Wednesday, December 14, 2005

The Shipping Grinch

Like many of you, I have been doing a lot of holiday shopping on-line, mostly at (shameless plug for my site!!). I was keeping an eye out for high shipping costs because of higher gas prices this season. Sometimes I find that sites with lower product prices have higher shipping or vice versa, so it pays to check the final totals before deciding where to buy. (Note that the shopping comparison sites don't take into account shipping costs...)

I did encounter an unexpected glitch associated with the “buy American” sites—total shipping charges were much higher than those charged by major retailers. For example, on an order where my purchases totaled $167, the shipping charge was $31! By way of comparison, typical shipping charges (by LLBean, REI, etc) for this purchase total average closer to $12! The reason for this became apparent when I completed the order and was notified that the products would be shipped from the individual manufacturers. In other words, the shipping savings normally associated with consolidating orders had been lost.

So, why is this happening? The advent of the Internet has meant that “virtual stores” can be set up where orders are shipped directly from manufacturers rather than from a retail middleman. This practice is called “drop shipping.” A benefit of drop shipping is that e-retailers are not required to invest in goods up front, and thereby forgo the risk of getting stuck with merchandise that doesn’t sell. There is also much less capital investment required. The e-retailer, in this scenario, becomes more of a service that coordinates transactions between customers and manufacturers. More of the burden for order fulfillment (tracking and shipping) is shifted to the manufacturer.

The absence of a “brick and mortar” store does have benefits for consumers because these e-stores potentially can offer a wider array of products. For the “buy American” niche, this is particularly helpful since many American-made products are not carried by traditional retailers. (I suspect this is because the profit margin is much lower than for imported products, but that’s another post.) All in all, then, I concluded that the extra charges were worth it because I saved shopping time by having all of the items available in one purchase transaction. However, it still came as a shock at check out. I think these stores need to better prepare customers for the Shipping Grinch.

1 comment:

Anonymous said...


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Paul Stanuch