Free, fast shipping during the holidays can pressure small businesses
Free, fast shipping during the holidays can pressure small businesses
With Black Friday and Cyber Monday behind us and Christmas about four weeks away, big retailers have been making it a lot cheaper to get your stuff to you quickly. Amazon, Target and Walmart recently have made moves to offer free, two-day delivery in the middle of the holiday season.
But free shipping is never free. That’s something small businesses know all too well.
Consider iBurn, a hot sauce shop in Houston, Texas. Owner James Beck said 40 percent of his roughly $500,000 in annual sales come from online orders. Lately, he said people are starting to expect that their hot sauce bottles ship for free.
“I actually was on the phone with someone and they wanted me to ship them one bottle of hot sauce and they were upset that they had to pay for shipping,” Beck said, adding that he’d lose money on the sale if he covered the cost of shipping for the $5 bottle.
He said the customer went to Amazon instead.
“[Amazon has] tens of thousands of people that can get that thing packed up and shipped out almost instantaneously, and can then have the volume to be able to minimize the costs to offer you free shipping,” Beck said.
Still, some small businesses are making shipping cheaper to lure in customers.
Kruti Patel Goyal, Etsy’s senior vice president of product, said the online marketplace reviews the millions of transactions between buyers and sellers and offers sellers tools to gauge how much to charge for shipping and the item itself.
She said in the most recent quarter of 2018, less than 20 percent of items on Etsy shipped for free, but that percentage has been increasing.
“We expect that to continue to increase as our sellers adapt their shipping strategy to buyer expectations,” Goyal said.
Those buyer expectations are putting pressure on delivery speed, too. The consulting company Shipware recently did a survey of shippers, who said fast delivery is the biggest pressure they’re facing.
“I’ve heard from multiple places that they have been eating the express shipping charges,” said Keith Myers at Shipware. “So a two-day air shipment — they’ll charge some of it to their customers but not all of it.”
To speed up delivery, Myers said some companies have been using their physical stores as mini-distribution centers instead of relying on warehouses in the middle of the country to cut down on transit time.
Another way to cut down on shipping costs? In-store pickup.
Natasha Amott, owner of Whisk, a New York City-based cooking supply store with three locations, said about 25 percent of her online sales are picked up in store.
The website, she said, works well to showcase items that local residents will buy in store and for specialty items, such as cocktail flavoring agents or bitters.
“One of our hottest items are bitters,” she said. “That, in fact, would probably be the No. 1 item we sell online.”
With in-store pickups, foot traffic in a story increases, pushing sales up. But small businesses face competition even on in-store pickups. Walmart and Amazon have pickup lockers in stores across the country, and Target recently announced plans to make curbside delivery available at over a thousand locations.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.
