As many of you know, the Summer Free Shipping Promotion has ended. As with any promotion or marketing tactic, one of our main goals is to evaluate the promotion to understand whether it actually hit it’s goal – that is, drove more sales and traffic. Normally, all we’d have to do is compare the previous period (i.e. same months last year) to this period and; adjusting for regular sales increase, figure out the difference in both revenue and number of sales. Unfortunately, as many of you know, we had a huge problem in the middle of the month – the Canada Post strike/lockout threat. This created a huge amount of uncertainty and we even had to turn off the promotion at some point as we switched to shipping via UPS.
How much difference did the threat of a Canada Post strike make in our sales? Well, we saw a 31% drop in total shipments and about 35% in total in June where the strike affected us most. That’s a huge drop, especially when you realise that the next month (August) we saw a full 40% increase. Now, you could say that the 40% increase was from the free shipping but there’s also an argument to be made that the increase is in part due to orders that were ‘held-off’ during the strike period.
On top of all this of course is the calculation needed to figure out the difference in profitability. It’s not enough to know how much more we made (if anything); it’s also important to know how much more we paid in shipping. There’s 2 main ways to do this of course – a line by line review (matching each free shipping order to it’s associated cost in our invoices) or we could go with averages. In this case, we work out the average cost of shipping each order and compare it against our previous year to work out the increase / change and compare it to our average revenue generated from shipping. This lets us know the difference that each order ‘cost’ us to ship, which then lets us work out the increased cost of shipping. Unfortunately, again; not that easy since we also have a bunch of Kickstarter shipments in our invoices. Which means we have to individually take it all out to actually work out our actual cost of shipping.
Overall, here’s what we figured out:
- The lower free shipping threshold probably generated an increase in orders
- This increase mainly came from existing customers, not new customers
- Surprisingly, the average sale value saw only a small change (6.82%)
- Profit margins per order dropped by about 16.98%
However, because of the strike our total number of orders actually dropped in comparison to last year (about 16%) during the period in question. It’s hard to draw any real conclusions because of the strike, though there is enough data to suggest that if the strike hadn’t happened we would have seen an overall increase in number of orders. The question which we can’t answer is whether that increase would make up for the drop in our profit margins (we need about a 34% increase overall to breakeven on the loss in profits) since the two months we just don’t have enough data / time to make it clear. My guess is that it probably a wash if a slight decrease in our overall profit, which is why we’ve moved back to the $175 free shipping option for now.