Attention, shoppers: Be wary of 'free' shipping that's not actually free
Published Thursday, December 22, 2016 9:30AM EST
The free shipping that’s being offered to consumers over the holidays, or any other time of the year, isn’t actually free.
“The word free shipping is used pretty loosely,” Bruce Winder, co-founder of the Retail Advisors Network, told CTV’s Your Morning on Thursday.
“If you read the fine print, you’ll find that it’s free under certain conditions.”
So are the roughly 80 per cent of Canadians shop online at some point in the year getting ripped off?
Not necessarily. Shipping items to individual homes is expensive for companies.
CEO of the Hudson’s Bay Company Jerry Storch told Fast Company in November that “direct-to-home has a supply chain cost three times higher than a store-based model”.
To compensate for the extra cost retailers add conditions such as minimum order size. For example, Hudson’s Bay Company offers free shipping if your purchase is over $99. Some retailers limit the type of shipping method to ground shipping, which can take 10 days for an order to arrive.
While other stores just bake the shipping costs directly into the price of the product, Winder said.
“They have to build it in to make money. Retailers will make a certain gross profit on an item, retail minus cost of goods sold, and they just take it from the gross margin. They build it into the cost,” he said.
And you won’t see savings if you go pick it up in store, either. The price may be the same whether you buy it in store or online.
“The way it works with retail economics is if you buy that item through a brick and mortar store, the company has to pay to ship it from the warehouse to the store and pay for labour to take it off the truck and put it on the shelf,” Winder explained.
“The online game isn’t super profitable for a lot of retailers,” said Winder. “When you look at net margins of online sales for a retailer, when you have the shipping and everything, it’s not a cash cow at this point.”
Winder also told CTV ‘Your Morning that consumers should be aware that loyalty programs costs are also factored into the price of the products.
“Just read the fine print,” advised Winder.