Handling Shipping and Handling with Care

Do you have a returns closet? I don’t mean somewhere in your catalog’s distribution center; I mean at home. If you don’t, you’re probably not ordering much from catalogs or the Internet, or maybe you’re ordering only merchandise you already know well. Because it’s a fact of life that customers can’t get this “shopping at a distance” right every time.

If you think like a consumer, you’ll recognize that consumers don’t see shipping and handling as a service. They see it as a risk — and fears about shipping, handling, and returns prevent many prospects from making that first purchase. As a consumer, you confront a certain gamble: Will the delivered item be like the picture? Will it correspond to the description? Will it fit, be the color you wanted, be compatible with the components you already own, accomplish what you wanted? And if it isn’t exactly right, what happens then?

My personal list of catalog horrors includes last year’s unsuccessful purchase of stoneware place settings for 32. I asked the order rep many, many questions, and the reality still didn’t match either the photo or her description. Two big, heavy boxes of unsatisfactory dishes sat in my foyer for weeks. The customer service rep said (blithely) that if I wanted a credit I’d have to take them to the post office. I happen to know the catalog’s vice president of marketing slightly, so I sent her a humorous e-mail, and she arranged for a call tag for the parcel carrier to come pick it up. But what if I’d been a regular civilian with neither the time nor the upper-body strength to send these things back?

Back at the office, despite the sales rep’s willingness to read some of the product specifications directly from the manual to my assistant, we still ended up with an unsatisfactory phone system, because the rep didn’t read quite far enough to uncover the critical, deal-breaking detail. And so far, our refund covers only the system, not the outbound S&H or our expense of sending the thing back, despite the fact that we could not have known that it wasn’t right for us.

Still lingering in my household returns closet is a pair of shoes (description was “latte,” photo appeared to be “coffee,” shoes were definitely “gold”) that I’ll eventually give away, unworn.

Who left that cart here?

Just recognizing the risk of disappointment and inconvenience for at-distance consumers doesn’t begin to address the angst that S&H triggers. According to the Direct Marketing Association, excessive shipping charges are the top reason consumers abandon their online shopping carts. Even experienced Internet shoppers suffer extra-ordinary sticker shock during checkout.

The “fairness” of charges has become an issue for consumers and regulators alike, according to law enforcement agencies that are opening or settling S&H cases. Fairness is perceived not as what the market will bear as determined by price testing; it’s not what others are charging as determined by competitive analysis; and it doesn’t correspond to the formulas many catalogs use based on the number of items shipped or the dollar value of the order. “Fair” means having a reasonable basis in the marketer’s real costs.

There’s no single formula for calculating S&H correctly; you may want to work with an industry analyst to help you identify and substantiate the relevant costs in your operation. It’s generally accepted that anything paid directly to the parcel carriers can be recovered, as well as the cost of all packaging materials and the direct labor expense to get the merchandise from the warehouse to the customer’s door.

Although it may be perfectly legitimate to pass along a variety of other costs, consumers are less likely to understand or accept expenses that are somewhat less direct, such as those relating to general warehousing or fulfillment expenditures, or costs associated with processing returns. You can find additional guidance about which items can legitimately be included in S&H charges at www.the-dma.org/guidelines.

Righting the shipping

Because many catalogers haven’t thought these particulars through, they believe they’re making quite a profit on S&H if their total charges equal more than their courier bills. On careful review of relevant expense categories, though, that ostensible profit usually ends up looking more like break-even. Bragging about real profits (with the perception of fleecing the customer) or unreal profits (with a lack of awareness of one’s own accounting) increases the likelihood that regulators will sniff juicy opportunities for litigation.

Oddly enough, it can be easier to justify your cost basis to an auditor than it is to get a cynical prospect to view S&H as a benefit in the shopping process. Obviously we want to avoid law-enforcement hassles. But once the issue of compliance is addressed, isn’t the real goal to encourage more prospects to try ordering and to help customers buy more often?

While the tactical goals of a formal shipping and handling review may be cost recovery and regulatory compliance, the strategic goals should be customer satisfaction, strong brand image, and general public confidence in catalog and online shopping. Certainly clear disclosure is crucial. No order call should end without the rep stating the S&H charge. (Explicitly. It’s not enough to say, “That’ll be $79.53, including shipping and handling.”)

A strong service positioning on the Web should provide a self-service option for customers to subtotal orders so that they can see the accumulated S&H whenever they put additional items into their carts instead of receiving a cart-abandoning whammy at the end of the process. But disclosure is no longer enough by itself.

If S&H charges feel fair and simultaneously like payment for better service, consumer perceptions will improve. Better service starts with increased accuracy and the reduction of risk and problems. Phone reps and Web pop-ups can clarify or correct information in error-prone areas such as color impressions or compatibility. Making returns more convenient with prepaid return labels or scheduled pickups would reduce inconvenience.

If more companies adopt such practices, I might be able to empty my returns closet and use it for, oh, maybe some new linens.

Liz Kislik is president of Rockville Centre, NY-based call center and customer service consultancy Liz Kislik Associates.

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