Should You Include Shipping Costs on Your Website or Not?
Some say, no: Buyers are psychologically allergic to paying for shipping. Any additional costs, even if necessary, will dissuade them from clicking “Buy”.
Some say, yes: Full disclosure and control gives the consumer options and frees the business from absorbing expensive shipping costs that chip away profit.
So who’s right?
Shipping Costs are a Deterrent:
The naysayers believe that potential buyers see additional costs tacked on that seem unrelated to what they’re buying and have a higher bounce rate. According to some psychologists, whom we’ll discuss later on, there is science to back this theory up. But, the most reliable science is trackable and testable which is what one distributor in NH has done. According to this daily LTL shipper, his business sees higher sales by keeping shipping costs as a low flat fee even when their actual cost is much higher.
“I’ve been afraid to look at the P&L in the shipping category. I know we lost over 10k in shipping alone this year!”
-Tim (NH)
According to Tim, in A/B testing buyers are 20% less likely to make a purchase on their website when the total price is the same but flat fee shipping exceeds $200 of the purchase price. For example:
Total Product Sale: $900.00
$700.00 - product
$200.00 - shipping
Total Product Sale: $900.00
$650.00 - product
$250.00 - shipping
Tim’s buyers are 20% more likely to purchase Product 1 with all things being equal because the cost of shipping is less and is a better overall perceived value. Below the $200 mark buyers showed a negligible difference so $200 is what the market will bear on this particular product.
Shipping Costs Should be Transparent:
The Ays push for transparency and control allowing the buyer to make the decision on shipping and bear the burden. This approach protects the seller by insulating them from bearing the costs of shipping. This seems to be a better fit for a less competitive type of business where the value proposition is the product’s uniqueness and the buyer is less apt (or able) to source the product elsewhere.
Chelsea, a custom furniture design in NC, wants the shipping costs broken out on her e-commerce platform and doesn’t give a second thought to passing on the full amount:
“I want to have shipping readily known when the clients check out.”
-Chelsea (NC)
What does the Science Say?
You could easily look at the effectiveness of a shipping strategy like Amazon Prime or Walmart.com and feel confident we’re in good company. But, we all know that shipping is not “free” right? It’s baked into the cost, yet it seems that when it’s positioned as “free” it removes an additional psychological barrier to making a purchase.
Chris Anderson, author of the book Free showed that people buy more in a case study about Amazon’s free shipping pricing. When Amazon changed the price of shipping to “free” sales in every country affected went up dramatically. In countries where the shipping was not free, there was no such change.
A 2018 study done by Baymard Institute (an independent web usability research institute) surveyed 2584 online shoppers about their checkout experience. 55% of users abandoned a cart during the checkout process because of extra fees such as shipping. 21% of respondents abandoned their cart because they couldn’t see the shipping charges at all.
Study shows 55% of users abandoned a cart due to high shipping fees
A 2010 survey done by Stamps.com reported that 64% of respondents found that “Free Shipping is the Most Effective Promotion” they can offer. Further, 52% of respondents saw their average order size grow significantly when they offered free shipping.
Free shipping loosens the purse strings
Psychologists point to a phenomenon called affect to explain why this works on us humans. The affect hypothesis says:
Free makes us happy
Happy makes us buy
A famous study from the book Predictably Irrational by Dr. Dan Ariely showed that people often make completely irrational decisions when influenced by the concept of getting something for free. The most notable was the Hershey Kisses vs Lindt Chocolates experiment (We all know Lindt is better).
Okay, okay, enough science…
It’s worth testing your buyers to see if they want to know what extra fees they’re paying up front and if they are adverse to paying for shipping. You might find, like Tim in NH did, that your buyers will eat up to $200 for shipping but no more. Or maybe you test it and see no difference because you have a unique value prop, awesome!
If you have an opinion or some experience, I’d love to hear it! Let me know in the comments or feel free to shoot me an email.