With the recent VAT rise it’s a good time to review your postage prices. Firstly almost all couriers will be charging VAT and so will Royal Mail for some business account customers so you’ll probably want to adjust your selling prices. There are two reasons for this – even though you can reclaim VAT on your courier costs you still have to charge VAT at the new 20% rate. Secondly, for Royal Mail and ParcelForce you will be paying VAT for the first time so if you can’t reclaim it you definitely need to adjust your prices.
The Royal Mail services attracting VAT for the first time are International Airsure (to EU destinations), Special Delivery by 9am and Royal Mail Tracked. In addition if you access any Special Delivery service through a contract then it will also attract VAT. All Parcelforce domestic and EU services will also attract VAT at 20% from 31st January 2011.
While you’re editing your postage prices it’s a good opportunity to make sure you’re offering attractive shipping rates to your customers. eBay changed the way postage is displayed to customer last year so different couriers will fall into one of three bands – Economy, Standard and Express shipping.
“Even if you think that your product doesn’t ever require an urgent delivery it’s still worth offering a choice to your customers”
Customers will have different priorities when ordering your items, regardless of whether you sell car parts, consumer electronics, clothes or antiques. Even if you think that your product doesn’t ever require an urgent delivery it’s still worth offering a choice to your customers.
The industry standard for shipping is generally to offer a standard delivery service with an optional upgrade to Express shipping (24 hour courier) and a downgrade for those customer who really aren’t in a hurry for their purchase to Economy shipping. Even though you might want to keep your postage costs on eBay as keen as possible consider offering other options for those customers that want to pay a little extra to receive their item faster.
It’s also worth looking at how you price deliveries. You may for example always ship using Royal Mail Tracked, or deliver with a 24 hour courier service. Even if you only use these services you can not only offer customers a choice but make additional profit into the bargain. An example could be to offer a standard delivery as "Other Courier 3-5 Business Days" and then offer an upgrade for a slightly increased cost for "Parcelforce 24 Hour". Even if you then ship everything as Parcelforce 24 Hour you’ll find some customers that paid for the slower service are delighted at the speed in which their item arrived. Those customers that do choose to upgrade will be paying you extra for the service they would have received regardless. This turns customers with urgent requirements into additional profit generators for no additional work on your part.
Don’t forget as well as pricing your items for single quantities to also include options for buyers who make multiple purchases from a single listing. If you don’t add in the cost for additional items then customers will be charged a multiple of the delivery cost for a single item. This can make your postage costs uncompetitive and for those buyers who don’t notice until they come to pay can also result in poor feedback.
eBay don’t have an easy way to differentiate postage costs and there can be a big difference in cost for someone who buys 10 items compared to someone that buys two. However again this can be solved by offering a range of services – you may offer Royal Mail Special Delivery at £8.65for a single item but that only covers the cost for products up to 2kg. If a purchase is more than 2kg then the cost shoots up to £21.65. In this case it might be worth offering Special Delivery at £8.65 plus £8.65 for each additional item but also include another option for Parcelforce 24 Hour at £10.00 with each additional item with free carriage (Parcelforce offer the same cost up to 30kg so it’s much easier to combine multiple purchases).
By offering two or more services buyers can then opt for the cheapest service based on the number (and weight) of the products they’ve purchased to get the most cost effective delivery method.
Remember not to choose the delivery options that may be the most convenient for you. Offer delivery options which will appeal to your buyers and give them the choice of receiving their item quickly, or to opt for a slower service and save some money. By offering a range of services you’ll not only appeal to more buyers but you can also improve the feedback that you receive as buyers can select the service that meets their requirements at the price they’re willing to pay.