Free Shipping
We all like the idea that we’re getting something for free. How often does that turn out to be true?
When someone buys a product, whether in a store, at an event, or on the internet, who pays for the shipping?
Let’s consider two cases:
First, a vendor runs a special with free shipping. What does that mean? It means one of two things:
- The vendor has chosen to take less profit on the price of the item during the “free shipping” special. In other words, the vendor’s usual profit margin is generous enough to allow that, while the vendor still makes money. It could mean that the vendor is phasing out products for some reason (discontinuing them, they’re getting old, etc.) and is deciding to cut prices and profit in order to get rid of them.
- Or the vendor has raised the price of the item during the “free shipping” special to disguise the fact that the shipping is now buried in the price. If so, the vendor’s profit may remain the same or even increase, depending on the amount of price hike. Vendors can do this in fairly slippery ways. They can temporarily change package size, for example, making it harder for a habitual customer to compare this price to the previous “regular” price.
Either way, someone is paying for shipping. And no vendor is in business to lose money. That’s true of both the producer and the shipping company. In the long run, the customer is always paying for shipping.
Second, a vendor always offers “free shipping.” What does that mean? This one is even simpler:
In this case, the cost of the shipping is always buried in the price. So if the customer is buying a $67 item and the shipping costs $8, then the real price of the item--the price on which the actual value is based--is $59. Of course the shipping was never “free.” The customer was just deluded into believing that it was.
Let’s make this more specific. Consider a 40 lb bag of dog food that costs, let’s say, $67. The cost of shipping is $8, and that’s added to the price. So the total price (before tax) is $75.
Consider another 40 lb bag that costs, let’s say, $67, but shipping is advertised as “free.”
For the first bag, we know that the value is based on $67 in dog food. The second bag’s value is based on $67 minus the price of shipping (let’s say $8 for simplicity). So the value of that second bag is based on $59.
That means we’re now comparing a $67 bag and a $59 bag. Are they likely to be identical in quality? Well, possibly, if the two companies’ profit margins are significantly different. But in an industry like pet food, profit margins are fairly low across the board. So it’s a pretty safe assumption that their profit percentages are about the same.
In other words, the $59 bag is a less expensive formula, which has to mean less expensive ingredients.
Let’s take it a step further. We’re talking about an $8 difference in price. The best way for a pet food company to cut that amount of money from its formula is by using cheaper, inferior protein sources. Why? Because the protein is the most expensive component in any pet food.
The conclusion, then, is that the bag with “free shipping” almost certainly contains inferior protein and possibly other lower quality ingredients. Does that make “free shipping” worth it?
Virgil and I greatly prefer a company that is up front about what the customer is paying for. For us, that means having the price of shipping clearly differentiated from the price of the product. That’s true for all the products we represent.
If you’d like to find out about the company and the pet products we represent, please call 888-829-9238 (toll free). Leave us a message after you listen!
PawPrintsLife Blog
Saturday, September 4, 2010
