“I ordered a new remote speaker for my iPhone and the shipping was free.” Unless the merchant has buried the shipping cost into the cost of goods or is taking a less margin on the sale, shipping is not free. Somebody is paying for it.

The Landscape Today
However, Amazon is taking the lead position by offering free shipping more often, especially at the holidays. This is causing havoc in the e-commerce world. There are many small e-tailers who are struggling with this competitive offer. It is also driving many merchants to use Amazon’s Fulfillment Services. This is a brilliant strategy by Amazon because it allows them to continue to drive down their operating cost which will give them the “lowest landed cost” in the industry. By continually lowering their cost and re-investing in the business model, they are in a great position to be the king of free shipping. The consumer is the big winner here and the smaller e-tailers are struggling with being competitive.

What about in the Future?
The e-commerce business is fragmented by millions of enterprises. However, Amazon, eBay and Alibaba are the dominant players. As market leaders, they will dictate price and service expectations to the market. This can be very dangerous; look what is happening in the parcel business with FedEx and UPS. These two organizations have implemented the single largest price increase in the history of the parcel industry in 2015. The small e-tailers need to continually drive out cost in their operations and look at all shipping options to stay competitive.

At the end of the day, the consumer wants a quality product, a good price, trackability, delivered in three to five days... and no surprises!

Michael J. Ryan is the Executive Vice President – Parcel Solutions at Pro Star Parcel and has over 25 years’ experience in the parcel industry. He can be reached at 708.224.1498 ormichael.ryan@prostar.com
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