1. Avoid overcharging for shipping and handling; strive to break even. Whether your fee schedule is based on the value of an order, the weight of the order, the distance it is being shipped or any combination thereof, attempting to make a profit from shipping charges is likely to cost you customers. Some 63% of the consumers surveyed by Jupiter cited excessive shipping costs as the reason they abandoned a shopping cart prior to purchase; by far, the No.1 reason cited. Similar findings resulted from surveys by the Yankee Group and by Ernst AND Young. "If you're trying to make shipping a profit center, you really have to question where you are going with your business," says Alexis D. Gutzman, a consultant and author of the book, "The E-Commerce Arsenal: 12 Technologies You Need to Prevail in the Digital Arena." At the same time, merchants shouldn't try to subsidize their shipping costs on a regular basis, or they will be treading water financially, most agree. Cassar's research shows the smartest strategy is to set rates that reflect your actual shipping costs on an annual basis — including building in a bit extra to cover unexpected costs such as shipments that are split up. "But don't make that extra a lot more than what you think your overages are likely to be," he says.

2. Consider product or order weight as a basis for your fee schedule.This is the exception, not the rule. The Jupiter study of the top 50 online retailers in 2001 found that 54% based their shipping and handling charges on the size of the order — either in the total price or the number of items purchased. Only 30% based their charges on the total weight of the items purchased.But carriers like the U.S. Postal Service and other shippers base their own fees largely on weight, thereby influencing consumers' expectations. In the Jupiter study, 45% of consumers surveyed — the largest percentage — said charging by weight is the "most reasonable" way for merchants to base shipping. Only 10% preferred charging by the value of an order.Cassar says his study found that charging by weight reduces much of the subterfuge that consumers feel is involved in setting shipping rates. It also balances out the perception (if not the reality) among consumers over who is getting the better of the deal — shoppers or merchants. He acknowledges that charging by weight may not be cost-effective for many merchants, such as those who sell tools and metal goods that are abnormally heavy. However, Cassar noted, most longtime Web users today prefer paying by weight — which suggests that such a consumer preference will continue to grow.

3. Offer multiple shipping options. Many holiday shoppers will pay extra for faster delivery of items. But many others appreciate having lower-cost options, such as ground transportation and less timely delivery. Typically, you should offer ground, next-day shipping and two-to-three-day service, as well as additional international charges where appropriate.Additional options that save consumers money without pinching your own budget are likely to have public relations value. For example, Blowguns Northwest, a Lake Stevens, Wash., retailer of blowguns and paintball games, bases most of its shipping costs on UPS charges — in fact, it has a UPS calculator tied into its shopping cart, says co-owner Diana Lopez. But because USPS rates are often better for her company's customers in Hawaii, Alaska and other more remote locations, the option of shipping through USPS priority mail is provided.One rule of thumb, notes Gutzman, is to keep a close eye on your competitors' shipping rates and options. "This is a no-brainer," she says.

4. Use reduced shipping fees for special offers and promotions.Analyst Cassar says he was astounded to find in his study that reductions in shipping fees are "among the most effective promotions out there. Retailers can see greater returns from $1 off shipping costs than $1 off product costs," he says.Some key conditions:

5. Whenever possible, test out various special offers with selected customers. See which ones bring customers in, and bring customers back. "Beware," notes Gutzman, "that not all customers are created equal."Avoid "sticker shock" by giving upfront information about your shipping rates. Even if you are just striving to break even, shipping costs — which cover packing materials and transportation — can add as much as 20% or more to a consumer purchase. Being open and up front about your rates can ease angst and avoid customers fleeing just before they hit the "Buy" button.Gutzman urges merchants to provide as much information as they can about their shipping rates — even adding a ZIP-code button so customers can quickly check shipping rates geographically — before shoppers have gone to the trouble of giving you their personal information for a purchase. If it requires you to tweak your Web site, or even revise your shipping fee strategy, do it, she says. "When people see a price without any shipping cost mentioned — then see a big markup after they have gone that far in the process with you — it really ticks them off."Note on free shipping: Use it sparingly and strategically, if at all. For example, Bridge City Tools, a Portland, Ore., manufacturer of woodworking tools, offers free shipping only for orders exceeding $500. "You should not lose money by offering free shipping," Gutzman says. "Those days are gone."