Unfortunately, smaller online businesses and 3rd party sellers don’t have the luxury of scale to compete.
For them, offering free shipping to customers could mean hemorrhaging money. Remember, smaller retailers don’t have the save revenue as bigger companies to cushion the blow.
Yes, they’ll provide free shipping to compete, but it’s not sustainable. Free shipping looks enticing on a webpage and can drive more customers to visit and shop.
Some small businesses aren’t able to offer free shipping at all and still end up suffering.
Take the example of Ann Miceli, an Etsy seller who discussed her struggles with free shipping in a 2020 Atlantic publication.
Ann lost 40% of her revenue in just a few months when Etsy’s new algorithm gave priority to sellers who guaranteed free shipping in 2019.
Because buyer expectations had changed, Miceli was advised to raise her prices to cover shipping fees.
She realized her competitors were “simply eating the costs” associated with free shipping, and she couldn’t afford to.
This is the story for many 3rd party sellers. They fear raising the cost of products to compensate shipping fees will dissatisfy customers.
Ecommerce platforms, like Shopify, try to stem the cost of shipping by offering perks to their merchants. Rates through UPS or FedEx can be discounted by amassing large quantities to ship.
However, small businesses are in the hole because of the pandemic. Brick and mortar storefronts closed during lockdowns, 34% permanently as of April 2021.
Now rising inflation is making the situation worse.