Hi all. I've been having many internal debates here with people regarding our shipping policies and costs. We *will* be changing them in the future - just would like some additional input on the subject. We do get about 40 surveys a day from people that we have good feedback on, but only occasionally do they want to have a dialogue back and forth on issues. You guys here on the forums are much more talkative.
Anyways, as many of you know, we use a big mixture of drop-shippers (warehouses that stock parts around the country), we stock a large number of products in Los Angeles, and we also special-order parts that are not-heavy movers (like 1972 Sportomatic transmission parts). As such, we are often able to negotiate shipping terms with some of our suppliers to direct-ship on our accounts, etc., which allows us to offer FREE shipping at times under certain common instances. However, with Los Angeles stocked parts, since many of them are special order and/or the pricing is competitive with our other competitors (i.e. we don't build the shipping cost into the price of the part), then we don't currently offer free shipping for anything shipped out of Los Angeles. The numbers are so huge, that If I did give away free shipping out of LA without raising prices, Pelican would lose money and the business would no longer be sustainable in the long run.
So, what happens (and is happening more and more), is that our FREE shipping program is eating up more and more costs, and it's being "subsidized" by our shipping via other methods (International and out of Los Angeles). Our customers are not blind to this, and this is a common complaint. Fixing it means dismantling the FREE shipping program - there is no other way to accomplish this (unless I just raise prices across the board).
10 or so years ago when we started our FREE shipping program, the economics were different. Nowadays, the costs for shipping have almost doubled, yet our FREE shipping minimums have stayed the same. If you do the math on that, it means that a net positive flow to the bottomline has become a huge drain. Plus, it sounds like our customers aren't really happy with having to pay for shipping out of Los Angeles (regardless if they get FREE shipping on most of the parts).
So, the idea is that we are looking to eliminate the FREE shipping program, and replace it with a "reasonable" shipping program or "discounted" shipping program. Example - on a $100 order, the shipping charge would be $5 or something like that. A charge that is commensurate with what the costs of providing the service is, but without the "heh, I feel ripped off right now". Our current shipping calculators are not well optimized to ensure a "happy customer feeling" with respect to shipping. Implementing this system will eliminate / even out the current model of one method of shipping subsidizing the "FREE SHIPPING" concept. Our goal is to not make more money on shipping, but instead to make the shipping charges equitable, reasonable, and somewhat more reflective of the actual costs. I'm not terribly interested in the game of raising all of my prices to pay for FREE shipping for US customers either (one proposal), as that would continue the pattern of International customers subsidizing domestic shipping.
I'm looking for constructive thoughts and feedback on the issue. Your input is appreciated. Keep in mind that since this thread might contain semi-sensitive business information, I will keep this topic up probably for a few days, and then it will disappear into the archives.
Thanks in advance!
-Wayne