- The Washington Times - Tuesday, June 12, 2001

Internet retailers once lured customers by promising cost savings and convenience. But a new study shows that more than half of consumers who show interest in online retail do not actually buy anything.

Sixty-three percent of online shoppers back out of purchases when they see how much they have to pay for shipping and handling charges, according to Jupiter Media Metrix, a Web research firm.

"Shipping charges are a very big reason for abandoned shopping carts," said Elaine Rubin, chairman of shop.org, the online retail arm of the National Retail Federation. "This is definitely a big issue for online retailers."

Often consumers browse Internet retailers, adding items to virtual shopping carts as they go. When they are ready to check out, they are shocked to see the amount of shipping fees.

That is because those fees are calculated based on the size or weight of the items, and can't be predicted until customers select all the items they want to buy.

"Retailers are trying to understand why this is happening," said Ms. Rubin.

Until a year ago, many online retailers lured customers by offering free or discounted shipping. But as investment in online companies has dwindled, most online retailers are now charging for shipping.

To charge shipping fees or not is a tricky decision, analysts say.

If the companies pass on shipping costs to consumers, they stand to lose customers. If they discount or waive the fees, they lose money.

One solution is to inform consumers of shipping charges early on. Giant online retailer Amazon.com, for instance, has a link from its Web site to a schedule of shipping rates, which are calculated by weight.

BlueLight.com, another online retailer, announces a specific shipping fee along with each item it offers.

Analyst say online retailers should remind customers of the convenience of shopping from their computers.

"They have to show the value proposition that they deliver is not based on price, but on being able to offer wider selection and convenience," said Jeff Fieler, an analyst with Bear, Stearns.

Offering as much information as possible regarding the additional fees also helps keep customers, Ms. Rubin said.

Consumers backing out on a purchase because of shipping and handling fees is nothing new, analysts say.

Whether it's high shipping fees for a very small item, or a very large one, the additional cost is always an issue, said Peter Benedict, an analyst with CIBC World Markets. "So the challenges to online commerce are the same as any direct sales channel."

Melissa Fulton, president of Regional Retail Concepts and owner of Celebrate Maryland, a retailer, has been in the mail-order business for 14 years. It recently began selling its merchandise online.

"Frankly, I don't feel shipping charges have ever been a major barrier," Ms. Fulton said.

Some disgruntlement arises from customers who try to purchase crab cakes through the site, however, because the shipping charges for perishable items are much higher, she said.

"But typically they are people who are not used to purchasing perishable items through the mail."

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