Tech
The Hidden Cost Of Free Shipping
FedEx, UPS and Amazon make deliveries on behalf of retailers advertising “free” shipping. But, none of those packages are being shipped for free. There were over 131 billion parcels shipped worldwide in 2020, and parcel shipments are expected to double again in the next five years, possibly reaching 266 billion by 2026, according to Pitney Bowes.
The cost of shipping is becoming ever-increasing. Companies like Amazon, Walmart, Target and even Etsy benefit from economies of scale because they generate mass online sales. This puts them at an advantage to achieve bulk discount rates from carriers. Watch the video above to learn why free shipping is a myth, what it really costs companies to send parcels around the country and how it impacts consumer sentiment.
The big carriers such as FedEx, UPS and Amazon make lots of deliveries, and none of those packages are being shipped for “free.”
“People like free shipping because the word free is very powerful, even if people know that it’s not really free because someone is paying for it,” Kara Buntin, owner of the Etsy shop A Cake To Remember, told CNBC.
There were more than 131 billion parcels shipped worldwide in 2020, and parcel shipments are expected to double again in the next five years — possibly reaching 266 billion by 2026 — according to Pitney Bowes.
“When consumers click that ‘buy’ box, they often don’t see [the] labor that leads to a box on their doorstep,” Ellen Reese, a sociology professor at UC Riverside and co-editor of “The Cost of Free Shipping: Amazon in the Global Economy,” told CNBC.
And those shipping costs are ever-increasing.
“Anyone can offer an Amazon Prime two-day shipping. It’s just the cost that…might incur in providing that service,” Dhruv Saxena, co-founder of third-party logistics company ShipBob, told CNBC. He estimates it may cost a company anywhere from $25 to $35 for a typical two-day shipping rate.
Companies such as Amazon, Walmart, Target and even Etsy benefit from economies of scale because they generate mass online sales. This puts them at an advantage to achieve bulk discount rates, according to the U.S. Postal Service.
When CNBC asked the Postal Service for information about how much money Amazon, Walmart and Target pay the Service to ship packages, the department said no contracts exist, but “there may be possibly an agreement in place with negotiated rates to deliver packages. However, we cannot confirm nor deny an agreement exists.”
This is due to federal regulations dictating acknowledgment the existence of a specific national service agreement “would cause harm and is confidential commercial information that would not be disclosed under good business practice,” the Postal Service said.
Amazon, FedEx and UPS either declined or could not be reached for comment for this story.
“Many [small businesses] have been under pressure, shutting down and closing because they can’t compete, “Jake Alimahomed-Wilson, a sociology professor at California State University Long Beach and co-editor of “The Cost of Free Shipping: Amazon in the Global Economy,” told CNBC.
In a 2019 survey, three-quarters of independent retailers said Amazon’s dominance is a major threat to their survival, according to the Institute for Local Self-Reliance.
“You can’t really plan for how much [carriers] are going to charge or how much [packages] are going to cost when you ship them, and that makes it difficult to offer free shipping because a lot of times you end up with no profit if you’re not really careful,” Buntin said.
Clarification (April 5, 2021): At 11:03 we state that “In absolute terms, Amazon is the largest emitter of greenhouse gases, with total emissions measuring over 60 million metric tonnes of CO2 equivalents in 2020.” That could be misleading. Of the six leading retail, e-commerce, and parcel delivery companies, Amazon is the largest emitter of greenhouse gases, with total emissions measuring over 60 million metric tons of CO2 equivalents in 2020.
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The Hidden Cost Of Free Shipping
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@Juanl0327
January 13, 2024 at 12:46 pm
Latinos *
@omegaman4153
January 13, 2024 at 12:46 pm
So-called "Free Shipping" does not let you make a true comparison unless you know what the actual DIMS cost is.
@tranger4579
January 13, 2024 at 12:46 pm
I cancelled my Amazon account over 3 years ago. Never looked back and have saved plenty money. What gets me is that until this day every year Amazon still tries to pull the yearly prime subscription but my bank has a block on them.
@yongchen4158
January 13, 2024 at 12:46 pm
Nothing is free like movie art of war quotes “their no such thing as free lunch “meaning nothing is free somebody always paid money is life everything cost money money
@josephcarreon783
January 13, 2024 at 12:46 pm
How much is the cardboard boxes cost to make it.
@ollicron7397
January 13, 2024 at 12:46 pm
I don't care. Bezos can pay.
@corruptedoxter8689
January 13, 2024 at 12:46 pm
Bruh
@astronft303
January 13, 2024 at 12:46 pm
Who cares
@pressurizer1
January 13, 2024 at 12:46 pm
We can force Amazon to improve on its ways in dealing with workers by not buying from them en masse.
@tomcat8662
January 13, 2024 at 12:46 pm
I mean, this is common sense stuff. Most customers know that the cost of shipping is built into the price they pay for the item and the subscription fees they pay every month. Obviously people don’t think that all these trucking companies and workers are donating their services out of the goodness of their hearts. 🤦♂️
@orlandocastillo6862
January 13, 2024 at 12:46 pm
I like how CNBC never miss the environmental issue 😂, like what is you solution ? Charge for shipping ? Or not order anything
@giordanoallen2581
January 13, 2024 at 12:46 pm
Great video. We all strive towards financial stability and a better life. It is easy to achieve this through the right investment, by living frugally and budgeting. I’m glad I learnt early in life to work hard for financial freedom
@MrWaterbugdesign
January 13, 2024 at 12:46 pm
Because shipping companies are getting more packages they have to charge more??? Someone funked Economics 101.
@vincentgumina7425
January 13, 2024 at 12:46 pm
Zappos founder Tony Hsieh was a pioneer for free shipping that inspired Amazon.
@DavidSusiloUnscripted
January 13, 2024 at 12:46 pm
This is a stupid topic. Anybody with half a brain cell knows “free” means “included in the price”
@Puzzledrev
January 13, 2024 at 12:46 pm
Tell us something we don't know.
@flabianusandreanto688
January 13, 2024 at 12:46 pm
Aon the green house, imagine if Amazon did not build the warehouse, and use DHL, UPS, etc to all the delivery.Would DHL, UPS contribute more pullution?
@signupstuff
January 13, 2024 at 12:46 pm
This is the goofiest video CNBC has ever put up. Who actually thinks shipping is free? That 'free shipping' = 'shipping included' is intuitive. I patronize shops that have inclusive shipping because I want to know what I'm paying up front. I don't want to shop for what look like great prices only to find out the vendor is trying to make up the difference with hefty shipping charges.
@chefinwhitecoat
January 13, 2024 at 12:46 pm
What of a waste of 1 minute.
@cyrilkarpenko691
January 13, 2024 at 12:46 pm
Doesn't matter what it involves. The market is free and if Amazon is able to afford waiving the price of shipping I don't really care that much of what is the structure of their cost.
@iamme50
January 13, 2024 at 12:46 pm
The fact that this video popped up on my feeds is hilarious. I was just dealing with some free shipping woes just a moment ago 😂😂
@brianmenjen1940
January 13, 2024 at 12:46 pm
Jeez this is a ridiculous story.
@alandeli5769
January 13, 2024 at 12:46 pm
For godly sorrow worketh repentance to salvation not to be repented of: but the sorrow of the world worketh death. (2 Corinthians 7:10)
The Lord is not slack concerning his promise, as some men count slackness; but is longsuffering to us-ward, not willing that any should perish, but that all should come to repentance. (2 Peter 3:9)
And the times of this ignorance God winked at; but now commandeth all men every where to repent: (Acts 17:30)
@bumblebeez1995
January 13, 2024 at 12:46 pm
The thing I hate about free shipping is you often have to pay more for free shipping, I try to only buy what I need and a lot of the time I have to buy something else to get “free shipping” it depends on how much the shipping cost is whether I just pay the shipping or not
@user-yr4os6jz4r
January 13, 2024 at 12:46 pm
I live on Big Island Hawaii. WE LOVE FREE SHIPPING HERE. If we see an item that is $25 and free shipping then we see the same item $25 and $8 shipping, we take the one with free shipping.
@johnjohnson3709
January 13, 2024 at 12:46 pm
Nothing’s free
@williamhaynes7089
January 13, 2024 at 12:46 pm
the Buyer is paying for shipment to a Brick and mortar store as well, so what
@muhdkhairulhassan7736
January 13, 2024 at 12:46 pm
Misleading headline
@Pokemonnostalgia1991
January 13, 2024 at 12:46 pm
This is stupid of course is not “Free” trust me we paying for it in some way