There Is No Such Thing As "Free Shipping" - OddGoods

There Is No Such Thing As "Free Shipping"

There Is No Such Thing As "Free Shipping"

Before I delve in, allow me to preface by saying that this topic will rub some of you the wrong way..."Why is he trying to make me feel guilty for trying to find a deal?!" I get it, but that's not my intention—My intention is to explain shipping expenses from the point of view of the maker. It's a touchy topic and let's be honest, no one likes to be put on the spot, about anything. However, this is an important, even crucial, consideration for small businesses and I've never been one to shy away from an honest conversation about a touchy topic, so here goes ...

Shipping is the single biggest pain point for a small online business.

Amazon has single-handedly made it nearly impossible for every other business to compete on shipping rates. $5 per package, no matter the size. How can they offer such inexpensive flat-rate shipping to customers and remain a viable business? First, it's important to note that it's a brilliant marketing campaign, not a reality. Someone always pays for shipping.

Shipping rates depend on weight, package dimensions, and distance. This is a base reality for everyone, even Amazon. Amazon is still subject to the same rate calculations that you and I are subject to when we mail anything through the USPS, UPS, FedEx, or any other carrier. The difference is that Amazon subsidizes shipping costs with a variety of clever marketing tactics that make you think you are actually saving money including: Prime membership fees and a vast array of free content that continually brings customers back to spend more and more and more money.

Amazon's shipping expenses in 2018 totaled $37.9 billion. In 2020, that total fell just shy of $53 billion.

Read that again, Amazon paid $37.9 billion in shipping fees to maintain their $4/per package fantasy. How can they afford to do this? Amazon's total revenue in 2018 was $232.89 billion, with a "B". Their 2020 revenue surpassed $386 billion, with a much bigger "B". After subtracting all of their operating expenses (including shipping costs) and, no doubt, wrangling some very creative accounting to avoid taxes, Amazon still posted profits of $10.1 billion in 2018 and $21.33 billion in 2020. 

Amazon may have been able to negotiate a volume discount with the USPS, but if their shipping expenses are any indication, they aren't paying $5.00 per package—They can simply absorb the cost of shipping packages to consumers and still post mind-boggling profits

What does this have to do with small businesses?


Shipping is a convenience. There isn't a delicate way to say this ... Your expectation, dear consumer, that the people (small businesses) you support with your wallet should pay the shipping costs for your convenience hurts their small businesses.

As a small business owner with an online store, every single marketing professional will tell you that if you don't offer free shipping, you'll never survive. Every. Last. One. This refrain is so ubiquitous, you can see the words dripping out of a marketing professional's mouth before the words are even spoken. "Get excited!" about holiday sales events they say. Just make sure you give customers the steepest discounts you can offer AND free shipping and all of your sales goals will materialize out of thin air. 

This is laughable horseshit.

The breadth of costs that come with running a retail business on or offline is anxiety-inducing: Manufacturing, warehousing, design, packaging, space, labels, website hosting fees, utilities, labor, marketing, advertising, customer service, software, and postage fees. There are approximately 24 million ecommerce companies online around the world. The vast majority of them are small, independent, mom and pop shops just trying to make a living selling products they believe in but do not have the financial resources needed to access to the worldwide distribution networks of larger companies.

Small businesses generally do not have the financial flexibility to offer "free shipping" in combination with product discounts, but they do. Some raise the cost of their products to cover the cost of shipping. Some simply eat the expense of postage and hope to double or triple their sales volume to make ends meet. While others employ various marketing methods and gimmicks to give you the impression that you're getting a deal ... because that's what you demand from them, a deal. No matter what the deal is—Free shipping, discount codes, coupons, holiday sales, etc.—every discount equates to a loss in profits for a small business owner. And every loss in profits increases the difficulty of staying in business.

Ever wonder why one puzzle company charges $25 for a puzzle and another charges $29.99 or $34.00 or even $40.00? Once you pass a certain threshold for manufacturing, there is very little difference in materials or the actual manufacturing process from one puzzle or puzzle company to the next—The suppliers we hire to manufacture our puzzles generally use the same materials and the same machinery. That additional cost comes from one of two things: Where it's produced and, you guessed it, shipping.

Yet, because Amazon has created this fantasy realm where all packages cost $5.00 to mail, the average consumer's expectation is that every online retailer should be offering $5.00 shipping—Never mind that you, yourself, can't walk into your local post office branch and get that rate, because it doesn't exist

The average cost to mail a package through the USPS that weighs less than one pound is $6.95.
Packages weighing over 1lb or have non-standard shapes will typically cost a minimum of $9.20 to mail.
The average weight of a 1000 piece puzzle is approximately 1lb 7oz—The base cost to ship a single 1000 piece puzzle with box dimensions under 12"x 12" via Priority Mail from Seattle to New York or Georgia is $15.20.
This means that the small puzzle-maker you love who is offering you a flat rate of $5 or $10 shipping is paying out his/her own pocket between $5.20 to $10.20 of your shipping cost to send you the puzzle you purchased ... Or this cost has been added into the retail price of their puzzles.**
If they are offering free shipping, it means that the small business owner is paying 100% of your shipping cost for a purchase you made. 
When you ask a retailer, "can you reduce the cost of your shipping, it seems expensive?", here's what you are really asking: "Your discount is great an all, but I don't think I should have to pay standard shipping rates because I'm buying your product to 'support you', so how much are you willing to pay me for my support?

The USPS (or any carrier) doesn't adjust their standard rates simply because an online retailer offered free shipping, nor does it reduce shipping costs because consumers think shipping should be cheaper. In fact, we don't even calculate our own shipping rates—the rates you see during checkout are pulled directly from the carriers. That's our cost, regardless of any discount we choose to give to our customers.

**Note: I'm not including companies who earn enough to afford national or international fulfillment warehousing to help offset shipping costs because most of us can't afford it.

Why don't you negotiate your shipping rate with the USPS?

Do a Google search for "how to save money on shipping costs" and you'll pull up dozens of articles with tips how to save money as a small business. Among the most ubiquitous is "did you you know that you can negotiate a lower rate with the USPS?" Problem is, it's nonsense.

You don't walk into you local PO and sit down with a post office manager and haggle for a shipping rate like you're buying a rug at a bazaar. 

The USPS offers two rates, the walkup rate and a commercial rate. In order to qualify for their commercial rate you must be able to prove that you ship a minimum of 500 packages per month. Period. If you qualify, you will receive a flat discount of $.54 per package. That's it. There is no negotiation. You either qualify or you don't for the standard commercial rate.

There is only one exception to this rate that benefits one company, Amazon. Amazon gets a sweetheart deal with the USPS by exploiting provisions in the Postal Accountability and Enhancement Act. The USPS subsidizes $1.46 per package for Amazon deliveries. FedEx and UPS do not get this rate. 

Think domestic shipping is pricey?

International shipping is a whole different ballgame—in addition to the base shipping charge, fees are also levied for customs duties. There is no average cost, but shipping a puzzle overseas will cost between $20-$60 for basic service. If you want accurate tracking or to combine import duties with the base shipping fee, expect the cost to rise exponentially.

The dilemma is real.

As small business owners, we intimately understand that our existence depends on your support. We all want you to become loyal customers and to rely on the quality and uniqueness of our products. And yes, we'll do everything we can to offer our VIP customers deals, when we can. It bears repeating that every single coupon, offer, or deal we pass along to our customers impacts our business.

By supporting small businesses, you are directly supporting a real person who actually cares about your opinion and patronage. You are supporting their families, their employees, their suppliers, and their local communities.

If you find an online retailer or maker who you love, the single best way you can support their small business is by paying for your shipping.

I get it, shipping is expensive. But what is your time worth?

Think as a small business owner for a moment: What is your hourly rate—$10/$20/$40/$100 per hour? How much does it cost you per hour to drive to your local store, browse for a puzzle, and return home? How much did you pay for gas? The odds are that it's more expensive for you to shop than it is to pay for shipping. After all, time is money ... even if you don't draw a salary.

Yes, it's a treat to go to your local puzzle store and lose yourself in stacks of colorful new puzzles and it's always fun to discover new things you didn't know you needed (like a black and white puzzle) ... But it's not free. 

One way or another, you pay to get that new puzzle home.

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