Happy October! :-) To recap- in parts one and two we've already discussed why Etsy offering free shipping is a good thing and why we shouldn't panic if we decide not to turn it on. Today I'd like to chat about two points that are closely related to the issue of free shipping (aka, if you have a product based business, these two points should be considered even if you're not on Etsy.).
Want to offer free shipping? Don't feel like you can? Two things that should be on people's minds since Etsy has us all thinking about it:
1. Etsy's introducing free shipping should be a reminder for all of us to check our pricing.
You are checking your pricing at least once a year
... right? Experts suggest checking your pricing every quarter or even once a month. But pretty much every day I see posts from people who set a price arbitrarily and/or have never recalculated their pricing.
Sad fact: most handmade businesses underprice.
Maybe they use the "materials plus labor times 2 equals wholesale, double that for retail" pricing formula alone, or maybe they have based their pricing on someone else's pricing, or maybe they started out pricing low due to their local economy. Then they keep telling themselves "I can't charge any higher, people won't pay it, I'll lose my customers", etc.
If you are a maker and you don't feel you can ever offer free shipping, there's a good chance your overall pricing is too low. The cost of materials, overhead, and the cost of living goes up daily, yet a lot of us think we have to keep our prices the same for years, sometimes even decades, to be "fair".
"I can't ever change my pricing" is a myth that kills a lot of businesses.
When relatively small things like Etsy's program for free shipping over $35 come along and people freak out because their business just can't support it, their pricing is possibly to blame.
Here's an easy-read book recommendation: "Pricing For Profit" by Kendra Cote. It's for bath and body product makers mainly, but the principles apply to any business and it will completely change the way you think about, and calculate, your pricing.
But wait... *fake shocked gasp* Is it ethical to tell people their shipping is free while they're basically still paying for it in your pricing? I've come across this issue a few times in recent months. This leads me to #2...
2. If you check your pricing and decide to turn on Etsy's free shipping guarantee, you aren't ethically obligated to eat the entire shipping cost!
Why does this come up? There has been some debate about the term "free shipping" and some business owners have a really negative feeling about it: "If it's free, the customer should not pay even one cent for it. I have to pay it." If you feel that way, it can still work! Especially with Etsy's reasonable baseline of free shipping after a $35 purchase.
When I decided to offer free shipping over a certain purchase amount I changed my packaging a little and found a faster way of doing a few things in other areas. I had already raised prices previously (to actually pay myself for the first time in ten years, don't get me started on that story...) so free shipping fit into my pricing with very few changes.
If you feel the need to pay shipping instead of spreading the estimated price out over several items, don't be tempted to just pay the shipping out of pocket. See if you can make your supply and materials costs, labor costs, or overhead percentage stretch just a little more to help cover it.
If you are thinking of raising your pricing to help accommodate Etsy's Free Shipping Guarantee, (or if you'd like to offer free shipping even if you're not on Etsy) don't feel guilty that you're not paying out of pocket for shipping. Buyers don't mind that we don't justify how we break down our pricing. When was the last time you walked into the store and demanded to know why their prices went up, or for a breakdown of their costs? No sane person does this... yet many business owners worry constantly that they must justify their pricing or explain how they can offer free shipping. This can cause pricing paralysis, stopping you from ever raising prices. (aka, slowly killing your business.)
"Free shipping" conveys to shoppers "shipping is included in the price you see up front". In other words, no matter how much they purchase, they won't get to their shopping cart and find an unexpected astronomical shipping cost on top of what they're already spending. (Cart abandonment comes from this more times than any other factor.)
Here's something to think about: Whenever a company (big or small) offers you free shipping, your shipping has been factored into the costs you pay. Did they raise prices a little over their whole product line? Did they find one or more of their raw materials at a better price? Did they skimp a little on quality to make up the cost? Since companies never disclose to us how they price their products, we never know- but most of us would agree that we'd prefer the first or second option. It's okay to do the same in our businesses. (Just stay far away from option three, amiright?)
Okay, so now that we've talked a bit about the financial and ethical side of Etsy's Free Shipping Guarantee, and you have seen how happy I am with the idea, the final topic might come as a surprise:
Why I turned it off for my shop!
Talk with you again soon!
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