
From there, it's possible to install a price calculator directly on the site that gives the right price for delivery (but often at Canada Post prices). Otherwise, the price is fixed for everyone! It could be $20 at all times, and within that, the company includes handling fees... or it sets its rate at $8 but increases the price of its products.
STILL TOO EXPENSIVE!
There remains the psychological aspect; even an average of $12 per shipment still seems expensive at first glance for many people.
Let's do a test: which one would you click "BUY" on?
- On site A, the product is $25, and shipping is $12.
- On site B, the same product is $37, and shipping is free!
When we look at the cost of delivery, in our heads, we think, "I'm not going to pay $12 for delivery to send something worth $20!"
Even I think that. 😅
No one really likes to pay delivery fees. It's like we're losing our precious money (?) We usually do everything to reach the free delivery threshold, even if it means spending $50 more, or we abandon our cart...
But then, we need to put things into perspective:
The $12 allows us to pay for a service to avoid going to pick it up ourselves. Is my time and/or my round-trip gas to pick up my order worth $12?
You know, if we take the time to change our mindset, $12 isn't that expensive for my package to arrive at my door and I don't even have to do anything else but click a button and open my door when the time comes.
THE MYTH OF FREE DELIVERY
Delivery is never free for anyone. It's absorbed somewhere! Either the company covers it in its profit margin (or in subscription fees, e.g., Amazon Prime), or product prices include a portion of delivery costs. Even the Etsy platform recommended its sellers to offer free shipping by including delivery costs in the product prices!
Free delivery all the time
This practice avoids barriers when the customer is ready to order but can hide inflated prices. The disadvantage of this practice is that the customer loses out if they buy the item multiple times. For example, if we pay $120 ($40 each) for three products that would normally cost $90 ($30 each) + $15 delivery, let's say. We lose $15 in the context of "free delivery."
Free delivery with purchase of...
Free delivery can be more easily absorbed by the company if the customer reaches a certain purchase threshold. It's a bit like offering a % discount on products. For example, if delivery is free with a $120 purchase and it generally costs $12, it's as if the products were sold at a 10% discount. The company will normally calculate the ideal threshold to maintain a good level of profitability despite its offer.
IN CONCLUSION
With variables changing depending on handling fees, carrier choices, package size, and even destinations, delivery fees remain a worrying subject for many entrepreneurs who aren't sure what price to charge.
The same goes for online customers wondering why prices vary so much. Thus, by understanding the nuances of delivery fees and adopting a different perspective on the issue, consumers can make informed decisions when shopping online, taking into account the real costs of delivery and the disadvantages of so-called free deliveries.
