“Free” shipping is not actually free

https://www.fastcompany.com/3061686/free-shipping-is-a-lie

by RobAley • 10 years ago

174 213 10 years ago

Free shipping is a lie, but the average consumer thinks of dealing with shipping costs separately as pesky, and Amazon & eBay have configured their fees to charge you more on any extra shipping line item to encourage sellers to make shipping "free".

I don't see "free" shipping going away, nor do I see Amazon's new delivery service succeeding where DHL and other have floundered in the past, since you need a certain volume in that business to even be viable, and Amazon has stated they can't push that volume alone to make running a shipping service make sense.

What might happen, and what I hope happens is the lower end, smaller businesses get better next day and 2 day shipping prices. Currently, from one wholesaler I can order a 50lb box of hardware, and UPS charges them $21 to $23 to ship it from Chicago to Seattle in the span of about 18hrs and get it on my doorstep.

Another much smaller vendor I deal with can't get anywhere near that pricing, half that weight/size box will run me $150 easily, with ground (a week and change) being $40 usually for a 25lb box from them.

Edit: Another layer to this is USPS and China Post teamed up a while back and offer Chinese sellers dirt cheap ePacket shipping, where 1lb of goods can be moved to the US for $5, whereas USPS charges $50 to the American seller to ship something to China [1]. Essentially, it makes American online sellers uncompetitive in our own market. This is why people like Trump, since he says he'll put a 35% tariff on foreign imports and end programs like ePacket (not supporting him though, just to be clear).

[1] https://www.skubana.com/e-commerce-trends/the-usps-epacket-p...

rileymat2• 10 years ago

It is not unreasonable for a customer to expect the price seen on an item to be what it will cost in total.

Amazon would be unusable for comparison shopping if you needed to go through checkout to get the full price with shipping.

webscaleizfun3• 10 years ago

Definitely, you should be able to get a shipping price without going into the checkout, Amazon makes it quite difficult compared to Aliexpress & eBay when it comes to finding out shipping prices, to the point that I avoid shopping on there with a rare exception occurring every 6 months or so.

For the average shopper, pricing in shipping and sales tax will make them buy more online. Breaking out sales tax has caused a 9% sales drop in states Amazon charges sales tax in.

aninhumer2• 10 years ago

Yes, but I also don't want to pay the individual shipping costs for every item in an order, when shipping them together is cheaper.

Retric• 10 years ago

Amazon does not need to ship world wide, they can pay DHL for most of the US and keep shipping in for example just NYC in house.

tyingq4• 10 years ago

" Currently, from one wholesaler I can order a 50lb box of hardware, and UPS charges them $21 to $23 to ship it from Chicago to Seattle in the span of about 18hrs and get it on my doorstep."

Not sure how they are doing that. The UPS rack rate for 50lbs from Chicago to Seattle is $83 via Ground, $161 for 3 day select, $252 for 2nd day air, and $310 for Next Day Air Saver. I can't see $23, even for ground...I don't know of anyone with a discount rate that good.

webscaleizfun3• 10 years ago

They push 10,000+ parcels like that a month, and send their shipping out to bid every year, helps to have big companies ordering tons of hardware from ya. 3 years ago they were on DHL which was great for DHL same day, I could order something at 8am and have it at the customer's site later that evening.

jlgaddis2• 10 years ago

I read (here, in an HN thread, IIRC) a while back that the Chinese government eats the cost of shipping items outside of the country (I haven't verified that, however, so it may be entirely incorrect).

That was the reason given why you can purchase an item online from a Chinese seller for, say, $1 USD -- including shipping -- and the seller can still profit from it.

icantdrive55• 10 years ago

Yes it's true. I just ordered some MR11 bulbs that are defective. (It might not be their fault. I think they send 220 volt, instead of 120volt halogen lamps.) It's not worth shipping them back. There's a weight/size limit, but many items are shipped free.

A bigger question. If more people took advantage of this free shipping paid for by the Chinese government; how would American companies compete?

(Since I here--Amazon has been slowly raising prices, and people don't seem to notice, or care. I noticed it with portable transistor radios at first, and MR11 bulbs lately. Personally, I'm getting tired of UPS trucks racing up and down my street, filled with a lot of stuff we probally don't need.)

mdrzn2• 10 years ago

Can anyone find any source on that? Sounds like an interesting read.

Guvante• 10 years ago

Amazon & eBay have configured their fees to charge you more on any extra shipping line item to encourage sellers to make shipping "free".

Are you sure that is why? I thought it was because sellers started selling $1 items with $50 shipping and handling fees attached.

Also places where competitors are listed together are hard to browse unless "total cost" is listed explicitly somewhere (having to figure out whether the $19 or $5 with $5 shipping is better is annoying).

ryao5• 10 years ago

I had not known about the program, but I did notice all of the cheap electronics with "free" or low cost shipping from China and Hong Kong a few months ago. Since I was visiting China later in the year, I compared pricing between eBay and taobao on the things that I wanted. Surprisingly, I found that ordering in New York through eBay was cheaper than ordering in Shanghai through taobao on a significant number of items that I wanted. I have since ordered plenty of stuff from China through eBay.

Raphmedia• 10 years ago

When I buy a product in a physical store the price of getting the product there is included. I don't pay the product + the shipping fee. It should be the same on the web.

tyingq4• 10 years ago

I understand the desire for parity, but as an online seller, it's difficult to do that...for a number of reasons.

Returns obviously cost more for an online seller because the outbound shipping becomes a loss, and the return shipping as well, if they cover that.

If shipping is "free", customers closer to the shipping point end up subsidizing customers farther away.

Companies like Fedex and UPS raise their rates, every year, in amounts that far exceed anything logical (cost of living, fuel, etc). Typically, 4 to 5 percent bumps every year.

For online sellers of larger items, these issues can be very significant. Especially large, but lightweight items, as the shipping companies charge "dimensional weight" instead of actual weight. It's easily over $100 to ship a largish, empty box across the US.

Edit: Dealing with shipping damage is another factor. UPS/Fedex compensation for damage is far less than the actual cost to make things right.

gonzo• 10 years ago

How large? How fast?

Unless it's ridiculous, I can't see even counter rate being that high.

Spooky236• 10 years ago

This stuff is another way the whole economy is getting screwed by Amazon in a manner similar to Walmart in the 80's and 90's. Amazon is spending billions to kill everyone else so that they can put the screws to everyone in the future.

If you look at the rates that Amazon pays to replenish FBA warehouses, you see the difference. UPS Ground from Upstate NY to Kentucky for a small parcel costs < $6. Compare that you the UPS "Retail" -- $16-18, or USPS Priority, which is a minimum of $11, depending on rate. IMO, shipping rates are going up because big kahuna customers like Amazon are grabbing all of the capacity and have contracts that allow them to surge instantly.

mikeash• 10 years ago

It's a bit tougher online because shipping costs can vary a lot depending on where the customer lives and what they're buying.

For example, the cost of shipping me two boxes of cereal is barely higher than the cost of shipping me one box of cereal. The cost of shipping it to Alaska is much higher than the cost of shipping it to New York. In a store, the cost of getting two boxes of cereal to the store is, on average, about twice the cost of getting one box, and the cost is identical whether your customer is from New York or Alaska.

bkmartin• 10 years ago

Your store scenario isn't true at all! It does not cost about twice as much to get two boxes of cereal into a store as one box. The same shipping economies are in play here. It actually costs less per box to get it into a store because they will bring in a pallet at a time. The real cost is the fact that you have a building and all of its costs with employees and all of their costs, etc. Shipping anything to Alaska is more expensive that to New York whether it is one box of cereal or a pallet. The difference is that the price for a box of cereal in Alaska will have that priced in vs the box in New York. The same can be done for online retail...except people won't understand it and get pissed and try to change their location reporting to try and get a lower price based on where they are located. You see, people don't view online shopping the same way as they view physical shopping. People will need to be reconditioned about online shopping now that we have the technology to do location based pricing thanks to geolocation reporting and other factors (like getting a zip code up front) that were not available when online shopping first came about.

Broken_Hippo2• 10 years ago

It is only double if you are receiving cereal one at a time: but with distribution centers and things like that, it is rarely the case.

It is likely, if you are ordering one box of cereal, that it is packed in a box with other things and that you get the box with your normal delivery. Heck, with this model, even getting two lawn mowers along with the shipment doesn't change the pricing all that much.

You basically have the same shipping for all 8 boxes of cereal on your shelf.

It is much more true when you ship to consumers - the cost is nearly double if you are sending the 2 boxes to 2 customers. Gotta have separate boxes with 2 labels, because they are going to two houses.

douche• 10 years ago

Are you counting the costs of shipping yourself to the store, and then shipping yourself plus the product back home?

There have been a lot of times that I've paid shipping and handling on something that would be far less than the costs in gasoline of driving to the store and back.

SippinLean• 10 years ago

Do you think it's cheaper to ship products in bulk to a store or ship them individually to residential addresses all over the country?

mabbo• 10 years ago

Maybe this is why so many of us have so much trouble emulating Amazon's model and making any money. It's because it's really expensive and it's also why Amazon's had trouble making money on merchandising sales. It’s a very expensive model and it’s not less expensive than the store-based model.

Amazon's savings come from it's lack of stores. Retail storefronts are expensive in terms of staff, cleaning/managing, rent, utilities, taxes. A warehouse in rural Indiana has a lower operating cost and can far more efficiently prepare items for customers on a per-worker, per-rent-dollar, per-utility-bill-dollar basis. And at scale, you only have to have a small margin to succeed.

JulianMorrison• 10 years ago

I don't care if a company makes shipping "free" and raises the price. Of course they shouldn't make themselves unprofitable by undercharging, just charge a reasonable price, and in the other direction I'd prefer seeing the whole cost up front to having a disingenuous "cheap" product that has "shipping" so gold-plated it's obvious they're pocketing it.

coldcode• 10 years ago

pets.com went out of business trying to ship 50lb bags of dog food for example with "free" shipping

bostonpete2• 10 years ago

I just ordered a big bag of dog food off Amazon, with free shipping, for less than the same brand costs at Petco. I'm not sure whether they're taking a loss on that, or maybe dog food is just extremely marked up in brick & mortar stores.

pravda3• 10 years ago

Everything is extremely marked-up in pet stores.

Pet water fountain at PetSmart: $50 Exact same fountain at Amazon: $25

But I've noticed that pet stores (or at least Petsmart) are starting to do price-discrimination by having online-only 'sales'. Purchase online at 25% off, pickup in store.

jrnichols• 10 years ago

pets.com also went out of business by blowing a ton of money on Herman Miller chairs, doing everything in San Francisco (they later moved some warehousing to the midwest for a better distribution network and lower costs) and a rush to IPO too.

smacktoward• 10 years ago

"The economics are clear... direct-to-home has a supply chain cost three times higher than a store-based model."

That surprised me. Does anybody have more details as to why that would be?

TulliusCicero• 10 years ago

In the store-based model, the customer handles the 'last mile' of getting the product from a distribution center (the store) to their home.

_rpd• 10 years ago

Yes, but direct-to-home doesn't need to pay urban rent or salaries for its distribution centers. There must be some other factor. Perhaps the costs of maintaining a reliable e-commerce site?

eloisant• 10 years ago

Basically the last mile is by far the most expensive.

It's cheaper to get a truck full of stuff to your shop than having trucks all over the country's cities going from door to door to deliver stuff to individual customers.

HeyLaughingBoy• 10 years ago

And this is exactly why Walmart can offer free shipping with in-store pickup on heavy items like snowblowers.

jlgaddis2• 10 years ago

Because you have to get the product to the customer instead of the customer coming and getting it from you?

basseq• 10 years ago

Here's a simplified example: shipping. Let's say I sell 5,000 widgets a month. I can ship all those widgets in one big truck to my brick-and-mortar store for $10k. Or, I can ship each one to 5,000 individual customers for $10/ea... or $50k total. My pure shipping cost is five times higher.

With a store-based model, I have to pay for retail space and employees; with direct-to-home, my dollars go to pick-and-ship and warehousing. eCommerce scales better because of the capital costs of building out new retail locations (effectively higher out-of-area CAC), but not insurmountably so. E.g., Amazon vs. Walmart.

hx876• 10 years ago

I don't mind if shipping isn't free. I do mind if the shipping cost isn't queriable until I:

1) Add the item to the cart

2) Create an account

3) Enter all my personal info

If your business makes it that much of a hassle to find out what shipping costs (presumably in order to capture sales), I'm indisposed to patronizing it. Transparency and lack of hassle are what I'm after, not free shipping.

saosebastiao8• 10 years ago

In order to estimate shipping, you need the weight and dimensions of a product to ship, an origin, and a destination. They already know the origin, they need the other two from you.

hx876• 10 years ago

If they have a functional inventory system, they know the weight and dimensions of the product, and all that's needed for destination is a box for postal code.

sbov2• 10 years ago

We just take the middle ground.

We charge one rate for shipping internationally, and one for shipping domestically. The charge is for the minimum shipping cost we have. We don't recover the full cost of shipping, but it's good enough for us.

bambax• 10 years ago

That is a bad pricing strategy. Shipping price doesn't need to be based on actual costs, it could be based on value. Or it could be averaged.

Whichever way it's calculated, it needs to be based on something the customer cares about.

What the customer cares about is shipping time, and maybe packaging / reputation of carrier.

What the customer ABSOLUTELY DOES NOT CARE ABOUT is where your warehouse is located.

gnopgnip• 10 years ago

There are flat rate shipping services in addition to the other options. Anything that fits in a padded flat rate envelope will ship for $6.10 anywhere in the US. There is no simple shipping answer that covers a variety of goods and makes everyone happy.

prakster2• 10 years ago

We're building a tool that discloses shipping prices AND delivery dates up front, as soon as you add a product to the Cart.

Here's a popular site that uses it: http://store.hufworldwide.com/

Let me know what you think...

ggggtez• 10 years ago

What, no. Tell me before I add to the cart, right in the product description page.

What kind of draconian world do I live in that I would need to add to the cart to compare prices.

mdrzn2• 10 years ago

Very cool! It fetches Geolocation from the IP. But the site says $15 (Intl), your shipping price says $29.60

fnbr• 10 years ago

That's a fantastic tool. As a consumer, I love that. Good luck- I'd love to see that on the sites that I shop on.

pravda3• 10 years ago

I think anyone who pays $32 for a T-shirt, whether free shipping or not, is an idiot.

But then again I might not be the target market.

turc1656• 10 years ago

Totally agree. I find that process extremely annoying as well. I usually never buy from those sites unless I absolutely cannot find the product at a similar price elsewhere.

Although, shipping prices can vary based on the total purchase since they aren't perfectly linear and it costs less to ship 5 items together in one package than each of those individually. So, I would say that adding the item to your cart is a requirement, but the rest should not be necessary at all. Also, shipping prices vary based on the total distance so the destination zip code matters as well.

I would say that the best solution would be to put an approximate shipping cost for that item being shipped by itself such that the shipping cost covers ~2 standard deviations for the US. If that were done, 95% of the time that cost would be valid or even less. Only in 5% of the cases would the shipping cost increase. In actuality, it would probably be even less than 5% because of the way supply chains work and where they put warehouses and fulfillment centers. This does lend itself to a possible legal issue, though, because people would claim that the stated shipping price as advertised is not what was actually paid. It would have to be explicitly stated very clearly that the displayed shipping cost before you put it into the cart and enter a destination zip code is just an estimate.

Ajedi32• 10 years ago

Or the retailer could just choose to eat the cost for those ~5% of cases to avoid annoying their customers.

agumonkey• 10 years ago

Let's change the world, disrupt industries, revolution the business and introduce ... a different page order.

maxxxxx• 10 years ago

I hate that too. Zip code or city should be enough to give an estimate.

ThomPete2• 10 years ago

How would they know your shipping cost if they don't know at least your zip-code?

Obi_Juan_Kenobi• 10 years ago

Calculate Shipping [enter zip here]

That's all you should need to do. Or have a flat rate for e.g. continental US.

ProZsolt• 10 years ago

With GeoIP you can estimate the zip-code

awqrre• 10 years ago

That but what really matters is the total cost, not free shipping... (item cost + shipping cost + whatever = cheapest?)

noonespecial• 10 years ago

About the only thing worse than that is inflated mysterious "shipping". An SD card with $17 shipping and when I add a second the shipping just doubles? Then it comes USPS first class package with $2.60 right on the label???

They must be just trying to piss me off.

Edit: This is likely the result of automatic "value based" shipping calculation. Don't let it create absurd situations like the above, it makes people feel cheated.

ryhamz2• 10 years ago

This guy gets it. Just like I don't like how tax isn't included in shop pricing in the US.

cromulent• 10 years ago

I know a lot of people like the Book Depository due to their "free" shipping. They actually adjust their price using geo IP data. VPN's can save you a lot.

Someone made a website to show you the pricing discrepancies per location:

http://www.bookdepository.cheap/Lisp-Small-Pieces-Christian-...

mobiuscog• 10 years ago

Aren't they owned by Amazon now ? I know it's often cheaper to buy from them as a marketplace seller on Amazon, with postage, than direct from their site (and still cheaper than Amazon).

wott• 10 years ago

I know it's often cheaper to buy from them as a marketplace seller on Amazon, with postage, than direct from their site.

I noticed that several times and never understood it.

dasboth2• 10 years ago

Shouldn't the shipping costs be based on where you're shipping to rather than where you're browsing from? Or am I misunderstanding?

sliverstorm• 10 years ago

You only give them the destination when you check out. They want to factor shipping into the price transparently from the start. GeoIP data is available from the very moment you load the webpage, your shipping address is not.

draw_down2• 10 years ago

Unless I know something is what I really want, I'll buy it in a store. Clothes are a good example- returning something because it doesn't fit is a hassle (because the shipping is expensive so there is an incentive to make it a hassle), so I don't do it. And so the supposed savings from buying online evaporate. (And of course stores prevent the problem in the first place because you can try it on.) I used to buy a lot of clothes online but now I basically never do. The experience really kinda sucks.

ghaff2• 10 years ago

Places like Amazon/Zappos make returns pretty hassle free. But I don't disagree with your basic point. I do buy clothes that I can't buy locally or are a known quantity from someone I order from repeatedly. But, when you're not sure of exactly what you want, no one has really cracked the code for online clothes shopping and, because it's a very tactile experience, it's hard to see how you really get there.

VLM2• 10 years ago

Tee shirts just fit. Polo and casual business wear just fit. Underwear is simple for guys, if the old one fit, the identically spec'd new one will fit (my wife claims that is not the case for women). For about a decade until quality fell thru the floor my default "asphalt hiking athletic shoe" for long distance urban exercise was, per my amazon list of orders, a "New Balance Men MX623 10.5 4E" and they fit like a glove every time. Not even a break-in period believe it or not, off with the old shoe on with the new. Pants just fit. Buddys jeans made in the USA just fit. For footwear if you spend enough money it fits, Thorogood / Weinbrenner products are very expensive and made in Wisconsin and fit perfectly out of the box like a glove; they also last forever. If you have to ask if you can afford them the answer is no, but they last for a decade or two so the annual cost is actually cheaper than buying cheap boots.

I would not attempt a tailored suit over the internet, your local tailor is not likely going to be amused you bought it online when you bring it in for adjustment. My wife can spend a seemingly infinite amount of time trying on different cocktail dresses. Not all stores for all clothes will go out of business. Merely almost all of them.

I'm just calling out that maybe 95% of my clothing was either a gift or purchased online and I've never had the slightest problem. Generally speaking things that involve paying a tailor probably should be purchased directly from a tailor but other than that...

draw_down2• 10 years ago

Often things do not "just fit" for me. Pants, definitely not. Even the same size shoe from the same brand as one that does fit me, may not fit.

It would be rad if that were the case though

paulmd6• 10 years ago

Actually it's quite easy to make clothing to measure if you take proper measurements. My SO makes a lot of specialty outfits for cosplayers and theater shows, and she regularly makes outfits for people she's never measured herself. They usually fit perfectly.

Your local tailor will gladly take these measurements for you. $20 for five minutes of work is easy money. Also, why would a tailor not be amused if you brought them a product and paid them to alter it? Not all alterations are possible of course, but they'll be happy to try. In fact, AFAIK it's common advice that you can get a generic suit from Men's Wearhouse or something and get it tailored up to look nice...

Most tailors are perfectly aware they're competing with mass-produced clothing from Asia. There's some bargains especially if you are only going to wear it once or twice. But in the end you usually get what you pay for, the quality and durability is not as good as from a tailor who did it right.

The other thing is the sizing - a lot of stuff from Asia is sized for tiny Asian people, especially women's clothing is often several sizes smaller than US clothing. But on the other hand sometimes it's department-store clothing that is being sold off-label direct from the factory. I would look at it as largely the same bag in terms of quality. Not every department-store dress is made to last either.

vinceguidry3• 10 years ago

Retailers complaining about how Amazon is creating a race-to-the-bottom with free shipping calls to mind horse vets complaining about how automobiles are eating into their lifestyles. It's sooooo unfair!

Amazon is changing the world the way Standard Oil changed the world. If it's going in my house and it's not groceries, it's coming from Amazon. The buying and shipping experience is unparalleled. Amazon isn't one of these bespoke SF-only investor-moneygrab services, it's real technological progress on a world scale.

kgwgk• 10 years ago

Remember the times when you had to go to some shady basement to buy counterfeit products? Amazon is so much more convenient!

vkou2• 10 years ago

Retailers complaining about how Amazon is creating a race-to-the-bottom with free shipping calls to mind horse vets complaining about how automobiles are eating into their lifestyles. It's sooooo unfair!

The horse vets found other employment.

The horses, by far and large, were butchered.

The question these days is - which of us are the vets, and which of us are the horses?

bostonpete2• 10 years ago

The vets were labor, the horses were capital/property. I'd say none of us are the horses.

snrplfth• 10 years ago

Well, most of the horses weren't necessarily eaten before their time - it's just that they weren't replaced, because the price of new horses went down quickly so horse breeders stopped raising so many foals. The working lifespan of a horse is at best 20 years.

JackFr• 10 years ago

Retailers complaining about how Amazon is creating a race-to-the-bottom with free shipping calls

Only thing worse is 20 years of financial journalists predicting Amazon's unsustainability and forthcoming demise.

hueving2• 10 years ago

Well the store itself is really unsustainable. It's aws bringing in profit.

Spooky236• 10 years ago

Amazon is changing the world the way Standard Oil changed the world.

Standard Oil established itself as the nation's tollbooth.

vinceguidry3• 10 years ago

Sure. Pay the toll, get free, virtually unlimited energy. Were you expecting them to do it for free?

nickparker• 10 years ago

It also gives me a fair deal of schadenfreude (or something in the same vein) to see them missing Amazon's end game in the retail space:

The cost of transportation is going to plummet as we move to electric and driverless vehicles. Amazon's game is the same as Uber's, lose money and win the market, then sit on your customer base as the same price points suddenly become highly profitable.

But Mr. Schwartz is sure free shipping is an unsustainable trend.

gdulli• 10 years ago

Amazon is creating a race-to-the-bottom with free shipping

This hasn't been true for a while. For at least several years they've been going in the other direction with free shipping. They've raised the minimum purchase requirement for getting free shipping twice in the last few years ($25 to $35 to $49) and the other way to get "free" shipping isn't free, it's $99/year and you have to make a certain number of orders per year to get it to amortize to a reasonable shipping cost (which still won't be free.)

imgabe• 10 years ago

I didn't think shipping companies were just delivering packages out of the kindness of their hearts. I just expect it to be included in the purchase price. I'd much rather have one price to consider rather than a really low initial price with a bunch of additional charges.

As a customer, adding a bunch of additional fees, even if they're reasonable, just makes me feel like I'm being nickel-and-dimed. Tell me the total amount you want me to pay you to get what I want and if it's in my price range I'll happily pay it.

aninhumer2• 10 years ago

adding a bunch of additional fees [...] just makes me feel like I'm being nickel-and-dimed.

On the other hand, when I know the shipping costs are included in the price, it makes me feel like I'm being gouged on larger orders where the shipping cost per item should be lower.

Someone1234• 10 years ago

That's what Jet.com tries to solve. Initially the prices you see have built in shipping (although $35 minimum), but as you spend more they give you discounts inline with their savings.

Jet.com isn't perfect but they're trying some interesting stuff with pricing (e.g. pay more for included returns, or pay less but have to pay shipping if you return, buy items in bulk and get a discount, etc).

Klathmon• 10 years ago

And a "solution" to that can be to give discounts when multiple things are bought together.

That re-aligns the incentives of both parties.

bryondowd2• 10 years ago

A company I worked for actually sort of made up their shipping prices whole cloth. They had contracts with the shipping companies to get a good deal on shipping, and rarely passed those savings on. So most cases, they charged more than they were paying to ship your product, and in a few cases they charged less. So, the majority were subsidizing shipping costs for a few, with a hefty profit bump for the company. But I don't think they had any real competition, so I guess they could just charge whatever they thought people would pay. They even operated multiple brands for the same exact products/services, just to offer different prices and advertise from a different angle.

So, back to the point, regardless of whether the price is broken out or bundled, there's really no way to tell how badly you're being gouged. Unless you can find it cheaper someplace else, the only question is whether it is worth it to you at that price.

robryan3• 10 years ago

Yeah and you are subsidizing places that cost more to ship to, and depending on the average basket size of the shop you are likely paying for shipping for each item individually. Often shipping rates include a flat per package fee with a smaller weight component, so a real rate for multiple items would be much cheaper than the combined built in.

Still as a psychological thing I think customers just prefer to see free and don't think too much about how it could be costing them more. Most of our shipping is free because it seems to give better results, even if the customer ends up paying more in some cases.

dredmorbius• 10 years ago

Discounting built into larger orders is one way to work around this.

Rather than the negative incentive of stacking on fees at the end, stack on discounts. Repeat customers may find this attractive.

Apparently a thing: https://news.ycombinator.com/item?id=12859942

TheCoelacanth• 10 years ago

Exactly this. It's not free to sell something from a physical shop either, but I don't get charged a "physical shop fee"; they just build it into their markup.

techsupporter• 10 years ago

Sadly, more and more physical stores are starting to charge for the costs of shopping there, too. "Credit card surcharges" were the beginning; now I'm seeing "debit card surcharges," a $0.25 fee to write a check, charging for bags (and not just in cities with a disposable bag ordinance), and so on. I can't wait until my receipt includes an "electric company usage fee" and "background music from Spotify contribution charge."

davidsawyer• 10 years ago

Absolutely. Whenever a user sees "$XX", it's a hurdle they have to psych themselves into jumping over. Why on earth would you want to make a user jump over more than one hurdle by including "$XX" for the product and then "$XX" for the shipping?

The obvious counterargument to this is, "If you get the user far enough down the purchase funnel and then show them that second hurdle of another fee or explicit shipping cost, they will have already invested enough time and effort into the purchase process that they will then justify that extra cost just before purchasing." This may well be true sometimes, and people will often pay for shipping if you itemize it out of the total price, but I think everyone would agree that this sort of nickel-and-diming practice pisses people off. Pissing people off hurts your brand. It just does.

Businesses often think too short-term when it comes to getting someone to purchase a product online. Yes, they may purchase that first time and pay "extra" for shipping. But do you think they'll come back a second time if they know they're just gonna get pissed off about that darn shipping price again? I'd say they're much less likely to.

odbol_• 10 years ago

The problem is, in some states, you HAVE to show separate shipping and sales tax, otherwise you are not allowed to deduct them from your taxes. Found that out after doing a Kickstarter (can't charge shipping + tax), and California's tax board came a knockin'. It's idiotic.

Broken_Hippo2• 10 years ago

Can you not show the final price to the consumer, then itemize it out on the final bill or receipt?

drcross• 10 years ago

It's easy to imagine a scene when self-driving trucks have multiple compartments and they pull up to your house, send you a notification on your phone and you run outside to pick up your package. Perhaps we're talking 10 years maximum?

wppick• 10 years ago

Sure. I think there's actually still a lot of room for improvements in the shipping industry. I'm currently trying to ship a bike from San Francisco to Toronto, and the cheapest rate that I can find is around $200 with ground shipping, 5 days. I can fly myself from San Francisco to Toronto for $250. Is my bike getting meal service? Why is it still so expensive? What we need is better APIs from the major shipping companies so that we can more easily shop around. I think the major shipping companies could also work together to have possible a single point of access for users and the shipping companies can bid on which shipments they want to take. Shipping really is part of the infrastructure of a country. Maybe the government can help add some cost saving improvements to the industry?

blasdel• 10 years ago

https://www.bikeflights.com does exactly that negotiating rates for these linearly oversized packages, though it's pretty much only FedEx bidding on them

They're $40-60 domestically, and looks like San Francisco to Toronto is $125

jlebrech• 10 years ago

I don't understand why shipping has to deliver to EVERY address, wouldn't is save them millions to leave at secure locations spread across their territory.

In the future I think they'll merge a shop/showroom with collection center. That way people can see products for real while they collect (it'll serve as advertising) and there will be more land for housing to be built due to less stores being around.

petra• 10 years ago

There are parcel lockers which are very eficinet(10X producitivity increase for delivery drivers) .

But they require real-estate, and in the end the ansolute shipping cost isn't terribly far from home shipping(in urban environments) , and at that difference, people prefer home shipping, in the US.

But parcel lockers are quite popular in the UK, Poland.

VLM2• 10 years ago

I partially agree, however... the future is already here, just unevenly distributed.

In the old days shopping online meant fast delivery because they were selling luxury items in competition with overbuilt brick and mortar retail. Unless you get that music CD tomorrow afternoon, supposedly you'll invest two hours in going to a music store, waiting in line, waiting in traffic, waiting to park, waiting for mass transit, waiting to find your new CD, etc. But it hasn't been 1995 in a long time.

The future will look like my existing amazon subscribe and save delivery, I get periodic deliveries of stuff like shaving cream and toothpaste and all that kind of junk at a huge discount in a giant monthly box and I'm sure amazon makes stacks of cash being able to predict demand into the future and balance across distribution systems. I even buy my looseleaf tea from S+S. So in the future shopping will only be cheap, or at least affordable, if you're willing to wait till the 14th of the month when you get your monthly giant box. Frankly if I had to pay shipping out of my pocket and I didn't have Prime for other reasons, I'd probably wait until my monthly shipment.

UPS spends a lot of time and money driving those trucks all over creation to drop off a tiny little package of nothing at my door, often multiple times per week. Note the USPS was talking some years ago about abandoning 6 day service and going to 4 day deliveries.

My gut level guess is delivery will be like peapod but not food. An amazon warehouse will collect large shipments from all over the planet for a month, then toss my months worth of stuff into an amazon owned reusable shipping bucket, then fill an amazon owned truck with an entire subdivisions worth of buckets, then an amazon employee drives to my subdivision and drops one bucket per house and picks up my empties, and says "see ya next month". Or maybe every week. Or two weeks. I bet people will select neighborhoods based on how often amazon (and perhaps the USPS) service the neighborhood.

Soon, delivery is something a neighborhood will get, not an individual. Just like picking up the garbage is enormously cheaper to hit the whole district every thursday than to dispatch a truck to my house every time I fill one trash bag.

Finally you have the 1%er meme. As the last of the wealth concentrates at the top, you can't have billions of dollars in infrastructure for a quadcopter drone to deliver nothing important to a couple rich people at crazy expense without that world also being full of a hundred times as many people getting wood crates of rice delivered roughly monthly. Perhaps by horse carriage once the cheap oil runs out.

The partial agreement I have with you is the franchised pizza company a block from my house currently for insurance and licensing reasons cannot accept packages for me at their fancy truck dock. That'll change once the owner gets hungry enough for cash. Right now retail establishments, especially chains, are very silo'd and pretend the world outside their franchise or suppliers does not exist. When they get hungry that'll change. The only question is how it'll be financed. So my entire neighborhood uses the pizza restaurant or dive bar as their delivery address... do they rely on me leaving the waitress a tip or buying a round of drinks when I pick up my packages or do they extort money from the delivery company or the sender or maybe even me?

An interesting example of the future being here already is I keep trying to buy into a popular local CSA that delivers to my local food store and I always fail (probably popular because they're awesome). I'm not even sure CSAs are legal in every state. But the future is already here for CSA organic produce, if I ever get to buy in my delivery point is my local independent food store. (I'm told the food store is making fat stacks of cash off the CSA, empty cooler space makes them no money anyway so theres no loss, and people who take possession of heads of tend to buy salad dressing from the store, store sales are booming, etc)

mindslight• 10 years ago

- I'd rather have shipping be separate (but prominently displayed), so that buying multiple items in one order would be beneficial. But obviously a site has to have consistently good prices for this to make sense. (And eventually, a meta-buy engine that optimizes sourcing from multiple suppliers, but we can dream).

- I figure the prominence of free shipping has more to do with price fixing by the manufacturers (minimum advertised prices, etc), and perhaps rate secrecy by shipping companies as well. Since walk-in stores build logistics into the price tag, online retailers had to move to that model as well to have comparable prices.

- I still don't believe that direct shipping is three times the cost of brick and mortar fulfillment. I'd really like to see that accounting to make sure that it is including things like the full expense of running a retail store with employees, additional distribution centers, and clearance markdowns. I can see a strong temptation for a traditional brick and mortar retailer to count much of that as necessary overhead for their entire brand rather than attributing it directly to retail sales.

dsugarman• 10 years ago

- right

- kind of, I think really Amazon made this the default and did it unprofitably.

- right

I think they are just looking at the logistical costs using truckloads instead of small parcels, etc. The cost of slow moving inventory at a store is much higher than at a distribution center. The economics of a store is much different than the economics of a distribution center. There is a reason products are more expensive at a store than online and it is that the cost basis of running a retail store is higher than running an e-commerce business. This claim is absurdly intentionally misleading.

Animats• 10 years ago

I still don't believe that direct shipping is three times the cost of brick and mortar fulfillment.

That's probably a figure for companies which already have brick-and-mortar stores and also ship from those stores. Like Safeway. Companies with big automated fulfillment operations, such as Amazon, shouldn't incur such high costs.

fma• 10 years ago

Jet.com calculates that for you. Free shipping...but the more you buy, the cheaper the stuff is.

QuinnyPig• 10 years ago

Have there been any deep-dives into what Amazon pays for shipping on a per-package basis? At their volume, I can imagine that the cost per item shipped has the potential to be low enough that it costs more for the worker to put the item in the box than it does to ship the item out.

tyingq4• 10 years ago

I'm sure their volume drives deep discounts.

Their scale also allows them to have multiple warehouses spread across the US, avoiding high cost / long distance shipping of individual items.

They have other levers as well. For example, they cap what third-party listings on Amazon can charge for shipping...often the cap is lower than the actual shipping cost.

5partan• 10 years ago

Futurama fans of course know about this: http://m.imgur.com/BiYzbP4?r

TorKlingberg• 10 years ago

With Amazon Prime I am starting to feel like I am paying for shipping twice, first for Prime then baked into the item price too.

Very often I am looking at an item that would cost £5 in a store and it costs £7 with prime. Alternatively I can buy it from a non-prime marketplace seller for £4 + 3 in shipping. Then there is an "add-on item" for £5 where I have to buy at least £30 in total. And finally a 4-pack for £21 with free shipping. Either way I am clearly paying for the shipping.

StillBored• 10 years ago

What gets me, is that frequently when the item price+shipping are added together the $.01 used books cost more than the new ones. Often by 30-50%. There were articles a few years ago about how people were making more from amazon's handling charges because the US post shipping rates on books were so inexpensive that they would have been listing the books for free if it was possible. That was even before amazon seemingly caught on and increased the shipping charges even more.

paulmd6• 10 years ago

I had the opposite experience. During college I used to sell a lot of textbooks on Half.com, and shipping costs would almost always eat into the item price.

Out of the standard media-mail $3.99 hardcover shipping price, Half.com gives the seller $3.04. For combined shipping, each additional item costs $2.49 and Half.com gives the seller $1.40.

Out of the expedited $5.99 price, Half.com gives the seller $5.24. For combined shipping, each additional item costs $4.49 and Half.com gives the seller $3.49.

Good luck shipping a textbook for $3, even by media mail. I would hand-wrap each book using some bubble-wrap and kraft paper (a clean paper grocery bag) to save costs on packaging, but shipping alone costs more than the reimbursements. Some of my textbooks are essentially worthless since if I sold for the going price ($0.99) I would actually lose money.

kogepathic2• 10 years ago

Shipping directly to consumers is more expensive and energy consuming than shipping to a single location (e.g. a brick and mortar store).

However what this article is neglecting is that brick and mortar stores are built where people go to them. The land and building cost money, which the store typically pays for through a lease.

So, yes, shipping isn't free. But having products sit on a shelf in a store in the city isn't free either. Especially if said products depreciate in value and aren't sold quickly.

Basically, look at why RadioShack went bankrupt to see how this can backfire for brick and mortar.

Also, "Free" shipping from China isn't. The cost of shipping from China is subsidized by other countries. I remember reading that the price to ship something from China to your house in the US, USPS gets paid less than it costs them to ship.

Shipping rates from China are up for review soon, and the industry is expecting their rates to be re-adjusted, after which ordering from China will get a lot more expensive...

massysett• 10 years ago

Exactly...I'm waiting for an article saying that the air conditioning and toilet water in Walmart aren't free. Article is one big "duh". Of course shipping isn't free. It's up to the company to figure out how to reduce or recover this cost, just like Walmart optimizes its supply chain.

ryao5• 10 years ago

When will they come up for review? I want to know when the cut off is for placing orders at the current rates.

kogepathic2• 10 years ago

Can't remember when, but here's an article on it:

http://fortune.com/2015/03/11/united-nations-subsidy-chinese...

Edit: "As part of this reform process, China will be transitioned in 2016 into a category for more developed nations, who generally pay higher terminal dues."

eevilspock• 10 years ago

In the same vein, it is a lie that ad-supported websites are free.

https://news.ycombinator.com/item?id=12810076

losteverything• 10 years ago

Someone is already working on a reverse free shipping. Like "everything a $1"

E.g. pay $15 and fill your up your cart. Choose from thousands of items. Each combo has a value, of course. Shipping free.

Have third parties pay to place produce samples inside your boxes. Like Bill messages of the past

JoshGlazebrook• 10 years ago

There are been times where a store offers free shipping over $x.xx but offers free return shipping. So why not just add on a few things you don't want and then return them when you get them? You get free shipping on the things you want.

trizic• 10 years ago

Also consider by charging shipping, the seller might refund only the item price rather than total (depends on reason of return). While if the seller offered free shipping, they may be obligated to refund the entire price, even though shipping was included somewhere.

paulmd6• 10 years ago

If the item is offered at a competitive price then it effectively is free.

For example many items are sold at a fixed MSRP and no retailer will undercut it, but some retailers will offer free shipping while others charge me. That's actually free shipping from my perspective.

The same logic applies retailers that offer "free shipping for orders above $X". Can you argue that the cost is rolled in anyway? Sure, but rational actors think at the margins. The alternative is effectively paying twice for shipping, both the explicit shipping charge and the upcharge rolled into the price. Again, if the prices are competitive the retailer is essentially eating shipping costs for you.

robotresearcher• 10 years ago

"For many online shops, the cost of a free shipment is either folded into the prices for items or funded by investors."

No kidding. I'm having trouble imagining how the cost of free shipments is paid for by the remaining shops, if there are any.

(Amazon Prime is pre-paid, unmetered, not free, shipping)

uremog• 10 years ago

On a personal level, from ebay experiences and such (in the hundreds of items), this is what I've seen. Anecdotally and empirically, buyers largely prefer if the price of shipping is added to the item's price, and marked as "free shipping", over being marked separately.

ryao5• 10 years ago

They do not earn eBay bucks on shipping fees.

yetkin• 10 years ago

What is the truth anyway? Business news?

6stringmerc• 10 years ago

Still, someone has to pay the cost of shipping.

Yeah, and this article managed to get an unexpected rise out of me, touching on my experience in municipal finance, leading me to want to yell:

"Right and somebody has to pay the cost of maintaining the infrastructures like ports and airports and roads and I don't see anybody lining up to fork over the cash out of effing altruism these days."

Like, I get it, we all want free stuff, but dwindling tax bases and constant bitching about taxes just avoids dealing with the more practical angles of societal function(s).

owenversteeg• 10 years ago

Ok, so it seems nobody else is mentioning one of the big things that shocked me from the article: the claim that shipping, for the company that runs Saks Fifth Avenue, is more expensive than retail.

What? How on earth is a ridiculously high end Fifth Avenue retail location staffed with models and lots of hired security cheaper than shipping? Their Fifth Avenue location in particular is literally stuffed with expensive glass chandeliers. It's an ENORMOUS property on Fifth Avenue in NYC, the most expensive street in the world; one of their stores alone is worth four billion dollars. If you think "enormous" doesn't merit all caps, its shoe department has its own zip code. http://www.reuters.com/article/us-retail-usa-shoes-idUSN2435...

erichocean• 10 years ago

its shoe department has its own zip code

That's awesome. :)

thefalcon3• 10 years ago

FWIW, selling shoes online - especially to pickier clients at higher prices - requires a high return rate. When you're shipping both ways with no revenue to show for it, that adds up quickly.

totoroisalive• 10 years ago

Economy 101

DannyBee• 10 years ago

While not "free", also realize the numbers displayed by companies displaying the number separately are often complete and total fiction, even if you consider handling/packaging/whatever cost.

IE next day air from within (let's call it a few hundred miles) does not cost them $50-75 on a 1 lb package, because the volume discount of any company that does any real amount of shipping is very high.

The shipping cost at a good volume discount is <$15 for something like priority overnight (and the cost at a great volume discount is closer to 7.50).

Even if you consider their cost to make your order slightly special, package it, whatever, it's still complete fiction.

I often see companies with separate shipping tell me something absurd, like it'll be $150 to overnight something. At which point i just tell them to charge my fedex account instead, because it costs ~10-20% of that.

So when i hear "they are having trouble keeping up with costs", maybe that's because they are trying to put too much of their margin into handling fees.

nikolay• 10 years ago

I can't believe that anybody has not mentioned ShopRunner [0] in this "analysis"!

[0] https://www.shoprunner.com/

Johnny5552• 10 years ago

Direct-to-home has a supply chain cost three times higher than a store-based model... It's because it's really expensive ... It’s a very expensive model and it’s not less expensive than the store-based model

I don't doubt that's true, but you're not going to get me into the store, so if you want my business you're going to have to ship my purchase to me, so figure out how to make it sustainable. Regardless of how much more expensive mail-order is, it's going to become a larger part of retail business.

I suspect that it's much worse for merchants that have a brick and mortar presence - they are paying a lot of money for those stores, and the incremental cost of serving one more customer is virtually zero, while there's a material cost to pack and ship a package.

alwaysdoit• 10 years ago

Free shipping is still valuable if you might return it, because shipping costs are not typically not refunded, but shipping costs baked into the purchase price are, unless they specifically state a restocking or return fee.

anotherevan• 10 years ago

I have no problem paying for shipping as a separate item. It is frustrating though when sites make it hard to figure out what the shipping will be. The good sites let you identify down to your city without having to enter other details (like email address, or even credit card details) before you even get to the check-out phase.

I will often play around with the order to try and maximise against the shipping cost. e.g., I use to order protein bars and would order the maximum number that wouldn’t bump me up to the next shipping class, to get the best value per bar.

My biggest gripe, living in the Antipodes, is that many foreign companies have really expensive shipping costs to ship internationally. I suspect we’re often not a big enough market to make it worthwhile for them to fine-tune the costs, but it still sucks when shipping can be 40-60% of the cost of an order.

e.g. I really want to try out some Death Wish Coffee, but ordering 2 lbs at US$38 plus US$27 to ship to Australia, vs US$6 for US shipping, sucks.

Some places feel like they are really gouging you on the shipping costs. (Not saying that’s the case with the coffee above, just that it costs a lot.)

ezzaf• 10 years ago

I suspect the reason is that it is just straight up expensive to ship to Australia from most places. We're actually quite a long way way. Adding to this is that most only retailers aren't shipping enough overseas to negotiate bulk rates like they can for domestic shipping.

The exception is businesses that do ship a large amount to Australia. Examples of this are online book and bicycle retailers in the UK and Amazon themsleves in the US. Their lower shipping prices are likely a combination of subsidisation and bulk discounts.

If you want confirmation Death Wish isn't trying to rip you off, compare against the USPS pricing calculator for a similar package. You can also check against what a freight forwarder (who do get bulk discounts) charge, and you'll see it's not much less. I recently got a similar package shipped to me and I remember paying pretty much bang on $27.

FrancoDiaz• 10 years ago

It's more than just free shipping. It's the two-day shipping that Amazon and Walmart are offering with Prime and Shipping Pass.

The problem with the smaller e-commerce shops is that most people aren't going to subscribe to 3,4,etc... annual service fees...especially for small places.

It took me a while to justify Walmart.com's Shipping Pass fee, but once I saw the huge discounts that I can get on bathroom and household stuff, then I got on board.

RandyRanderson• 10 years ago

Just a note for Americans that are not aware: the rest of the world, generally, pays a lot more for the same or inferior items. Some Canadian examples:

0 Shipping - Free shipping is much less common within and to canada; it's also more expensive, in my experience.

1 Duties/import broker;s fees - Can be tens of dollars, even for items whose value is about that.

2 Taxes - Typically, bringing across items with net value more than ~150USD will have taxes levied (~15%, depending)

3 Straight-up 'gouging' - For example, the exact same book in canada will typically be 10-30% more, even taking into account exchange rates. I'm sure the differences can be partially explained but I've never seen good reasons.

4 Product differences - Cars are a good example here. In the US often the 'base' model will have features CA versions of the same cars require upgrade packages for.

5 Product Choice - The bigger US market means more colours (or colors even), wattages etc to choose from

6 Warranties - I haven't taken a survey but whenever I've checked the US warranties are as good or better.

And that is just CA, EU countries generally have it worse if my UK friends are to be believed.

woliveirajr• 10 years ago

Remembers me of http://romain.goyet.com/articles/free_shipping_from_china/

Where the author wonders how a single button, costing less than 5 dollars, can have free shipping from china to france.

ryao5• 10 years ago

AliExpress puts a markup on the actual item versus the price that you would pay in China. That could partially explain it.

In other posts in this discussion, kogepathic claimed that the cost of shipping is subsidized by other countries and webscaleizfun even posted a link to evidence of the US subsidizing the cost of shipping between China/HongKong and the US:

https://news.ycombinator.com/item?id=12857444 https://news.ycombinator.com/item?id=12854573

Maybe France has a similar arrangement. That combined with the markup Aliexpress charges would explain it.

Edit: According to jeromegv's link to the Washington Post, this is by international treaty and almost every country is subject to it:

https://news.ycombinator.com/item?id=12857145 https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...

Consequently, France is subsidizing the shipping costs for AliExpress.

yyhhsj0521• 10 years ago

Why is shipping so expensive in US? I live in China, and virtually every online stores here offer free shipping, even for for example a screwdriver which worth less than 5 dollars. I once researched into it and found that if you are a store owner and have many packages to be delivered everyday, the price can be as low as 30~50 cents per package.

And it's really efficient. Basically no shipping would take more than a week. Average time would be 3~4 days.

ryhamz2• 10 years ago

Your country's highest minimum wage is what the lowest possible earner in the US (federal minimum) makes in about 1 week, assuming just 40 hours of work.

That's also why food delivery is cheap/free in Asia as well as cleaning. I'm an expat in Hong Kong and these people basically own modern slaves. ~$550 + food and shelter for a live in worker that works 6 days per week.

Anyone in the US that touches the delivery process is getting decent money compared to a low skilled Chinese worker.

ryao5• 10 years ago

I am visiting China and only about half of my taobao orders have had free shipping. In some cases where I paid for shipping, there was a free shipping option, but the price + shipping was lower for another listing of the same item where I had to pay for shipping.

Also, shipping is not always quick. Sometimes, the merchant doesn't have the item in stock that they listed and rather than delist or tell you, they just leave your order in the system until you contact them. Then they tell you to ask for a refund. I have had it happen multiple times over the past 2 weeks with enterprise-grade network equipment like SFP transceivers and media converters. I even had it happen with a TP-LINK TL-EP110.

duncan_bayne• 10 years ago

TANSTAAFL - There Ain't No Such Thing As A Free Lunch. This applies to services like education and healthcare as much as it does to shipping.

If there's one word I wish we could banish from common usage, it's "free" (as in gratis, not libre).

Discussions around economics and politics would become much more transparent and honest if we used phrases like "taxpayer funded education" and "customer subsidized shipping".

hippich• 10 years ago

Speaking of Amazon - if you have Prime membership and buy something with "free" shipping from third-party seller fulfilling via Prime, seller still pays ~25% - 30% of the total to amazon to ship this product. So all sellers factor in shipping into prime price.

Where it get really bad - when you do NOT have prime - you also get charged extra for shipping, yet seller still pays same cut to amazon! :)

kalivia• 10 years ago

Free shipping seemed to be a necessary evil to get people shopping online. First free shipping and then same-day delivery got people past all of their mental hangups of online shopping. Now with more small businesses entering ecomm, there will probably be more consumer flexibility on shipping costs. But to get people in the door, it was necessary.

“Free” shipping is not actually free

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