Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Wed Sept 3 2014 22:08:10

Can Sellers Afford Not to Offer Free Shipping on Amazon?

By: Ina Steiner

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Amazon told its third-party merchants, "We want sellers to think seriously about offering free shipping for all their products" - but is it feasible?

Sellers began talking about a new Free Economy Shipping option on August 19th - see Thursday's Newsflash story for more information. The new Economy option only gives sellers one extra day to get items to buyers compared to Standard shipping, and it provides no shipping credits to sellers to cover costs. (Is there a shipping method that costs significantly less but only takes one day longer to get to customers??)

So what are the advantages to offering free shipping? In its sales pitch, Amazon wrote, "Offering free shipping can increase sales and may help sellers with Professional selling plans compete for the Buy Box."

But what may be more of an incentive for some sellers is this news: "Additionally, Amazon is investing in features to raise customer awareness of offers with free shipping."

That may mean that sellers who do not offer free shipping could find themselves at a significant disadvantage - possibly just as the holiday shopping season ramps up.

Will you be tempted to offer free shipping on Amazon? And if you do, by how much would you raise your prices? Would it be by a flat percent across the board, or would you have to analyze each product individually? If the former, do you use a tool that would allow you to do that in a simple bulk edit?

Please let us know what you think of the new shipping option and what it means for sellers.




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by: koonkat This user has validated their user name.

Wed Sep 3 23:12:20 2014

Amazon is luring it's sellers on a race to the bottom!  Our costs certainly aren't going down. And in the past year there's more moronic businesses that swoop in kill categories, then leave for the next one.  No niche, no expertise, no service, just commodities.  The massive river is polluted.

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by: Moonwishes This user has validated their user name.
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Wed Sep 3 23:56:46 2014

If Amazon with all it's wealth behind it needed to up  the purchase from $25 to $35 worth of goods this year to give free shipping, what makes them think that smaller 3P sellers can offer it without a sales limit? If they can't afford to do it with all listings pointing directly at the Amazon ones to start with how are we supposed to? Utter nonsense. I doubt that postage costs will stay level come January and I have seen some sellers with ridiculously low prices on their goods. If they sell their whatsit for 75 cents with free shipping it will cost them money--the only way they are making anything is via the shipping credit. I haven't looked at the Amazon rules on site yet, but are they going to drop the fee they take out of the shipping credit? Or are they going to find a way to scoop up that money calling it an advertising expense?

I'm not sure why the sites with 3P sellers seem to want to highly encourage if not force a free shipping issue when I don't see all on line stores offering that, possibly a discount but not free. I have had to buy more on line due to having trouble getting out to shop and I sure pay for shipping and a whole lot more than Amazon or eBay sellers charge. One of the reasons I like ecrater is I can charge a reasonable postage fee that covers the postage and the other misc. costs of shipping. I don't have to kick back part of it to the venue that is already collecting fees on the sell itself.

This will be interesting to look into and watch and see where everything splatters.

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by: Ebay's Slow Death This user has validated their user name.

Thu Sep 4 03:00:01 2014

So, let me get this straight.

Amazon wants their Sellers to offer Free Shipping, and to essentially go in and change their shipping to Free on their live, current listings, without raising their prices.

I went to look at their fees, and they certainly don't make that information easy to find, and then it is kind of complicated to figure out.

Say you sell a $10 book. You pay a Variable Closing Fee of $1.35. Then there is the $.99 per item fee (waived for sellers who pay a subscription fee). A Referral Fee of 15%, which would amount to $1.50 (on $10). The least expensive way to send any package through the Post Office would be by First-Class Mail, for up to 3 oz, which is $1.93 (on Ebay, but I think it is more on Amazon, if I remember correctly). Media Mail for up to 1 lb. would be about $3.00.

Therefore, if you add it all up, the fees, with FC 3oz postage, it would cost you a minimum of $5.77. (For an up to 1 lb book by Media Mail, it would be about $6.77.) Your profit would be, $10.00-$5.77=$4.23 (or $3.23 for MM) Probably, you had to pay for the book, and there are the shipping supplies.

When you offer Free Shipping on Amazon, where is your profit?  Also, most books sell for less than $10.00.

It seems like Ebay and Amazon are needing more revenue, so they are making their Sellers bare more of the burden, and are feeing them to death.

If I got any of my calculations wrong, please correct me.

I stopped selling books on Amazon about a year ago, because I was losing money.

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This user has validated their user name. by: Rexford

Thu Sep 4 06:19:50 2014

These sites all make enormous profits, and their C-level management make mega-millions...... but they don't want their sellers to.

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by: Moonwishes This user has validated their user name.
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Thu Sep 4 08:51:16 2014

>>A Referral Fee of 15%, which would amount to $1.50 (on $10). The least expensive way to send any package through the Post Office would be by First-Class Mail, for up to 3 oz, which is $1.93 (on Ebay, but I think it is more on Amazon, if I remember correctly). <<

Not sure what this referral fee is that you are talking about. If you have a 'promerchant account' (or whatever they call it now), the .99 cent fee is waved, so the FVF for $9.99 is $2.00, so $7.99 then less $1.93 (cheapest 1st class package rate with e/postage I use endicia) so you get $6.06 unless you aren't a pro-merchant and then you 'earn' $5.07. The FVF varies depending on the type of item and I pulled my selling and FVF numbers from an actual transaction. From that $5.07 you will also have to provide packaging, labels, tape, cost of goods sold so you take home less than half of your selling price. Of course it gets worse the less you charge for something. I can see where Amazon can give 'free' shipping if your total purchase is over $35, I could probably do so to and make a bit less of a profit as well if my order total was $35-45. I wouldn't make as much of a profit for sure and if I tried to hide the postage in the cost of the item that would just make my items stand out as more expensive.

I try to run my business from a business perspective so that I make a decent profit for the work I put into things. I've bumped heads with many sellers over the years that are doing this as a 'hobby' to earn a little spending money (so why do they always whine about no sales?), or earning enough to buy more craft supplies, or sellers that don't have a lick of common sense and no matter what someone else charges, they will always have the lowest price, no matter what it is. Not sure how this will shake out. Do you earn the lesser amount of money, or continue to ask for shipping, or did we have an option to charge a different amount for shipping? But then we run into Amazon taking part of the shipping charge for what purpose I've never been able to figure out. In general I've never had a problem with Amazon and have made money on there, but this is a tough one.

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by: zombie This user has validated their user name.

Thu Sep 4 09:33:23 2014

When are these ''Venues'' going to learn?  I don't care if someone is charging for shipping or not.  I'll still do my research and buy from the lowest price (shipping included).  These ''Venues'' think that just because it's free shipping that people will be rushing to buy.  Not me.

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by: Xander This user has validated their user name.

Thu Sep 4 12:32:08 2014

Amazon suffers from the same data accumulation pressure as ebay. They study the numbers, see free shipping is trending and try to make everyone add it to their listings.

What urks me is how they seem to be in a race to force feed changes to their sellers. Truth be told, neither ebay or Amazon could stand alone. They need independent sellers to support sales. Amazon would be tiny if they were going it alone.

If it was realistically possible for sellers to come together and make a stand as a group, these venues would be forced to change their tune. They prey on the fact we do not have agreement and representation as a group.

Amazon continues to make huge profits every year on the backs of independent sellers.

Amazon called us last year, they were inquiring into our product line and wanted to bring us on board. After the whole ebay experience, I declined. It felt darn good knowing they could not profit from our product line.

Personally, I think amazon is a better choice than ebay but I'd already had my fill of venue hierarchy so we turned them away.

Although there are still some who think shipping is really free, most do not but might realize there can be benefits when making returns. Free shipping also helps our ''math challenged'' youth.  

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by: sasikat9 This user has validated their user name.

Thu Sep 4 14:14:42 2014

Could someone explain how amazon can do this.

I buy Fresh Scent Kitty Litter in the 25 lbs boxes from the grocery store for 12.99.

Amazon will sell me the same 25 lb box for 11.67 and ship it free if I spend 35.00

Total of 3 boxes is 35.01 shipped free.

When you go to check out it says shipping for 75 pounds is 55.00 but as long as my order is over 35.00 its free....

Please tell me how Amazon can make any money doing this.

PS my FedEx guy would also like to
know also...Amazon ships each box inside a brown cardboard box that is about 10 inches to long stuffed with paper. And he is getting worn
out delivering all these boxes each day.

Garbage collector is also in on this as I have a pile of about 20 large broken down boxes for them each week with the AMAZON name emblazoned on them.

To me this makes no sense on Amazons part. On my part it sure is nice not to have to pick up the box and put it in the cart and then pick it up again to put in the car and then pick it up again to carry into the house. Fed Ex guy just carries them into the garage. Ya gotta love em.

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by: AgendaSwallowsAll This user has validated their user name.

Thu Sep 4 15:19:58 2014

Don't use Amazon but on ebay or any other site we list on, we sell 8x more with a listed ship rate than we do with free ship.

Furthermore, it's my thought that buyers are more likely to purchase multiple items when there is a listed ship rate and an item after the first rate. As an example say item #1 is listed @88.99 with a ship rate of $14 and an after the first rate of $5. If we were to list with free ship it would be $102.99 per item for a total of $205.98 as opposed to $196.98. We try not to be thieves so we're left in the place of having to refund the customer to reflect fair combined ship and 99 times out of 100 you don't even get a ''thanks for the discount and/or honesty'' OR a feedback in 50 percent of all instances. The issue here is the additional loss of our time when already at a low margin.

It's only the entities who make out in a multitude of ways be it fees, how their numbers appear to Wall Street, etc., the seller & buyer only stand to lose cash-wise, heart-wise or both.

 

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by: sailormoon This user has validated their user name.

Thu Sep 4 18:18:03 2014

sasikat9 I buy that same cat litter and have that same question. I'm guessing on top of the crazy cheap shipping and base cost they just don't make a lot of money - maybe it's a loss leader they are doing on purpose? My postman drops it off with the comment "it's cat litter" so obviously a lot of people are buying it too. Loss leader isn't too far out of left field, if it weren't for the cat litter I would be reconsidering renewing Amazon Prime. I wouldn't necessarily get rid of it, but the litter is certainly a very big convenience and a big reason to keep it.

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by: Xander This user has validated their user name.

Fri Sep 5 00:24:09 2014

In regards to the cat litter question: Amazon probably sells so much of this product, they qualify for high volume discounts. Since they probably buy and sell more litter than your local chain store, and the simple fact they have warehouse costs verses retail store costs to factor in, they can sell the product for much less.

In regards to the shipping, keep in mind that Amazon collects a fee for their ''prime'' service. On top of that, they have many warehouses nationwide which all stock their prime items. These warehouses are located so they can deliver them within one, two or three days using normal ground shipping options.

Loss leader? They probably don't make a fat margin on litter but make up for it in volume. The more you buy, the better they are positioned to make higher profits. The bad part? That would be an increased cost for local litter and the possible closure of your local supply chains. Local stores need to meet minimum operation overhead costs or they will end up closing down.
We have all seen local stores shut down, especially these past 10 years.

Speaking of litter, these days some of us use Bakashi to add life to our pet litter. Instead of tossing foul smelling spent litter into the trash, it can be composted or broken down using EM1 technology. Broken down litter can be then placed into your organic matter ''green'' bin without damaging the water table or even used in your yard as fertilizer.

Once we become accustomed to using bakashi, we can make it at home for pennies on the dollar.

They have been using EM1 technology in Japan for a number of years.

Save money on litter and help save mother earth also.


When it comes to saving money on regularly purchased items, we need to consider the impact of buying them online verses our local supply chains. Generally speaking, it's worth it to support local business instead of saving a small amount on amazon and ebay.

Just imagine what life would be like if we had to buy everything online and did not have access to everyday products locally and considering the damage these venues have on independent sellers who are feeding their families, to support them instead of local business may not serve our best interests.

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by: ConnecticutGal This user has validated their user name.

Fri Sep 5 02:14:34 2014

I don't sell on Amazon but do have an Amazon Prime account that will be up in October.  It seems counterproductive to Amazon Prime if third party sellers are shipping for free.  In other words, why would anyone subscribe to Prime?

BTW, since they've raised the annual fee, I probably won't be renewing Prime.  Lately, they have been sending me snail mail to let me know about my "free" streaming content that comes with Prime.

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by: Ebay's Slow Death This user has validated their user name.

Fri Sep 5 02:34:34 2014

@Moonwishes-

I finally found the page about fees on Amazon again. It says:

''Are there any fees for selling?

Marketplace items list for free, but a 6 to 25 percent referral fee, a variable closing fee, and a $0.99 per-item fee are applied when a sale occurs. The $0.99 per-item fee is waived for Professional sellers.''

The ''referral fee'' is their commission, and is 15% for books. Then the ''Professional'' subscription costs $39.99 a month. If you pay that, they waive the $.99 on each sale. So, you have to sell over 40 books a month to have any benefit from it. If you sell less than 40 books, then it is costing you more than the $.99 an item.

They don't make this information very easy to find. Then it is split up into several levels, so it can be difficult for a Seller to add all the fees and do a cost analysis. Sounds like you are like me, and do that constantly. I want to know how much money I am making on a sale, even if it can be discouraging sometimes.

Anyway, I thought I would try to clarify my post. I wonder how many Sellers on Amazon, or Ebay, don't realize how many darn fees they are paying?  

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This user has validated their user name. by: laurengrace

Fri Sep 5 10:40:52 2014

NOteven worth it to sell an item under $15..and definitely no free shipping accross the board on my items. I would make nothing at all.

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by: This a joke, right? This user has validated their user name.

Fri Sep 5 15:09:57 2014

I would love to offer free shipping on ALL of my 8000 Amazon listings but for some reason they do not let older sellers set shipping rates and I am an older seller

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by: Dragonfyree This user has validated their user name.

Mon Sep 8 01:21:55 2014

I rarely buy from sellers who offer free shipping, because almost always it is more expensive.  

When buyers say they want free shipping I think they want those penny sales with free shipping.  Not sellers adding shipping into price.

You'd really be out of business quick if you offered really free shipping.

Although I did buy a book last week on Amazon for a penny with no shipping.  I thought it was a mistake and the shipping would be added when I checked out, but it wasn't.  

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by: Moonwishes This user has validated their user name.
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Mon Sep 8 01:41:10 2014

@ebay's slow death. Thanks for the clarification. After seeing this article I spent an hour or two on the Amazon site trying to figure this all out. I am a professional seller and do sell over 40 of my product a month plus it allows me to make catalog pages that allow me to list more goods that allows me to sell more goods. All positive things.

However as I was reading I was seeing stuff I not only never knew (probably new since the last time years ago when I was a promerchant and just hadn't read all the new info, but also don't know why I can't apply it. As a Professional seller (what used to be called a Promerchant I believe) It stated that I should be able to set my own postage rates (I don't sell in any media category). Big surprise to me as I have never seen how or when I could do this and I went hunting at this point and still couldn't find out how to do it. I also couldn't find how to sign up for the free shipping or banded shipping assuming I wanted to. I also didn't get any emails or notices about this free shipping push and wouldn't know a thing about it except for here. It makes me wonder if some Professional sellers are more special than others. Sort of like Animal Farm "all animals are created equal but some animals are more equal than the others". Either I'm a Professional seller or I'm not. I don't see any different grades for this service and I pay my $39.99 same as everyone else. the only explanation I could find was something on the order that if you are eligible for doing the free shipping you would be notified. What would make one seller eligible and another not assuming both aren't selling in the media categories? In the last year or so I have probably added 500-1000 new catalog pages on Amazon that has correct and complete information compared to some sellers that might start a page and leave everyone scratchy their heads as to what is actually for sale. Yet no matter how many announcements Amazon sends me, this 'free shipping' hasn't been brought up at all.

Has anyone else that sells on Amazon gotten notification about this????

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by: Tiffee Jasso This user has validated their user name.

Mon Sep 8 03:49:19 2014

Amazon is using the carrot technique to intimidate its sellers, knowing full well there is no magic bullet to get one into the buy box. Amazon, like a couple of other big venues and search engines, do not give a damn if you lose money as long as you make them look good.

This business of touting "free shipping" knowing there is no such critter is stupid (bear with me here), but that somehow, you are to twitch your nose and get it to the buyer within 2 days, is insanity.
Now my point. The stupidity is on the part of sellers for playing the game in the first place. The insanity is on the part of the corporations that hire people that have no knowledge of shipping logistics and wouldn't know how to sell water in the Sahara Desert, if their lives depended on it.
CEOs are hired today because they know how to manipulate the books, pad the GMV for Wall Street, and lie like champs.

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by: julie This user has validated their user name.

Mon Sep 8 04:34:40 2014

Hi Moonwishes!

I sell on Amazon with a ProSeller account (or whatever they call it) and I did get the Offer Free Shipping email.

I don't know, I'm not crazy about the idea since our profit margin is already low as it is. Right now, we are per item based and to be able to offer ''free shipping'' we would have to switch to banded price based. Certainly can't offer ''free'' shipping without some spending from the customer.

In years past, I have used the coupon discount in Seller Central, offering free shipping on $35 to match Amazon. Ran it for months with not a single use. But then, the coupon would only show if you had the Buy Box and Amazon would not exactly make it very visible if you did.

Do you use sellercentral.amazon. com to manage your inventory and pricing? (If you are paying the $39.99, then I would think you are?) Anyways, if so, log into your seller account.

1. Go to Settings at the top right. Then select Shipping Settings from the drop down.
2. You should have displayed ''Current Shipping Rates and Settings''.
3. Click on Edit on the right.
4. You will see in the 1st column ''Free Economy'' that you can now select to add, then hit Continue at the bottom and you should be able to take it from there.

Hope that helps!

I am still debating, and will probably give this a try and see what happens. It's not like you can't change anything back if it's not working out. The hardest part for me is going to be figuring out a price-based system and still stay profitable. Since First Class Parcel just took a hike, I need to do this anyway.  

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by: FREDDY This user has validated their user name.

Mon Sep 8 08:42:54 2014

Have no idea why Amazon is doing this. It just doesn't make sense.
Almost as if Jeff is NOW trying to copy John????
There is no such thing as ''free'' shipping. The cost will be passed on. From my experience Amazon products are more expensive than 3rd party.(even figuring in the shipping). Possibly Amazon wants to get 3rd parts sellers price closer to theirs.
Also, Amazon pays no where near the shipping cost as the 3rd party sellers. They have a great deal set up with UPS FED ex, USPS. All from the volume amount.  

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