Why Unconditional Free Shipping Is Bad For Us

A few years back I was standing by the customer service counter at Staples.  A man walked up and handed the employee an empty ink cartridge for a copy machine.  The “customer” said that he bought the product six months previously but had just now opened the package and determined that the cartridge was empty – no ink.  He didn’t present a receipt or any of the packaging material (these big cartridges come packed in boxes with inner seals).  The employee kept the large empty plastic container, asked no questions, and issued the man a voucher for another cartridge.  When the customer walked away the employee must have seen me roll my eyes.  He volunteered that although he did not believe the man’s story, he did what Staples policy required.  “You see” he said, “that’s Office Depots policy and we have to compete.”

Last week I was at an Internet marketing conference at Google’s Silicon Valley campus.  One of the speakers was a VP who leads the worldwide ecommerce operations of a large corporation that did a billion dollars in revenue in 2008.  After the conference, we sat next to each other on the shuttle to the airport.  The topic turned to free shipping.  He told this story: his 14-year old daughter bought and returned 20 pairs of soccer shoes from Zappos.com before finally keeping a pair.  For those of you who may not know, Zappos is a well-known ecommerce shoe retailer whose marketing strategy has centered on their policy of free shipping and free returns.

I don’t know if Zappos is making money these days (I doubt they did on the soccer shoes customer), but I do know that they were not profitable in their early years and this past November they laid-off 8% of their people.  But whether or not this shipping strategy is sustainable is not my central point.  Zappos is not serving the public good.  Neither is Staples or Office Depot (if that return policy is still in place). Our society needs its people to take a measure of responsibility when an individual enters into a transaction with a merchant.  When people are allowed to behave with impunity in the marketplace, we all eventually pay.  [Think current economic crisis.]

I first saw this problem coming with Nordstrom.  What buzz was created with their take-it-back-no-questions-asked policy.  People competed to out-do each other with their “Who-screwed-Nordstrom-worse-and-Nordstrom-didn’t-care” stories.   It became a kind of shopping joke, while at the same time apparently, a successful marketing strategy for Nordstrom.  For small merchants, this was not a joke.  It was a problem on a par with Wal-Mart opening a store on the outskirts of a small town.  Historically, the fundamental goal for a merchant was to nurture a good relationship with a customer [not unlike a community’s banks].  Nobody was out to cheat anybody: merchants needed customers and people needed stores.  Each side took his/her respective responsibility in the trade.  To lose this nexus means losing a measure of our collective and personal values; unraveling a bit of our social fabric.  Big corporations, not operating on a human scale, “train” customers (like the innocent 14-year old) that our marketplace is neutral on the subject of responsibility in the transaction (the data from computer modeling informs these businesses that these policies can generate more profit given certain assumptions and time frames irrespective of specific transactions).  But for smaller merchants with fairly priced merchandise, unconditional free shipping is unsustainable; human scale and time don’t allow it.

“So what”, you may say.  If you can’t compete, try a monastery or a cave (or go to work for a big corporation).  But it’s not that simple.  Policies like “unconditional free shipping” or “return merchandise with no questions asked” are a bubble (or a deception).  And we have all become experts on the fate of bubbles.   As I am implying, I believe this is not unrelated to all the bad business practices that we all have become aware of and that have gotten us into this current economic mess.  Like lenders loaning us money for homes we couldn’t afford, or credit card companies sending us cards so that we’d go into debt and pay onerous interest rates and fees, this is ultimately (whether intended or not) just another way to dupe us.   

The best merchants on or off line are gimmick free, not shipping free.  I suggest supporting them rather than a business that, because it absolves the customer from acting responsibly, may be both sealing its own fate while simultaneously bringing down its betters.  But the overarching problem is worse-the erosion of our commonweal. 

Fred Belinsky

The Village Hat Shop

Comments

[Brent]

Great article. I completely agree that the free shipping bubble will soon burst when companies stop going after market share and start trying to be a responsible profitable company.

[Doug]

I disagree. Free Shipping rules!

[Scott]

The real problem is this dumbass let his kid be a moron. Why would a parent let thier kid order and return 20 pairs of shoes? Especially if the "adult" works for an e-commerce company.

Assuming of course, the 14 year old didn't use her own credit card.

This guy is a bad as the guy at Office Depot for letting his kid abuse the system.

[Charlie Dee]

I think that if you want to do business, you do what you have to do to survive through the tough times. If customers want free shipping, you do free shipping. If you do not, you will not have to worry, you will not be in business. I agree, FREE SHIPPING RULES. I currently have several hats on my wishlist, and I will not order them until you ship them free!!!

[Terry]

Free shipping is an obvious suck-up to get business. If I can save time and gas buying on-line I'm OK with shipping costs.Merchants stay in business by offering products that Walmart hasn't the class to carry. Yes, I'm a snob. And I support independent or local retailers because if we don't they will disappear and all we'll have left is the crap from Walmart.
Pay the shipping and stop trying to get something for nothing.

[Thad]

Here is a perfect example to support your argument from another angle:

Recently (actually for Mother's Day) I was going to order some special plants for my mother and my mother-in-law. I live in the UK and they both live in the US, meaning that the presents had to be shipped from the supplier. So, went on Amazon to look at bonsai trees, priced them up there and then went to the suppliers independent site and priced them. Guess what?

The independent supplier, despite Amazon's free shipping, was cheaper!

In other words, the price difference btwn the people who grew the bonsai and Amazon's price was greater than what the growers were charging for s&h.

So, again, we return to that old nugget of wisdom - there is no such thing as a free lunch!

[package delivery philippines]

Best of luck to you and thanks for your terrific and candid website. This is a great resource.

Daniel R