We need to admit it, we have an addiction.
We’re addicted to free shipping.
It feels really good. You need something. Or you want something. So you go tap, tap, tap or click, click, click and a day or two later there’s a package waiting at your front door, having arrived almost magically at no cost to you.
Most often, the package is from Amazon which has millions of Floridians hooked on free shipping. We’re so addicted, in fact, that we actually pay $119 a year for “free” shipping, which is pushed like different colored pills: two-day, same-day, release-day and right now.
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It’s true that Amazon Prime customers get a tantalizing package of benefits in addition to free shipping. There’s music, and books, and access to movies and television including the award-winning comedy series “The Marvelous Mrs. Maisel” and great shows like “The Romanoffs” and “Jack Ryan.”
But it’s really all about the free shipping. According to recent research by The Diffusion Group,
79 percent of the us say free shipping is the primary reason for subscribing
to Amazon Prime. Only
11 percent say it’s the videos, with the remaining
10 percent spread across, music, photos and reading.
The problem is, free shipping isn’t free. It’s not free for us. It’s not free for Amazon or other online retailers. And it’s not free for the local South Florida community.
Even though online shipping fees are positioned as free, we’re paying for them. The cost is baked into the price of the product. Or, as in Amazon’s case, its partially subsidized by an annual membership fee.
And the lure of free shipping is very effective at getting us to spend more. How many of us have bought just one more item — that’s not really necessary — just in order to reach an online seller’s free shipping minimum? That’s money we wouldn’t have otherwise spent.
Free shipping also costs the likes of Amazon a bundle. Sending packages is expensive, especially when you factor in the behavior of some people I know who order three pairs of shoes knowing full well that they’ll return two after trying them on — with free shipping back and forth in both directions.
It’s no wonder that online retailers lose tens of billions of dollars a year on free shipping costs. Luckily for Amazon, they can absorb the shipping cost losses thanks to fees and profits from other parts of the company.
But the biggest victims of our addiction to free shipping are local merchants. Free shipping has brought a continual stream of delivery trucks rumbling down residential streets and directly onto the turf of local bricks and mortar stores. The result: Our local merchants are competing against much bigger companies with more buying power and greater economies of scale.
And that’s too bad because according to the Institute for Local Self Reliance in Washington, D.C., and the research firm Civic Economics, in Chicago, compared to online retailers, local businesses pump 20 times more of every dollar spent right back into the local community. The research shows that on average, each $100 spent at locally owned businesses generates $45 of secondary local spending, compared to less than $2 for the same $100 spent with an online retailer.
That is the true cost of free shipping.
So how do we wean ourselves from this addiction?
Online shopping may be too ingrained and too convenient to walk away from cold turkey. But I’ve been trying to wean myself little by little, buying more at the local hardware and housewares store.
In fact, I was actually in a real, local bookstore just the other day. It felt really good.
Adam Snitzer is a revenue strategy expert and president of Peak Revenue Performance, a consulting firm that specializes in helping companies attract more, high-paying customers. He can be reached at firstname.lastname@example.org, or via the company’s website at PeakRevenuePerformance.com.