In terms of dollars and cents, eBay and Amazon benefit from the shipping costs merchants charge shoppers. In the pre-Internet days, Shipping & Handling was a profit center for mail order companies, but now online merchants are lucky to break even thanks to the pressure to offer free shipping.
Even for those who do try to recoup expenses by charging buyers S&H, a certain percentage of those charges has become an outright expense when it comes to selling on eBay and Amazon thanks to their respective policies.
On Amazon, the marketplace processes payments on behalf of merchants, and while it charges non-Prime customers for shipping, it doesn’t pass along the entire amount to the non-FBA merchants who actually incur the cost of shipping the items to the customer.
What can be irksome to sellers is that Amazon doesn’t make it clear to buyers that 3P merchants aren’t receiving the entire shipping cost.
Sellers may be interested in reading a recent GeekWire analysis of Amazon’s second-quarter earnings in which it found that the marketplace made more from shipping revenue as a percentage of shipping costs in Q2. It said Amazon’s revenue from shipping rose to cover nearly 60 percent its shipping costs for the quarter.
That’s a new high, according to analysis conducted by Geekwire, up from a low of 36.2 percent in the fourth quarter of 2011.
In fact, according to Amazon Q2 earnings, while worldwide shipping costs rose 29% year over year, its shipping revenue rose 57%. As GeekWire noted, some of that comes from higher Prime membership fees for customers and from revenue from FBA shipping programs.
Meanwhile eBay also takes a cut of seller shipping charges. Four years ago, eBay started charging commission fees (Final Value Fees) on the total selling price – including S&H, but excluding sales tax.
Not only is the policy wildly unpopular, eBay fails to credit sellers if they refund buyers for overcharges when purchasing multiple items, as this 2012 article noted.
Shipping is a touchy area as shoppers grow to expect free shipping and as the cost to ship a package continually rises. We’d like to hear from readers on your thoughts on how to manage shipping costs and how you deal with marketplace shipping policies.
Comment on the EcommerceBytes Blog.