What is it about the “idea” of free shipping that is so attractive? I, myself have been lured by this phrase many times. But how can this be? UPS, FedEx and the USPS don’t work for free. Does it really matter? At least we’re saving some money.
A retailer throwing in the cost of shipping as an incentive for buying their product is believable enough. For instance, on Amazon.com if you spend over $25 you often are eligible for free standard shipping. Since many of the items Amazon sells are books, CDs and DVDs, one could see how eating a dollar or two is possible–especially since Amazon is such a huge seller. It’s not like they are paying the same shipping rates as the average Joe on the streets. They get deep discounts and they play the averages to know that in the end, they won’t lose money.
Where you should be especially suspicious about free shipping is on large or heavy items. Things like heavy 6 gallon wine kits are extremely expensive to ship. It doesn’t matter how large the company selling these items may be. They are not going to be able to negotiate the price down enough with the carrier to give away free shipping. The cost is going to have to be made up somewhere.
So, how do retailers offer free shipping on these larger items? There are several ways, but here are the most common methods:
- They hide the actual cost of shipping in the price of the item. This is an especially effective tactic on expensive items. For example, let’s say an electronic grain brewing system is priced at $650. The retailer may pay something like $500 for it. If the retailer is a big shipper, they may be able to negotiate a shipping rate of $25. So they offer “free” shipping to spur interest. In the end the retailer is still making $125 and has probably charged a higher retail price to cover those charges.
- Another particularly effective method is the use of “standard” shipping. Let’s take the example of an industrial bottle filler. The retailer may offer this device for $2700 with a cost of $2550. The actual cost of shipping is $150. Of course if they offer free shipping, they won’t make any money. So how can they do it? They offer free “standard” shipping. The customer is told that the order may take 2 to 4 weeks for delivery, but if they wish to receive it within the next few days they can use an expedited shipping method and the cost will be $200. Of course many customers will have an immediate need for that device, so they will go ahead and pay the extra shipping charge. The retailer actually makes an extra $50 on the transaction and this helps defray the costs of the customers that accept the free method. It’s just a matter of averages.
- Another common ploy is offering something like, “Free Shipping on all Orders over $50”. More often than not, a company doing this has marginally inflated the base price of all of their products just enough to make up for the lost shipping expense. Larger orders equate to more profits. Once again, it is a matter of averages.
The same principles apply to low cost shipping. The lesson here is that shipping is always charged, even though it may not be plain to see. You may think, “No big deal, at least I’m saving money some money!” The reality is that you are always paying for shipping, one way or another.
I’m a strong advocate of showing customers the true price. This is one reason why EC HOMEBREW always charges for shipping. We employ a fair, weight-based shipping policy using the lowest cost, most popular carriers like USPS, UPS and FedEx. We want you to understand that we are not hiding anything. Along those same lines, we don’t treat shipping as an additional means of profit. Our goal is to break even on shipping. There are times when we may make or lose a couple of dollars on shipping due to fluctuating carrier rates, but we never intentionally overcharge. We are in the homebrew business, not the freight business!
There’s a lot more to be said about free shipping. I know some may think it is a boring subject, but when you’re purchasing items online, it is a subject that deserves special consideration. I also don’t want you to think that everyone offering free shipping is trying to rip you off. There are good deals to be had, but it is in your best interest to reflect on all the costs of your purchase. Don’t fall into the psychological trap of believing the flawed American eBay and Amazon free shipping models are the end-all. Don’t abandon the cart when the additional shipping amount displays after you have entered your shipping address! The main thing I would like you to gather here is…
In most cases, Free Shipping is a Lie!