The Truth About P&P Costs – How do they Impact on SME Conversion Rates?
For small, product oriented businesses, it's hard to overlook the importance of postage and packaging costs. After all, these are integral to the total cost of manufacturing and shipping goods, and therefore has a direct impact on your bottom line profit margins.
This can also impact on your SME's conversion rates, as the pricing and delivery models that you choose will influence the overall quality of service that you provide and the way in which you're perceived by customers.
We'll address this further in the post below, while considering which strategy is the most likely to deliver results.
The Illusion of Free and Cheaper Service Providers – The Pitfalls of P&P Costs
As the ecommerce space has become increasingly competitive, we've seen free delivery become increasingly commonplace. While this strategy may require businesses to absorb delivery costs, common logic suggested that this would be offset by ability to trade in higher volumes and optimise customer conversion rates.
Over time, however, it has been claimed that brands have simply accounted for the offer of free delivery by incrementally increasing the cost of goods. Now, while this helps to creatively optimise margins, it also undermines the value proposition in the eyes of savvy consumers and may impact your ability to build customer loyalty.
As Royal Mail has continued to increase the cost of sending domestic and international parcels, some brands have taken the alternative approach of identifying cheap service providers. This provides access to initial savings, of course, but the decision to select partners based solely on price also incurs the risk of substandard and inconsistent service provision. Over time, this can have an extremely detrimental impact on your brand's reputation and conversion rate, causing long-term issues that negate any short-term gains.
Bridging the Gap Between these two Extremes
As we can see, it's important for businesses to bridge the gap between these two extremes, by creating a comprehensive and detailed strategy that accounts for costs, service and the overall consumer experience.
So, while there's nothing wrong with offering free delivery or reducing the total cost of shipment, you must make informed decisions that boost the long-term standing of your venture. This means creating transparent pricing that enables customers to understand the cost of goods and their chosen delivery option, while also partnering with couriers who offer flexibility to consumers.
Liaising with established logistics firms such as Whistl is particularly effective, as this allows you to minimise cost without compromising on the quality or flexibility of the service available.
Remember, balance is the key watchword here, as you look to create a model that optimises your profit margins per item while also driving healthy conversion rates.