When a distributor or manufacturer drop ships directly to a customer on behalf of the manufacturer or distributor, a charge for the processing of the shipment will be charged
Drop shipping is a preferred method used by some manufacturers who wish to give their customers an excellent shopping experience, the customer willing to pay a little extra for the product that they are purchasing if it will be delivered to their door the very next day. When drop shipping is used, the customer will be charged by the distributor, as will the merchant.
Even though it’s called a “per-order fee”, this type of fee can actually be incorporated in the price of an order and shipment in a number of ways. Some merchants only apply the per-order fee in limited circumstances.
One common method of applying the per-order fee is to only apply it to orders that fall under a set amount. Typically you’ll see this in action when ecommerce stores offer free shipping for order above $xx.xx. This type on implementation is actually meant to encourage customers to purchase additional items to get the free shipping. Merchant’s must carefully calculate their average shipping costs if they plan on using this strategy. It can be very effective in increasing average order value, and the merchant also gets the benefit of the per-order fee for smaller orders.
Some merchants choose to apply the per-order fee in the checkout cart. This allows every customer see the charge at the same time in the order process, however it can lead to a higher rate of abandoned orders as some buyers balk at the additional charge just prior to payment. This can be offset somewhat by informing customers of the per-order shipping fee prior to the checkout process. Some merchants have also found success by simply explaining the need for the charge, as well as the advantages to the customers in the use of the charge – such as faster and more efficient shipping.
Another popular approach is to include the per-order fee as part of each individual item’s price. This allows the merchant to offer free shipping while effectively hiding the actual shipping charges from customers, although it also raises the price of items. Implementing this method does require significant calculations based on the cost of individual items and splitting the per-order fee fairly across the individual items of merchandise. If he isn’t detailed in these calculations a merchant could find himself actually losing money on shipping without even realizing it.