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Excessive Charges

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Posted June 15, 2001 By Staff     Feedback

A new study by Jupiter Media Metrix claims online retailers are putting off consumers with exorbitant shipping and handling charges.

A new study by Jupiter Media Metrix claims online retailers are putting off consumers with exorbitant shipping and handling charges.

Faced with undue shipping charges, as many as two-thirds of consumers have pulled out of online transactions asserted Jupiter. "As profitability becomes increasingly important, it is perfectly understandable that retailers would seek new sources of profit, including S&H charges," noted Jupiter analyst Ken Cassar. "Customer trust can, however, be easily be undermined by excessive charges."

Having surveyed some 2,271 online consumers, Jupiter came to the conclusion that three-quarters of Web shoppers determine shipping costs before completing an online transaction. Online retailers were therefore counselled to tread carefully when factoring shipping and handling as unwarranted charges could easily result in the loss of online trade.

"Online shoppers are wiser to the true costs of shipping than retailers think," quipped Jupiter, citing a "dangerous" per-item based pricing model employed by Amazon competitor CD Now. The policy, which allegedly charged US$2.99 dollars in shipping and handling for the first compact disc sold and 99 cents for every additional CD, ostensibly resulted in unbalanced rates. According to an example cited by Jupiter, a customer ordering 200 copies of a CD would end up with $200 in charges whilst CDNow incurred only $28 in actual shipping costs.

"Consumers are well aware of the fact that shipping costs are driven by weight, rather than by the value of the package," stated Jupiter. In CDNow's case this resulted in the e-tailer "robbing their customers" - in the case of, however, the reverse was true. Instead of passing the high costs of shipping pet food on to customers, made the fatal error of subsidizing these costs. Amongst other factors this led to their eventual bankruptcy. According to Jupiter, shipping and handling charges are a thorny issue which can either get the better of an e-tailer, or (as in the case of CDNow) undermine customers trust.

Jupiter claimed that the majority of the consumers it surveyed said that shipping costs should be based on the weight. It found, however that 54 percent of retailers currently base shipping costs on order size, while only 30 percent base costs on weight.

"Retailers that believe that they're simplifying matters for their customers by charging based upon the dollar size of the order or on the number of items in an order are making a mistake that may undermine the relationship that they're trying to build," concluded Cassar.

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