How do you determine what delivery charge to charge customers?

CocoPopsLover

I have noticed on a lot of sites selling what i want to sell (bodycare range), they charge customers £4.95 for delivery, but when i was getting quotes, delivery seemed a little more than this.

How do they come up with the £4.95 figure?

I am so sorry if this sounds like such a dumb question, but just needed to know how the delivery charge is determined so i can put it in my business plan

paddyrg

Maybe they have better deals with couriers, maybe they use cr*ppy couriers, maybe they subsidise the P&P with some of the profit on the items (bodycare/makeup has enormous margins in many cases!).

It's a balancing act - what will the customer bear? As a buyer, I won't worry about £2.99 delivery, but £4.95 I will be looking for alternatives, and £6.99 forget it (for a small parcel). But offering free P&P, now you have my attention, even if you charge slightly more than the other guys...

CocoPopsLover

I see! Thanks!

chalkie99

If you look at https://www.parcel2go.com they have an economy service through Hermes at £3.99 + VAT, so £4.79 total, for parcels up to 15kg.

pinkclouds

paddyrg wrote: »

But offering free P&P, now you have my attention, even if you charge slightly more than the other guys...

Agree with this but it has to be on every item (flat rate free shipping). In reality, I know part of the product cost is for the shipping anyway but psychologically it still makes me feel good. I really dislike "buy x amount to get free shipping" deals.

paddyrg

I know one site which does a "buy one or more items from this list (of clearence stock) and get free shipping on your whole order", which is nicer than "free shipping over £50 or whatever, as they clear slow lines and still offer a benefit. Just a different model!

Good luck with your venture!

moneypooh

Postage is a cost that needs to be covered in your overheads. If you decided to offer a discount you need to make sure that the cost is covered by the unit price. Even if you get a good deal with a courier company you still need to pay this out of your profit, and if your margins can cope with this then fine.
Posting involves processing paperwork, picking, packing and sending (by whatever means) - so time and resources. As long as you can cover these in your sales then there isn't a problem.

paulwf

This is the old dilemma which if you visit 10 different shopping sites you'll probably find 10 different postage rates.

My thoughts are:

- keep it simple so you can clearly state the postage on each page, e.g John Lewis usually do "free postage on orders over £30". If sites don't clearly display their p&p or have some complex chart with various postage rates and courier options I'll probably go elsewhere.

- couriers work on volume, in your business plan you need to have a clear vision of what size you want your company to be and work back from there. Perhaps you need to subsidise postage until you can get to 1000 orders a month then you can get a better deal with couriers and a better wholesale rate on products or whatever.

- capture email addresses for marketing (with full consent of course). That allows you to do free postage offers at quiet times of the year, perfect in January which is a dead month.

- if you are dealing small scale don't do free or flat rate postage as you might end up with lots of small orders which is a pain. Try and make sure orders are a worthwhile size even if you lose a couple of customers as there's no point processing orders where you only make a couple of quid profit. Of course if you want to be a big player then you'll have a semi-automated system so get every order you can

antrobus

CocoPopsLover wrote: »

I have noticed on a lot of sites selling what i want to sell (bodycare range), they charge customers £4.95 for delivery, but when i was getting quotes, delivery seemed a little more than this.

How do they come up with the £4.95 figure?

I am so sorry if this sounds like such a dumb question, but just needed to know how the delivery charge is determined so i can put it in my business plan

If they all charge £4.95 then I'd guess it's because that's what the market will bear. If you charge more than £4.95, customers will think you're expensive, if you charge less then they might see it as a bargain.

From the point of view of your business plan, it doesn't matter if you include a £4.95 delivery charge as income, and a £6.00 (for example) average delivery charge as an expense. Somebody might ask the question as to why they're different. You tell them the former is the market rate determined by the competition and the latter is based on quotes you've received from X and Y.

What matters at the end of the day is that you sell enough product at a sufficient price to cover all your costs and leave you with a profit sufficient to make the effort worthwhile.

paulwf

Whilst on this topic check how VAT will impact your charges OP. My understanding is:

- when charging postage to a customer VAT is incurred if you are VAT registered
- the above excludes postage via Royal Mail
- couriers will generally quote their prices ex VAT so if you aren't VAT registered you need to factor VAT in
- Royal Mail won't charge you VAT

Please note - this is not my area of expertise so I may be wrong on the specifics, just take it as a starting point for your research! You may end up in a situation where a postage quote looks good but you've actually got to pay 20% on top so be careful comparing RM to the rest.

Couriers are very sneaky, prices start low then fuel charges and whatnot sneak in, you need to be factoring in a decent profit to cover rising charges.

CocoPopsLover

paulwf wrote: »

Whilst on this topic check how VAT will impact your charges OP. My understanding is:

- when charging postage to a customer VAT is incurred if you are VAT registered
- the above excludes postage via Royal Mail
- couriers will generally quote their prices ex VAT so if you aren't VAT registered you need to factor VAT in
- Royal Mail won't charge you VAT

Please note - this is not my area of expertise so I may be wrong on the specifics, just take it as a starting point for your research! You may end up in a situation where a postage quote looks good but you've actually got to pay 20% on top so be careful comparing RM to the rest.

Couriers are very sneaky, prices start low then fuel charges and whatnot sneak in, you need to be factoring in a decent profit to cover rising charges.

I was actually looking at Royal Mail

I do not expect to be making £1000's in a few days and using Royal Mail seems to be the best bet

As I intend to start small as it takes a while for marketing to take effect and to build a reputation, I am quite happy to pick, pack and post by myself as I do not expect the demand to be overwhelming for the first few months!

I have not registered for VAT because I do not expect to make more than £50,000 this year but I am considering whether the benefits of registering are worth registering now (i.e reclaiming VAT on qualifying purchases)

The is also the option of charging slightly more for items and offering subsidised or free delivery compared to my competitors? Just a thought!