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'Free' online shipping not so free after all

Reuters

"There's no such thing as free," stressed George Gombossy, editor of consumer advocacy website CTWatchDog.com. "You're paying for shipping. It's in the price you're paying."

By Eve Tahmincioglu, msnbc.com contributor

Few things make a consumer happier than free shipping, and the promise of getting holiday stuff delivered gratis may get lots of you clicking “checkout” at online retail sites on Cyber Monday. But there’s a dark side to this growing marketing tactic — you may end up spending more this holiday season, and waiting longer for your merchandise. 

Last year, the week following Thanksgiving, including Cyber Monday, experienced a huge increase in the number of customers using free shipping to deliver their orders, but those supposedly savvy shoppers ended up spending more per transaction than their counterparts who paid for shipping charges. 

“For the week ending Dec. 5, 2010, transactions using free shipping were $125.20 on average, 45 percent higher than those with paid shipping,” according to ComScore Inc., an Internet marketing research firm. 

And for the 2010 holiday season overall, consumers who partook in free shipping spent about 15 percent more than those who did not. 

Andrew Lipsman, ComScore’s vice president of industry analysis, said there could be a number of reasons for the phenomenon. “There’s the psychological impact,” he noted, that causes some consumers to throw extra items into their cyber basket because shipping is free; and the difference could be driven by minimum spending thresholds. 

Indeed, many free shipping deals are often tied to minimum order dollar amounts, such as at Amazon.com which offers free shipping with order of $25 or more, and Sears.com which requires you spend more than $99. 

Getting the free-shipping perk may also mean you have to wait longer for your items to be mailed out, potentially causing issues if you want items well in advance of the holidays. 

For example, if you get free shipping with Amazon you have to wait five to eight days, compared to three to five days if you pony up the $4 for standard shipping. 

“You'll almost never see ‘free shipping’ with one of the quick shipping options, such as overnight or two-day. It's usually four to ten days,” said Seth Rabinowitz, a partner for management consulting firm Silicon Associates, who advises companies on how to gauge their shipping options online. “That's fine if you're certain you're not going to want to return said item, or if you may have to return/exchange it if you give yourself plenty of time for it all to happen. Being this close to holiday gift exchange time, I think it's already too late to wait 10 days to receive your order if there's a risk you'll be sending something back.” 

Clearly, the free-shipping hype has intensified this holiday season, with 93 percent of online merchants offering some sort of no cost shipping this holiday, up from 85 percent last year, according to the National Retail Federation industry group. There’s even a designated free shipping day set for Dec. 17 and more than 1,200 retailers have already said they’ll participate, including well-known merchants such as Sephora and Land’s End, according to FreeShippingDay.com. 

In most cases, larger retailers are able to negotiate better deals on shipping with companies such as FedEx and UPS, and as a result may not have to raise prices to cover the costs as much as smaller merchants, said Ina Steiner, editor of eCommerce Bytes, a newsletter for online retailers. The free-shipping impact on a small business’ bottom line could be extreme if they didn’t make up the expense, she said. 

Steiner suggested consumers not rely on “free shipping” as the only reason they buy an item from a certain retailer. Before making any purchase, she advised, shoppers should check for online coupons that may offer discounts on items that more than make up for shipping costs. 

“There’s no such thing as free,” stressed George Gombossy, editor of consumer advocacy website CTWatchDog.com. “You’re paying for shipping. It’s in the price you’re paying.” 

The cost of shipping is not coming out of the pocket of a merchant, he maintained, so consumers should to do their homework and look at the price of an item and compare that to other online retailers and even to brick and mortar stores. “You need to compare apples to apples and then include all of your costs, shipping, whether you’re traveling to a store, when you get it, etc.,” he added. 

“If they were advertising honestly,” he said about online merchants, “they’d say, ‘shipping is included in the cost.”’

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Tahmincioglu