Jeff Koeze's Blog Good Food, Good Business, and the Good Food Business

30Oct/090

A Truth about Shipping and Handling

Yesterday I was reading the customer comment list for Koeze Direct for the week, and came across this comment: "You people make more money off shipping than the product."

Resistance to shipping and handling charges is growing among our customers, and I believe this is widespread.   I also find it rather curious, first, because it is a real and valuable service that mail order and web retailers provide, and second because as more retailers move to so-called "free" shipping, transparency in product pricing will decrease, which is never good for consumers.

Just to set the record straight, however, Koeze Direct strives to break even on shipping.  We collect more than we pay on some shipments, and less than we pay on others.  This is because we charge freight off a simple chart based on value, and the actual cost of a shipment depends on weight, distance, and surcharges (for fuel, residential delivery, etc.).   But our charges are usually less than you would pay to ship it yourself.

To give a concrete example:  Koeze Direct charges $8.95 to ship a 30 oz. jar of cashews, which packed to ship weighs 6 pounds.  Shipping that the cheapest way possible via UPS (basic ground, within a single UPS zone, to a commercial address) costs $7.90.  But send it a bit further -- say St. Louis, Missouri -- and make it a residential address -- and the charge is $11.72.  And, mind you, in the S+H charges Koeze provides the box and other packing materials, and they get the package into the shipper's hands (perhaps saving you a trip).

Because the products are heavy compared to most others, Koeze doesn't feel that they can make a profit on shipping and handling and stay competitive with folks who sell stuff that weighs less.  But many, if not most, shippers do make a profit on their shipping operations.  Personally, I don't think that is a bad thing.  Lots of businesses provide a combination of products and services, and almost all attempt to make money on both.  The example that leaps to mind is getting your car fixed.  You pay the hourly service rate, plus the costs of the parts.  The auto repair shop makes money on both.

I do think that the emphasis on "free" shipping is a bad thing in the long term for consumers.  Free shipping isn't free.  Customers are ultimately going to pay for this service, whether they pay in higher merchandise prices, or as an added charge, or in some other way.  (As my father always says, "There ain't no free lunch.") What customers lose is the ability to compare prices as carefully when merchandise and services get blended into a single price, as they do with retailers who offer so-called "free" shipping.

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