Free Shipping: Does it Really Save You Money?

Ah, free shipping! Is it the greatest invention of the 21st century, or an election year gimmick to get your web viewing attention? I suppose it all depends on your definition of the word ‘free‘. Webster says that, among other things, ‘free’ means: ‘not costing anything‘. When was the last time you sent a package to a friend or relative and the shipper delivered it ‘without costing anything’? I am going to guess that this has never happened to you. If one defines free as any blank space on an invoice where the shipping charges are normally are applied, then your world is simple and blissful.

Check Your Receipt

Unfortunately, nothing is free, especially shipping; we live in a world where oil is now $100 a barrel and fuel prices are rising daily. Shipping is a significant portion of the cost of any product, whether it is delivered to you or you pick it up at the store.

If I were an online merchant and used the ‘FREE SHIPPING’ term in all of my advertising, and all over my store to entice customers, I would need to have a plan for recovering my shipping costs. And since the only three charges on an online invoice are merchandise, tax and shipping and most people know what their local tax rate is, the only place to make up the difference is in the price of the merchandise.

Now the question for the merchant becomes how much more to charge for each item and what break-even methodology to use. I could charge a whole bunch more on each item (say 10%) so that I recover my cost on even the smallest orders, or I could charge less (maybe 5%) and establish a threshold for the free shipping (perhaps $50 or $100). Both of these work out great (if you are the merchant.) If the merchant uses the first method, the customer pays more than they should on any large order, and when the merchant uses the second method, the customer pays more than they should on small orders. Wow, how disappointing.

Do the Homework

We have shown that there at least two different ways of achieving the goal of ‘free shipping’. Combine this with the more traditional (OK, boring) method of charging explicit rates for shipping; now we have three ways of buying. If I am the average consumer, the reason I am shopping and buying online is because I am busy and don’t want to be bothered with the hassle of picking up items which could otherwise be delivered. Interestingly, Webster also defines free as: ‘relieved from or lacking something and especially something unpleasant or burdensome‘. Well, there you go! As an online shopper, you are immediately free from the burden of picking up your merchandise. Since you have all this extra time to fritter away, why not do some comparison shopping. I would advocate the use of comparison shopping whenever possible to shed some light on the full cost of doing business at any site which advertises ‘free shipping’.

How Bad Could it Be?

This depends on your definition of the word ‘bad’ … I did some comparison shopping yesterday, using our online store and four of our competitors. The first one used a $100 threshold for free shipping, the other three had free shipping with no minimum order.

To demonstrate a meaningful comparison, we chose the top four competitive sites as ranked by Google’s (organic) results for such as high volume terms as ‘flatback rhinestones‘, ‘hotfix rhinestones‘, ‘crystal rhinestones‘, or ‘bulk rhinestones‘. Each site consistently appears on the first or second page of results for all of these terms.

Here is what we used for our market basket comparison:

• 1 Gross Swarovski Flat Back 12ss Standard Color (any single color)
• 1 Gross Swarovski Flat Back 16ss Standard Color (any single color)
• 5 Gross Swarovski Flat Back 20ss Crystal (one color)
• 3 Gross Swarovski Flat Back 20ss Standard Color (any single color)
• 1 Each Gem-Tac Adhesive 3.7 oz.

Here is how they stacked up:

• RhinestoneBiz: $96.41
• Competitor-1: $102.35 (this one had the $100 free ship threshold)
• Competitor-2: $111.22
• Competitor-3: $133.27
• Competitor-4: $158.54

As you can see, the competitor who uses the threshold (cost recovery method #2) came the closest in price, and those that had no minimum (overcharge for everything) did poorly or miserably.

Could it Get Any Worse For the Competition?

Unfortunately, it can. One important ‘feature’ which is not advertised on the sites which claim to have free shipping is that each utilizes USPS Regular Mail as the delivery method in the U.S. There is nothing wrong with USPS Regular Mail, if you are sending a letter. However, if you are shipping merchandise, there is no insurance value and the expected (cross-country) time in transit is 7 days. Included in the Rhinestone Biz price of $96.41 was USPS Priority Mail (2-3 Day Service) and our optional full insurance coverage. If you were to add these items to the competition bottom line, the difference would be staggering.

Summary

We have shown how sites advertising free shipping can charge you 10% - 50% (or more) than you should be paying and don’t offer an acceptable transit time or insurance on your order. If you are looking for a wide selection of rhinestones in any quantity, please do your comparison shopping. I am absolutely convinced that you will find the selection, price and delivery terms at Rhinestone Biz will beat any competition.