Wednesday, May 16, 2012

Ship for Free? - Why or Why not !


Shipping Fee - To be Free or not to be Free.

  1.  If you can make money on shipping you are achieving online selling miracle. 
  2.  If you can break even you are way ahead of the pack.
  3.  If you lose or give away free shipping, this is a common cost (investment) of doing business.  The most preferred.   Why would you want to lose (invest) money when you ship something?

FIRST - In Retail there is a cost of acquiring merchandise – called FOB – freight on board.  The shipping costs that are passed on to the retail merchant when the vendor ships merchandise to the store location, or in the case of the big merchants, the cost of a distribution center, break down, and redistribution.  Wal-Mart is famous for having the most efficient re-distribution of merchandise, and this alone differentiated itself from K-mart and killed them.  The same case study of Staples and Office Depot, Staples wins.  Moving stuff is very important part of the cost of doing business.

One of the big advantages of Pawnshops and such, is customers bring the stuff to the store.  FREE –  FOB.  Big competitive advantage.  Think of the effort and cost to bring items to your store location.   Its  huge.  Its free.

SECOND – Big question?, why give it away for free and lose (invest) money.   Amazon?  No one does it better and they are the one to study and figure out why they do what they do.  

When analyzing online business, the cost of acquiring customers comes into the equation.  Between $20 – $50 per customer.  How do you get a return on this customer acquisition investment?  You have to sell repeatedly to the same customer in order to get a return on your investment.  Maxpawn provides customers for FREE.  Our Bravo stores have a unique and lucrative opportunity. This is why Amazon gives free shipping for items over $25.00 and repeat customers.  You need velocity and repeat business.

If you sell online, the strategy behind this effort has a big payback.  Shipping is not a cost but an investment.  Here is why.

PAYBACK – Online customers are very loyal and shop more frequently.  Fact is, people have more time to shop online than shop at stores, and this trend has not slowed down.  If your customer service delivery is good, people will shop your store every day.

The first dip into the water with many online customers is Media.   If you make them happy , they will come back.  Bravo’s key advantage is full use of the Estimator.

1.       Specific identification
2.       Meta Data – Quality Assessment

In this business there is nothing better than really knowing what your inventory is to sell it fast with the highest profit potential in your store and online.

Conclusion

I believe that pawnshops and such have the merchant advantage.  But, there is so much room to grow the business.  We just need to figure out how to get you more merchandise.

At the end of the day, week, and next few years this effort will enhance your store performance, you will be a formidable online selling machine  with hundreds or thousands of loyal online customers.

Your store inventory variety will expand, turn over will accelerate, your loan base will grow in numbers and dollars.

Have a lot more fun :)  Its fun to sell online.