The Summer Free Shipping Promotion

Free Shipping Promo of $100 cancelled 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.

Canada Post strikes, UPS & Scythe Shipping

Canada Post on Strike Again?Canada Post is likely going to have a strike / lock-out in July.  Nothing officially confirmed, but it sounds like it’s going to happen. Here’s how we are handling things and how it is going to affect shipping at Starlit Citadel.

Canada Post Strikes / Lockouts

The lockout is currently rumored to happen in July, probably July 1 as the postal workers are looking to vote on the strike on July 2. As such, any Canada Post shipment that is estimated to deliver before June 31, 2016 will be fine (unless you aren’t able to receive the delivery and aren’t able to pick it up before then or the shipment gets delayed).  In other words, we CANNOT guarantee a shipment that is en-route for delivery around June 31, 2016 and later will arrive as it might get stuck in Canada Post’s warehouses.

We will likely turn off Canada Post delivery completely next week as anything ordered after Monday is unlikely to get delivered anyway.

UPS Shipping

We have turned on UPS shipping in Canada in the meantime.  You will notice a huge difference in pricing between UPS & Canada Post due to the difference in our contracts and base costs between the two companies. If you are in the East Coast / Maritimes and a rural location, we recommend using UPS anyway as they will be able to make deliveries to your location during the strike even if you order rihgt now.

Free Shipping Promo of $100 cancelledFree Shipping at $100 Promotion Cancelled

Please note, the Free Shipping promotion at $100 is now cancelled as we are not able to run this promotion while shipping via UPS.  Previous pre-orders that need to ship out during July wills till ship for free.

We have re-instated usual free shipping promotion – that is, shipping is free for orders over $175 (before taxes and after discounts) so you can still receive free shipping on your orders, it’s just going to be at a higher level.

Scythe Shipping

Lastly, for those who have Scythe shipments going out from our facility. We are working as fast as possible to get all shipments to the Maritimes / Quebec / rural East Coast out today. We currently have 7 business days before July 1, so we’re hoping to get as much out as possible in the next 2 days so that all shipments will be on the way to customers and in their hands before the strike happens.  This means that if you are in the West Coast, unless we have processed your orders already, you might not get a processing notice for a few days as we take care of these backers as we have more time to get your shipments out.

Jamey will have a more detailed update for everyone later. Please bear with us as we are working as fast as possible to get as many shipments as possible out to everyone.

Summer Promo: $100 Free Shipping Treshold

Free Shipping at $100!Now that Summer’s pretty much here, we’ve decided to lower our free shipping threshold in Canada from $175 to $100. Yes, that’s right. $100.

What’s the catch? Our usual free shipping policies apply.  The $100 threshold is per order and is calculated after discounts but before taxes and shipping is calculated.  Furthermore, if your order has pre-order / backorder items on it, we will hold the entire order till all items in the order are ready for shipping.

Of course, at the new $100 level, you should be able to split your orders quite easily to ensure everything that everything that is in-stock is in one order and everything that is a backorder on another.

Once again, this promotion is running for all of Summer and is scheduled to end August 31, 2016.

Happy Ordering!

 

 

Shipping more, making less

One of the dangers of this business is doing more for less. Unfortunately, it’s an easy thing to do when you are working on thin margins and/or changing how your processes work. Unfortunately, in this case, we made a few mistakes and ended up doing the above – the worst case scenario possible for a business like ours. It’s why we moved Free Shipping to $175 from $150.

The Setting

In January we managed to request a lower rate on our Canada Post shipping.  This was predicated on a certain volume of items shipped, which we expected to hit with a minor increase in our shipments.  At the same time, we noticed a decrease in our shipments to the East Coast due to the increasing competition we saw.  So, to hit both the increased number of shipments we needed and to pass on the savings, we decided to lower our Free Shipping threshold to $150 from the original $175.

What Happened

Well, unfortunately we didn’t hit the shipment numbers that we required, which meant that our rates bumped back up to our old rates.  That meant that for each free shipping order that went out, we were losing more than we were previously.  Combine that with the fact that we did see an increase in free shipping orders, our total losses had increased.

Now, this would have been fine if we saw a significant bump in shipments (thus generating more total revenue even if we made less per order); however this wasn’t the case.  We saw more shipments certainly, but not enough to cover the increased cost of shipping all the free shipping orders.

If you are having trouble imagining it, look at it this way – if we free shipped 10 orders previously and it cost us $15, we lost $150 for the 10 shipments.  Now, if we free shipped 12 orders now at $15, our total loss is now $180.  However, our revenue numbers are $1,750 to $1,800 – a $50 revenue increase.  That’s a net loss in profit, not a net gain.

Thus – more work, less money.  It’s why we shifted back to the $175 free shipping level.  Will we ship less? Probably.  We might even lose a few customers because of this – but the gain in profitability should balance this out.

 

Free Shipping & Margins

We provide a Free Shipping Promotion on the site for orders over $175.  It seems quite high when you consider that in the United States, it’s often at $100 or $125.   Of course, we do live in the 2nd largest country in the world with a tiny population, making our overall cost of shipping much higher.

In fact, it generally it seems takes between $8-10 to ship across the United States (with a business discount) while in Canada we’re looking at a minimum of $17 from edge to edge.

Our $175 Free Shipping Offer

So, let’s discuss the $175 free shipping level.  On a $180 order, we make about 37% in gross profit – or $66.  The rest goes direct into paying for the stock to replace the games purchased.  Now, on this order we have to pay our gateway fees for the credit card charges of approximately $6.   So, we now have $60 total in gross profit.

A Free Shipping order is generally quite a large order so our average shipping cost is about $18 per order.  On top of this, we need the box and packing material, an estimated $2 per order.  Total cost of shipping is about $20 for each shipment.

That brings out total gross profit on this Free Shipping order to $40.   So on a $180 order; we make $40 Gross Profit; before you start counting operating expenses like salary, rent, electricity and marketing expenses among others.

The $100 Free Shipping Offer

So, let’s do the maths again on a $100 Free Shipping Offer.

$100 of product = $36 in Gross Profit.  Take another $3.00 off for Gateway Expenses, and that’s $33.

On $100 of product, due to the smaller box size we’ll call it an average of $15 to ship plus $2 box cost and packing material.  That’s $17 in shipping; so that’s $16 in gross profit.

How does Chapters do it?

If you’re like me, and you buy from Chapters, you probably have received packages of books that are only 1 or 2 books wide.  At a $29 free shipping option, it seems impossible for them to do this.

However, Chapters has a few advantages over us:

  • Volume – Canada Post provides volume discounts.  We just aren’t anywhere as big as they are so our discounts are only a fraction of their discounts
  • Better Margins – again, it’s worth noting that their margins are much better on books than ours on board games
  • Smaller Boxes – means smaller shipping expenses.
  • Multiple Warehouses – and here’s the other equation – it costs a lot less to ship within a province (or two adjacent provinces, etc) than it does to ship across the country.

In time, as we grow we’ll probably revisit the Free Shipping policy.  The trick is to get our shipping discounts to a point where it makes sense.  I expect it might be viable in 2 – 3 years time, if we grow sufficiently.  Till then, bear with us!