Amazon is known far and wide for its free, fast shipping, but for many smaller retailers that famous shipping is putting squeeze on their own eCommerce efforts.
With consumers increasingly expecting free shipping with their online orders and retailers left to foot the bill, small retailers have to offer more than just a cheap product and a fast delivery.
Big Shipper, Small Shipper
In 2012, Forrester found that about 30 percent of online shoppers started their hunt with Amazon; last year it was 44 percent, according to research by BloomReach, Inc. In those short years between, Amazon has grown by leaps and bounds, as has eCommerce as a sector, and free shipping has become more of a “must-have” than a “like-to-have.”
The web’s biggest retailers, including Target, Wal-Mart and, of course, Amazon, don’t have much to worry about when it comes to shipping, and their volume alone can justify free shipping. It’s the smaller operations and start-ups that struggle to hold on to customers when they’re forced to charge for shipping and handling.
Large shippers get big discounts on shipping since they ship a lot of packages at once using a single service. A discount of 70 percent or more is common, according to the Wall Street Journal. A Shipwire survey showed retailers who spent about $100 million annually on shipping could expect to qualify for an 80 percent discount on overnight shipments, and 60 percent on residential ground delivery.
Shipping Options for Small Companies
To put that into perspective, shipping a 10-inch square, three-pound box Express costs Amazon about $14.28, or $5.80 for ground shipping. The same package costs a start-up $18.22 for ground shipping, and a whopping $73.62 for Express delivery. Small companies do have options, though. For a small fee, they can contract with Amazon and take advantage of their fulfillment services, as well as discounted shipping.
Instead of struggling to compete, some have managed to make peace with the retail giant and earned significant discounts in shipping at the same time. For example, those retailers that spend at least $1,000 weekly through UPS via Amazon get a 37 percent Next-Day Air discount. The Amazon fees alone may be worth the partnership for a small- to medium-sized company, but the additional exposure to millions of potential customers can make working with Amazon more than worthwhile.