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No "free" shipping?

 

Here's the secret that you've probably always suspected was true but may not have thought much about when it comes to shipping: “free” is actually never at zero cost. Whether FedEx, UPS, Amazon or the U.S. Post Office, none deliver anything at no cost. "Free Shipping" is only in the perception of the customer.

Peek behind the curtain. 

After a 6% discount off the "rack rate", the average price a small company in the U.S. (like us) can get for "reasonably fast" (3 day ground) shipping of a 1 lb package is about $8.00. Larger companies that ship thousands of packages a day get discounts that are several times that. One way to compete for customers is to lower your prices. One place to lower your price is to offer "Free Shipping!" Of course the business still has to pay the carrier to get their product into your hands. Where does that money come from? Well, contrary to what some believe, the business doesn't just 'eat' the cost. They've already lowered their product price in the name of competition. The only other place to get it is to pass that shipping cost to the customer.  Some just add the shipping fee to the cost of each product they sell. Some mark the shipping UP to make shipping a profit center. Others get creative and charge a "membership fee" and pay down their shipping costs with that. 

Reasonable? Because huge marketplaces like Amazon routinely offer "free delivery" (if you don't count the membership fee) we have to be able to present a shipping fee that seems reasonable to our customers. To do that, we have chosen to have some of the actual shipping cost be shifted to the price of the product. 

Here's how we do it. The actual cost for I Have a Bean to ship a four pound box of coffee to a home in Florida is $12.00. (sometimes a few cents more, sometimes a few less) If we're only charging $3 to the customer, where does the extra $9 come from? The coffee. Essentially we skim $2.25 off what we get for each of the four pounds and combine that with the $3 we collect from you under the label of “Shipping.” All of the $12 then goes to the shipping company (UPS / FedEx etc.). You only see some of our actual shipping cost in the $3, $5, or $7 shipping fee that we charge.

Not a profit center. Like any number of small businesses, shipping is not a profit center. As you can see, it actually subtracts profit from our bottom line and makes our product more expensive for the consumer.

That's the way it worksThere is actually more complication than what I've just explained, but there is enough here that you get the idea.

If you have further questions about this, please don't hesitate to contact us and ask!

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