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Charged £14.22, on £95.00 order, order received sent 2nd class Royal Mail for £2.95, I except there is a cost for someone packing and the box but this seems well over the top.

This is unreasonable.  To me it looks like the costs are calculated on low value, heavier items (was your item especially light/small) or someone has set up their shopping cart very badly.

I can’t believe people intentionally set out to overcharge on large orders: it just doesn’t make commercial sense.  Setting up a shopping cart can be really hard see the homework below.

I really don’t “buy” into the handling costs thing. That should be covered in the mark up of the product. The profit margin on the retail sale is the handling and packing fee.

If only life were that simple.  Very high delivery charges are a no-no but …

[1] Not all costs are directly related to the product.  They are incurred once per order and so are better in the delivery charges.  Things like a fixed transaction costs, boxes, labels, padding and overheads.  This last item can be staff costs if the business is large enough.

[2] Retail margins are not that great that everything can be lumped into the retail price and remain competitive.  Direct retailer (read manufacturers) have much larger margins and therefore can afford “free packaging” offers for larger orders.  This option is not available to stockists etc.

[3] Competition online is such that a truly competitive retail price is vital if the item is generally available.  Hence there is real commercial pressure to keep the retail price and delivery charges separate (see first two points).

Finally, here’s some homework for you to ponder:

Packs retail at £2.00 each.  They cost £1.30 to buy at trade.  Each order has transaction costs of £0.30 plus 5%.  Packaging costs £0.50 for up to 5 items and £0.75 for 6-10 items.  UK postage costs £0.90 for one item, £1.50 for 2-5 items & £2.40 for 6-10 items.

What delivery do you charge for ordering 1, 5 and 10 items?  Don’t forget to add 5% to the delivery cost to cover the online transaction charge.

Hint: a 10% on-cost for delivery costs you money.

Have fun.

Martin Stephenson :: Work | Blog | Auctions