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Free Shipping isn’t Free and it Isn’t Sustainable

By December 9, 2016Fashion, Online Sales

Ever since Amazon started offering free shipping, households stopped being willing to pay for shipping on small orders. Retailers have been trying to adjust prices to help accommodate a free shipping offer, some designers just bite the cost because they know that even low shipping prices causes people to abandon their shopping carts. This causes retailers to have to deal with the high logistics cost.

The rise in shipping costs is directly related to the rise in fuel costs. Crude oil broke $50 USD a barrel, which has been effecting many industries with the sudden rise in oil based costs. This includes plastics that are used to keep transported item safe, and in many cases the plastic tape that seals the boxes. America’s trucking has been at an all time high, with an all time low for local pick ups. People have accused amazon of shipping air- bad packing policy lowers the amount that can be trucked from one place to another. Speculations about raising the minimum wage and price increases might also further raise prices but I don’t like speculating.

When Walker Sands ran a survey on consumers, 9 out of 10 online consumers considered free shipping to be a major factor in their buying habits. This same study found that the consumers they surveyed shopped online at least once a week. The main Whitepaper can be viewed at Walker Sands here– they even have a brief overview in video format.

According to the same Walker Sands study, companies have been spending 1/3rd of their capital on fulfillment (including logistics and delivery options unpaid by consumers).

This has been painful for many retailers- including Amazon- who are trying to discover ways to move the cost of the bill to the consumer. With the uncertainty in the market place, the cost to ship has been cutting even more into company’s revenues. In 2006 Amazon reported shipping costs to consume 3% of revenue, but in 2016 they have reported it’a 5% (almost becoming 6%). More and more small retailers have had to make decisions about being upfront about shipping costs or try to hide the costs in their ticket prices.

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