Free Shipping… But At What Cost?

We are all paying for shipping even when we think we aren't. So what are the impacts?

The Jim Jarmusch film Broken Flowers has one of my favorite opening credit sequences of all time.  A letter is dropped into a blue USPS mailbox outside a nondescript building.  We are invited to follow its journey, through trucks, planes, sorting machines, and more trucks, ending at the recipient’s mailbox. All accompanied by my favorite Holly Golightly song. It shows that even the simplest thing, something that is happening millions or even billions of times each day around the world, is part of a complex series of logistics, with many workers touching it along the way.  

And guess what? All of those online purchases we make on a regular basis follow a similar, complex journey.  There are planes, trains, and trucks. The fuel and maintenance that keeps them moving. The people who drive them. The people picking and packing our orders. The shipping materials. Until our purchases start teleporting into our houses, shipping isn’t free.  Someone has to pay that shipping bill…but since we just added an extra pair of socks to our cart to qualify for free shipping, I guess it isn’t us…or is it? 

Let’s say you ordered a dress, but you were a few dollars away from that free shipping threshold…so you added a pair of socks.  Classic move. Raise your hand if you have way too many socks thanks to shenanigans like this…

So you pay and receive your confirmation email.  What happens next?  

  • First your order is pulled in a warehouse. Some warehouses have special efficiency software that sends the person picking your order (and several others at the same time) on a precise journey through the shelves and racks so not a single step is wasted.  
  • Your particular item is tossed into a bin and then passed on to packing, where someone tapes up a box, adds all of your stuff, the packing slip, any other tchotkes or swag that the brand is adding it…then it’s taped shut, the shipping label is added…and it joins other packages on a pallet.  All of the stuff used to pack your order–box, label, tape, bubble wrap, those plastic “air pillows,” the packing slip–costs money, too. 
  • Next the shipping carrier–UPS, FedEx, USPS, Canada Post, DHL–picks up the pallets of outbound shipments. These head off to a hub where they are unloaded, sorted, grouped together by final destination, and then packed up onto more pallets and sent off to the hub nearest to you.   
  • At the hub closest to your home, it is unpacked, sorted, and sent out on smaller trucks to your porch.

It goes without saying—okay, maybe I should just say it–that the retailer who sold you the stuff pays for shipping. They are able to negotiate better rates based on the volume of packages they are shipping, but it still costs a chunk of change. The shipping carrier isn’t doing it for free. After all, they have a lot of bills to pay:

  • Fuel for all of those trucks and airplanes, as well as maintenance and insurance.
  • Utilities and maintenance for the hubs and sorting facilities, along with all of the sorting machinery, forklifts, pallet jacks, and so on.
  • The wages and benefits for all of the people involved in this process: drivers, pilots, sorters, machinery operators, maintenance crews, customer service agents who deal with your lost packages, delivery people, supervisors, and their own internal accountants, clerks, administrative support, and HR teams.

Wow…that’s so much money right? So much money spent to get that order to your door. If you opt to return something you bought (and odds are very high that you will), just imagine everything I just explained, but in reverse.  When you buy something that has free shipping and then return it for free, the company just lost $10-20 on you.  And that might not sound like a lot.  But when you consider that about a third of all orders are returned, you see that it’s a losing proposition for a lot of retailers.

It’s expensive to ship something. But unfortunately big businesses have been luring us into making yet another purchase with promises of free shipping. It gets us to spend more money, more often.  Time after time surveys and consumer insights research have indicated that customers are more likely to shop with a brand if they offer free shipping and free returns.  70% of all orders are abandoned before finishing checkout.  And half of those orders are abandoned because customers perceive the shipping as “too expensive.” Cart abandonment is a metric that e-commerce managers literally fret about…so they come to internal business meetings with the suggestion that it’s time to lower the free shipping threshold from $100 to $50 or just eliminate the cost of shipping altogether.  Furthermore, every retailer I have worked for has found that free shipping equals a massive increase in sales. That’s all it takes. Remove the sense of risk that a customer has around paying for shipping…and they will open their wallets.  After all, if the order doesn’t work out, and they return it all for free…what did they lose? Nothing.  But if they had paid for shipping, they would be out $10 or $20.  

While we just scored that free shipping, retailers are still paying all of those shipping expenses. As a person who began my buying career in the early days of e-commerce, when “free shipping” was not even a whispered idea, I have seen how the cost of these logistics has completely changed the model of product development and production. Why? Because there is no way that a retailer is just going to accept making a little less profit in order to offer free shipping to its customers, so they make up for it by reducing other lines on the balance sheet. You’re probably not going to be surprised to hear this, we all pay for that shipping in other ways

  • The retailer might increase the retail prices of what we buy. 
  • Or more likely, especially in the era of fast fashion when everything must feel like a hot deal, they will realize that raising prices is a losing situation. Instead they will increase the profitability of each item without increasing the retail price. That means decreasing the cost to make something. This translates as cheaper fabrics, cheaper trims, less fittings (“well, it will fit “someone?”), less details (say goodbye to those pockets).  This also means squeezing the factory on costing, which means squeezing the workers who actually make the things we are receiving in that package that was shipped for free.
  • The cost cutting doesn’t end there. They don’t offer benefits and good wages to the warehouse workers, their retail workers, and their corporate employees. They cut healthcare coverage (if they’re based here in the U.S, which so many are). They turn the thermostat just a little bit lower during the winter. They keep as many employees as possible just under full time hours so they aren’t required to provide benefits like health insurance and paid time off. Stores, warehouses, and offices will run with the least amount of employees possible, often pushing workers into unrealistic productivity metrics.  

Trust me, that shipping cost will be made up somewhere.

The logical next step is they are going to negotiate their rates with the shipping carriers. So then the shipping carriers will cut their budgets, meaning cuts to staff, benefits, and reductions to service.  Ever feel super annoyed about how long you had to wait in line at the post office? Or feeling disappointed about a late or wrongly delivered package? These are all related to carriers making budget cuts to accommodate discounted shipping rates for retailers.  This also drives up the costs for all of us when we want to ship something ourselves, along with increasing shipping costs for smaller businesses who don’t have the leverage of the big retailers.

We are all paying for shipping even when we think we aren’t!

Is free shipping a scam?  A myth? A fairytale?  Pick your favourite term and go with it but know that shipping is never free and someone somewhere is always paying for it.  So what are the impacts of all of this “free” shipping?

  • We buy more stuff than we actually need just to hit that free shipping threshold. 
  • Products are lower quality (cheaper to make) in order to cover the cost of shipping. We get less use out of them and they head to the landfill a lot faster – a bad deal for customers AND the planet!
  • We return more stuff because it’s low risk on our end but increases the carbon and waste footprints of our shopping! [ Side note: Return rates are so high that many retailers find it less expensive to just eat the cost of an item (and dispose of it) than to process the returned orders and put the items back in inventory. More on this in Part II ]
  • Workers around the world are feeling the pinch of covering those shipping costs as their wages are pushed lower.

We also cannot ignore the impact that all of this quasi-free shipping is happening on small businesses! Platforms like Etsy and Poshmark incentivize makers and sellers to offer free shipping in order to offer a more “Amazon-like” experience to customers. The thing is…these platforms don’t cover the cost of shipping. They have nothing to lose by pushing free shipping. Instead, the sellers are forced to cover the burden of shipping costs. Some sellers bake the cost of shipping into their pricing…meaning they increase the prices they are charging YOU. In that case, the shipping isn’t actually free! Ultimately when you ask a seller for free shipping, you are asking them for a discount. And you are literally taking money out of their pockets.

Many of us see paying for shipping as a burden or a waste of money…and it’s time to destroy that line of thinking!

  • Realize that shipping is actually a luxury: it saves you the time and frustration of actually going to a store. And it opens up options that wouldn’t be available to you locally. It’s kind of magical when you really think about it!
  • Budget for shipping expenses! Don’t expect/demand free shipping from small businesses.
  • Don’t add stuff you don’t want to your cart just to get that free shipping. Do you really need another scrunchie or pair of socks?
  • Most importantly, see all the people who get those orders to your porch. Recognize their hard work! And consider all of the resources and time involved in moving stuff around the world.

When you start to see all of those people, all of the work and equipment, fuel, electricity, maintenance, plastic, paper, and technology involved in making all of that happen…well, you have to recognize that the prices we do and do not pay don’t make sense.  

We have been so confused, so deceived for so long about the true cost of the things we buy.  We think stuff should be cheap, plentiful, and the shipping should always be free.

But at the end of the day, that’s just not possible. We all pay for free shipping in one way or another.  And most importantly, all of the humans who are involved in the stuff we buy, they pay for it the most. 

Amanda Lee McCarty (she/they) wanted to be an art teacher, but somehow ended up with a career in fashion that began as a seasonal part-time sales associate in the fitting rooms at a fast fashion retailer.  They have spent their career in the buying and merchandising departments of some of the most iconic millennial fast fashion brands. After losing their job at the beginning of the pandemic, Amanda started a mission to educate others about what really happens behind the “glamorous” facade of the fashion industry via their podcast Clotheshorse. Clotheshorse features conversations from industry experts and small business disruptors about everything related to clothing, shopping, and consumption. Slow Fashion is for Every Body! Amanda is also co-host of The Department, a podcast about trends and how they define the world around us. Both podcasts are available every where you listen to podcasts.  And you can find Clotheshorse (and a lot of information) on Instagram as @clotheshorsepodcast 

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