According to research by New York-based Jupiter Media Metrix, 63 percent of consumers said shipping and handling charges have deterred them from completing online purchases, and 45 percent of retailers said they are losing money on shipping and handling costs.
Jupiter researchers said companies should use a weight-based system like that of the United States Postal Service to minimize the merchant and consumer risks attributed to shipping and handling charges.
But retailers are split on how to charge for shipping and handling. The survey of 50 major online retailers found that 54 percent base shipping costs on order size, 30 percent base it on weight, and 16 percent base it on the dollar value of the order.
"One of the surprises from this research I found was the amount of consumers who said they would prefer to pay shipping and handling costs on a weight basis," said Ken Cassar, a Jupiter analyst who worked on the study.
Forty-five percent of consumers surveyed said they would prefer to see shipping and handling charges based on weight.
"I think people chose weight because they all have gone to the post office and seen how the clerk does it there," Cassar said.
In fact, Cassar said Jupiter's research found that consumers are wiser to the true costs of shipping than retailers think, because most of them have mailed packages via the USPS, United Parcel Service, or some other delivery service that bases its shipping costs on weight.
In addition, Jupiter is warning retailers that the relationship with their customers will be undermined if they continue to believe that they are simplifying matters by charging based on the dollar size of an order.
Jupiter found that companies that charge on any basis other than weight risk either losing money or robbing their customers. For example, Jupiter points to e-tailer CDNow--which charges $2.99 in shipping and handling for the first CD and 99 cents for every additional CD--as a company that uses a per-item based pricing model.
A purchase of 200 copies of "Journey's Greatest Hits" would cost a customer $200 in shipping and handling fees, while CDNow would incur only about $28 in shipping costs.
"The long-term interest of the retailer is best served if its customers trust it," Cassar said. "Jupiter research shows that shipping and handling is not perceived as a product, but as a necessary evil."