Small Retailers Push for Online Sales

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Not all small businesses can afford to offer free shipping online. Cindy Nichols-Cheever, owner of the Duxbury (Mass.) gift shop Mermaids at Duxbury Bay, says the cost of shipping is the biggest concern for her online customers, who make up about 15% of her business. "The freight I'm not making any money on," she says. "The freight they pay is really what it costs me to ship the box."

Smart Warehousing

Companies that can't afford to absorb shipping costs should be up front about the fees, because seeing charges tacked on at checkout can repel shoppers, says Eddie Davis, head of small business merchant services at PayPal (EBAY). "People actually do abandon carts when they see an extra line" for shipping costs, he says. Likewise, small companies selling online need to be clear about return policies to reassure buyers, Davis says.

Shipping volume is growing more slowly than last year, and spending on shipping has actually gone down 30% per item shipped, according to client data from Shipwire, a Sunnyvale (Calif.) company that offers outsourced warehousing and shipping services for online retailers and says it has hundreds of small business clients. "People are picking ground shipping over second day, [and] they're picking second day over first day," says Shipwire Chief Executive Damon Schechter. He also says small business clients are becoming more adept about shipping by warehousing goods across the country to get products closer to customers and reduce costs.

One bright spot for online retailers Schechter identified this holiday season is exporting. He says clients a year ago were shipping only 2% of orders internationally, but that figure is now up to 15%, spurring Shipwire to open warehouses in Toronto, Vancouver, and London. Davis of PayPal likewise says small businesses are increasingly selling globally, spurred in part by favorable exchange rates that make buying U.S. goods a bargain.

Despite efforts to expand internationally and woo reluctant shoppers, online retailers are preparing for what might be the gloomiest holiday season since e-commerce began in the 1990s. DeBoom of SkirtSports worries about shrinking margins and training her customers to expect sales, but she feels like she has no choice but to cut prices. "If something's not on sale, people are not buying," she says.