It’s a new fact of retail that consumers want shipping as fast as possible for as little cost as possible. Often, that translates to “now” and “free,” despite the reality that few merchants outside of giants like Amazon can make the numbers work.
That’s the conclusion from The Wall Street Journal‘s breakdown of how “megaretailers” manage to leverage the incredible volume of product they ship through partnering carriers into crucial discounts that allow them to pay what would be exorbitant bills. For example, Amazon, Target and Walmart all have the projected volume and market share to negotiate markdowns on shipping rates into the 70 percent range. That translates into a $14 fee for the express delivery of a small, three-pound package from New York to Atlanta.
For smaller retailers, like cooking boutique Saratoga Olive Oil, though, those charges could be upwards of $75 without the Amazon-sized discounts.
“We’re not having Saratoga Oil Prime anytime soon,” Peter Koch, Saratoga’s operations analyst, told WSJ. “We’ll never be large enough.”
Where more and more small businesses are finding themselves pushed up against a wall, though, is in pushing these higher costs to consumers. Because of rock-hard consumer expectations on free shipping availability — as well as what “free” in the phrase should actually mean — retailers find themselves increasingly pushed to accept Amazon’s definition of the concept as their own.
“When we started, there was no such thing as free shipping,” Jeff Gornstein, president of online retailer Comfort House, said. “And actually, today, there’s no such thing as free shipping. We are absorbing more and more of it because we can’t pass along the costs to consumers, because of Amazon.”
All signs point to the formation of a free shipping bubble that traps every retailer around, but whether Amazon or the thousands of smaller merchants around it pop first remains to be seen.