by Carlo Longino

Free Shipping Bites Into Online Retailers

from the read-this-free-with-$25-order dept

Three-fourths of online retailers offered free shipping promotions during the holiday season, a research firm says, and all that free shipping is hurting their bottom lines, particularly in light of rising fuel costs being passed along by shipping companies. Analysts say that the promotions were a driver of a strong online shopping season, and that shoppers will expect to see them again next year, putting pressure on retailers to again offer them. Shipping fees have been a bugbear for many online sellers, as they try to come up with an ideal balance between covering costs and keeping prices low enough to attract buyers. Amazon's aggressiveness isn't helping matters, creating an expectation among consumers that free shipping is part and parcel of online shopping. It's quite a change from when shipping charges were profit centers for online retailers, and it's questionable if all this free shipping is sustainable in the long term. Online retailers need to remain cogiznant of -- and be more upfront about -- items' total cost, including shipping and any applicable taxes. If they can't keep that under those of brick-and-mortar stores, something's not right. It sounds like, though, shoppers can expect to see less free shipping, but maybe more interesting interpretations of the term.

Reader Comments (rss)

(Flattened / Threaded)

  1. identicon
    Myself, Jan 11th, 2006 @ 3:17pm

    A take I haven't heard before.

    Seems to me that the whole mess would be more efficient if they didn't drive every delivery route every day. I'd like to see the shippers, even the USPS, set it up like this:

    Some routes get monday/wednesday/friday service, some get tuesday/thursday/saturday service. Bam, vehicle expenditures just got cut essentially in half. Each route takes a little longer since the same number of parcels are being delivered, so the drivers work slightly fewer hours, but nowhere near as drastic as half.

    Certain routes, like office buildings that have their own ZIP codes, could still get every-day service if they wanted it. High-priority packages, which go out first thing in the morning and frequently have the drivers backtracking over the same routes, would still justify a special trip.

    Seriously, if I'm getting the bargain-cheapest shipping anyway, what difference is one more day going to make?

    The only way it works though, is if it's across the board. An entire route goes alternating-days, or it doesn't. Otherwise you're still driving the same route and just stopping less predictably.


    reply to this | link to this | view in thread ]

  2. identicon
    Reverend Kennedy, Jan 11th, 2006 @ 3:43pm

    Re: A take I haven't heard before.

    I thought the shipping costs just paid for shipping instead of going into the company's pocket in the first place, hmmm.

    reply to this | link to this | view in thread ]

  3. identicon
    Mousky, Jan 11th, 2006 @ 5:04pm

    Re: A take I haven't heard before.

    First, you only find "routes" in areas that experience lots of volume (for example, downtown and business parks). Drivers are typically responsible for a given geographic area. Deliveries are scheduled according to time of delivery (9 am, 10:30 am, next day, two-day and so on) and geographic location to minimize backtracking. Same thing for pickups.

    Second, switching to alternating days does not mean that vehicle expenditures "just got cut essentially in half". That may be true if your are operating between 40 to 60 percent capacity. If I own a delivery company with 100 vehicles, switching to an alternating day system does not mean that I can eliminate 50 or so of my vehicles. Besides, switching to alternating days could mean more deliveries over longer routes or larger geographic routes, which could increase costs.

    reply to this | link to this | view in thread ]

  4. identicon
    trainbuff, Jan 11th, 2006 @ 8:21pm

    Bring back Railway Express Agency.

    One enduring symbol of railroading’s past is the red-and-white diamond herald of the Railway Express Agency. Today one finds reminders of REA only at museums or old depots, but it once was a major element of the American scene — the FedEx of its day. http://www.trains.com/Content/Dynamic/Articles/000/000/003/132swiza.asp Bring this back & shipments could be picked up at the nearest REA depot at the freight train trackside. Or a truck depot at a highway interchange. Cheaper than door-to-door.

    reply to this | link to this | view in thread ]

  5. identicon
    Tidybol, Jan 11th, 2006 @ 10:01pm

    Re: A take I haven't heard before.

    It is sad that companies attempt to profit from shipping.

    My take is relatively simple. Why not simply charge shipping for what it really costs. I know damn well it doesnt coat $4.95 to ship a CD or DVD. I honestly wouldnt mind paying a reasonable cost for shipping. It doesnt have to be free...just reasonable.

    reply to this | link to this | view in thread ]

  6. identicon
    Anonymous Coward, Jan 11th, 2006 @ 10:55pm

    Re: A take I haven't heard before.

    $3.85 for USPS Priority Mail with Delivery Confirmation (semi-tracking number), and the difference between that and you $4.95 has something to do with packaging materials, and the cost of the packer's paycheck to make it all happen -- and in some cases, have it prepared or even delivered to the mail drop-off point (post office).

    $5 for the shipping of a CD or DVD is extremely reasonable, taking all the aforementioned into account.

    reply to this | link to this | view in thread ]

  7. identicon
    No way, Jan 11th, 2006 @ 11:11pm

    Re: A take I haven't heard before.

    USPS "Media Mail" can send a CD to someone across the country for $1.59. If a company really cared about how much shipping costed they would find the best options. 75% of most shipping costs just go to making the item you are buying the real price they want you to pay for it. Just look at all the TV ads where they say you get "free blah blah for life", and you still have to pay shipping costs. Obviously they are making profit off of those "free" items.

    reply to this | link to this | view in thread ]

  8. identicon
    Ron, Jan 12th, 2006 @ 12:11am

    Too bad

    Too bad, it's the price of doing business online today :)

    If you charge for shipping, then beware.. there are 10 others that will be happy to steal your customer and offer free shipping to them. (Hey if you don't like it then maybe you're in the wrong business)

    Personally I expect free shipping. I mean, why should I pay to have my stuff shipped when 'Online Store B' can offer me the same price with free shipping?

    Never agree to pay to have your stuff shipped, make the retailer foot the bill.. you're already being generous enough by simply ordering their product. Honestly, most don't even have rent to pay on a physical store, nor employees, nor health insurance.. boo hoo should we bring out the violin?

    reply to this | link to this | view in thread ]

  9. identicon
    Oliver Wendell Jones, Jan 12th, 2006 @ 5:13am

    Re: A take I haven't heard before.

    I thought the shipping costs just paid for shipping

    You are correct, but you've not used the entire name for this surcharge - Shipping & Handling.

    The latter half, the Handling, is the part that has always been a revenue source.

    This has gone completely out of control on ebay recently with people selling items well below their wholesale cost (i.e., DVDs for $1) and then making it up in insanely high S&H prices (i.e., $15 to ship a DVD via USPO). You can always tell the rip-off artists because they don't allow any discount on S&H for ordering multiple items, they don't allow local pickup, etc. You *have* to pay their outrageous S&H charges if you want to deal with them. My favorite ones refuse to ship unless you pay extra for insurance, too. I won't usually pay insurance for anything less than $50, so I simply won't do business with those types of sellers.

    reply to this | link to this | view in thread ]

  10. identicon
    Scott, Jan 12th, 2006 @ 5:40am

    Re: Too bad

    I hope you aren't serious.....generous enough to buy their product, no employees, no physical store? They still have employees, call centers, data centers, customer support reps, bandwidth, hosting fees, etc. Many on-line retailers still have warehouses too.

    I didn't realize I was being generous when I bought something, I thought it was usually all about me wanting something.

    reply to this | link to this | view in thread ]

  11. identicon
    Brewski, Jan 12th, 2006 @ 6:48am

    Ship to store

    Wal-Mart is taking their internet operations and ccombining it with their their brick & mortar stores. They are trialing a "Site To Store" system where you can order it online and pick it up at your local Wal-Mart. It's currently only available in the Dallas area, but it's still better than paying for shipping on items that aren't carried in the local store and especially heavier stuff (like furniture) that costs a fortune to ship.

    reply to this | link to this | view in thread ]

  12. identicon
    Ron, Jan 12th, 2006 @ 3:30pm

    Re: Too bad

    "I didn't realize I was being generous when I bought something, I thought it was usually all about me wanting something."

    True, yet we live in a free market system of supply and demand, free of (generally) government control. Otherwise, you would be forced to pay whatever price the merchant would have you pay, and be subject to their conditions/terms/whatever: You could be forced to wait in line for hours for a loaf of bread and could be charged $2,000 for it, like the old Soviet style economic system. The merchant could sell you a moldy loaf, or half a loaf for whatever price he demanded.

    You would be at the mercy of the whims of the merchant.. take it or leave it, he's the only bread merchant allowed to sell loaves of bread. In a free market, one of competition, the consumer has the final power of choice, not the merchant. It is YOU who tells the merchant how you will buy their product.. you have your pick of merchants who will bow to your wishes.

    You should definitely exercise that privelege, and exercise it often; never settle for how a merchant tells you that you should consume their product/service, it's ultimately your choice. You are being generous.. as you could always give your business to the competitor down the street.

    reply to this | link to this | view in thread ]

  13. identicon
    Dianne, Jan 31st, 2006 @ 3:19am

    Re: Bring back Railway Express Agency.

    My father worked for REA for 36 years. I have a photo of him that they used for advertising at one time. I have many good memories of company picnics in Miami and visiting the terminal there and in Tampa when he was transferred there. Do you have any records of the Miami terminal? and if so, any photos...I am interested in seeing the Railway Express Agency brought back as a viable entity as well.

    reply to this | link to this | view in thread ]

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