Monday, 15 October 2012

Delivery pricing - an afterthought

I've just been reading the latest Asos plc accounts. And in the small print, I found this gem:

"From 1 April 2011, the Group has reclassified delivery costs from cost of sales to operating expenses to reflect their increasing deployment as a marketing expenditure. Prior year comparatives have been reclassified accordingly."

Great advice from an online retailing star!

Delivery pricing

Firstly a big thank you to those who sent me feedback on my last post about click-and-collect (and especially to those who "liked" it or forwarded it to all their contacts in turn)!

And now, a warning...

You cannot proceed because you have not reached the minimum order value of €19. Eh?? And this is only the German site. If you want to try the same thing in Belgium, then it's €25.

Congratulations to C&A on possibly the most unorthodox way of avoiding "sticker-shock" at checkout I have yet seen! Doubtless they can be extremely confident that their online customers are not going to abandon their carts due to being unhappy with surprise delivery charges. And on the other hand, delivery is free if you spend more than this minimum. But this does seem a very  strange way of emphasising their very strong "free delivery" message - by hiding it competely on the site homepage, and then jumping on you later if you try and checkout.

Better (best?) practice is demonstrated here by John Lewis. This is the top-left on their homepage (the red circle is my addition):

The free delivery message is considered so important it takes pride-of-place just below the navigation and above the hero product offer.

The C&A "alternative shock" approach seemed unusual enough to prompt a bit more research, and at least validate that my shock was not reflective of some British bias. I've taken a quick look at a few top British, French and German sites:


And no, nobody else is trying this "minimum cart size achtung" approach! No surprise there then... However the first surprise is how hard it is to find this information. Consumer unhappiness with delivery pricing is THE top reason for cart abandonment (assuming you have a basically clean-functioning site). From Forrester's 2010 cart abandonment reasons study:

And the top consumer expectation of a website is that pricing and shipping information is clear:

So why hide it? Customers demand this information. No points to, whose help pages were simply not working (it's a priority guys, not an annoying bit of the website that doesn't matter much). But particularly on the German sites, it is remarkably difficult to find the facts. A standard footer would be a strong recommendation (example from John Lewis again);

Second surprise is how few sites (and not just top sites) offer free delivery above a threshold level. Free delivery over threshold is a very good idea for a few reasons:
  1. checkout conversion rates are known to be lower at psychologically critical price points (it's the old $9.99 thing again), especially at the critical 3-digit point in dollars, euros or pounds. If you want those €95 carts to convert - a figure remarkably close to the average cart size on many sites - don't slap a delivery charge on which takes it over the €100 mark.
  2. customers will add an extra article to their cart to get above the free delivery threshold. Set your free threshold to just above your typical cart size!
  3. any free delivery message is a very powerful messaage
  4. turning away orders (like C&A) is turning away all distress-purchases. Given that a primary driver for customers to use online is convenience, eliminating all those potential customers having a panic-buy moment for that item they desperately need for their summer holidays is a big loss of trade. OK, servicing small orders is expensive, but customers will pay for this convenience. Make the charge standard, waive it over any reasonably threshold.
The ubiquity of delivery charges also implies another misconception (I see this quite often when I work with clients new to online): multichannel is not free, and is no more/less profitable than stores. There is a cost to having stores: expensive space in town-centres and shopping malls, presentable staff, distribution networks. The customer comes to this expensive space. In effect you have paid a high cost per unit sale to have the customer come to you. In a non-store/online model, you pay a cost per sale to take yourself to the customer - fulfilment centre, picking/packing, shipping. The costs are (or should be) comparable per unit sale.

Very small online orders do need a delivery charge to be applied, because they are disproportionaly expensive to handle. The cost per unit sale for larger online orders is most likely comparable or lower than the cost of the equivalent store sale. Attempting to pass this cost onto customers, when they would not have paid the cost in store (has anyone tried charging a customer £3.95 to take their purchase through the store exit door?) is an artificial charge that is costing you sales.

This conclusion is starting to become particularly clear when you look at the cost of delivery for large articles such as white goods. To ship a washing-machine to a customer costs around £30-£35 in the UK. John Lewis charges nothing for white goods articles over £50, Tesco Direct charges a flat £7. Customers won't tolerate having the high cost of shipping passed through to them: it's not added in store, why should they pay it online? Sites such as Carrefour electricals (France: €59.99 (!!)), Baur (Germany: €39.95), MediaMarkt (Germany: €34,95) need to rethink their model sooner rather than later.