The Future of Online Shipping: How are Retailers Following Suit as Amazon Goes Free?

Business shipping costs are, of course, a primary concern for retail businesses that sell their wares online and ship them directly to customers. When shipping costs are too high, which is often the case for small businesses that don’t sell enough units to qualify for bulk shipping rates, it can eat away at profits. This is why many online retailers charge shipping and handling fees to customers. But now that Amazon is offering free shipping on thousands of smaller items that customers frequently purchase, how will other online retailers keep up? The following post will look at eBay, Shopify, and other sites for examples of how smaller businesses can compete in this changing business shipping market.

Custom Shipping Box for Amazon

Amazon’s Big Shipping News
Last month Amazon.com Inc. introduced a new shipping scheme that impressed many customers, while causing concern or inspiring reconsideration of shipping for policies many online retail businesses. Amazon’s announcement means that the company will now offer free shipping – once reserved for big-ticket purchases or special Prime members – on all sorts of small, popular items without a minimum order requirement from the online store. This includes things like earplugs, makeup, and smartphone accessories, just to name a few. These kind of items are the bread and butter of Amazon’s business model, according to some sources, and free shipping is already boosting sales enough to make up for the additional costs incurred. For a massive retail operation like Amazon, this is possible because of the large number of items they “sell.” But the question remains: what about other online retailers without the massive scale of operations that Amazon has achieved?

How Amazon Makes Free Shipping Possible
It’s important to note that Amazon used some carefully planned strategies to achieve this free shipping scheme on smaller items in single purchases without increasing their costs or eating into their profits. Basically, it all comes down to third-party sellers. Amazon works with hundreds of third-party sellers to fulfill these orders, who get a percentage of each sale that Amazon achieves in exchange for completing the customer service, packaging, handling, and shipping. In this sense, Amazon is not really the retailer. They are merely bringing buyers and sellers together, and keeping a hefty portion of the profits in the process. Some experts say they might still only be breaking even on these transactions, but the increased attention that Amazon gets will likely be worth it for the company in the end.

What This Means for Smaller Online Retailers
Though free shipping may not be possible for small online businesses with their own ecommerce websites, there are other possibilities. Companies that work within a larger framework such as eBay or Shopify may also be able to ship their products without charging an additional fee to customers, thanks to the high volume of sales achieved through a more widely circulated medium. The lesson for online retailers may just be that you have to take a hit on business shipping costs to achieve the sales volume you’ve been dreaming of.

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