View Question
 Question
 Subject: Amazon.com's Shipping Category: Business and Money > eCommerce Asked by: earnestpooky-ga List Price: \$200.00 Posted: 11 May 2006 09:25 PDT Expires: 10 Jun 2006 09:25 PDT Question ID: 727708
 ```Why is Amazon's Standard Shipping for Books (\$3.00) lower than Fedex's Ground shipping fee? (\$3.88)? What kind of deal do they make? Do the distributor still get profit with the low \$3.00 fee, ...or Amazon is just actually paying them to make the fee lower? (In fact I don't know which distributor dlivers Amazon's stuff...there's only Amazon's logo on the box.) I'd like to know the details about how they team up to make the price lower. I guess it's a lot of questions... Thanks for your time! PS.I'm from Taiwan so my writing may be weird :p. There's no way I can find out the answer in the local Library. And Internet is tooooo big. So google answer is my only hope. Thank you for helping. Leo```
 Subject: Re: Amazon.com's Shipping Answered By: leapinglizard-ga on 12 May 2006 10:53 PDT Rated:
 ```Dear Leo, Amazon's Standard Shipping rate for books is actually \$3.00 per shipment, plus \$0.99 per individual book. So if you were ordering a single book from Amazon with Standard Shipping, the total shipping charge would be \$3.00 + \$0.99 = \$3.99 . How are shipping costs calculated? We charge a single flat fee for each shipment, plus additional, smaller fees for each item in that shipment. The total shipping charge will be displayed on the last page of the order form, before you submit your order. Here is the equation we use to calculate the total shipping cost: (Highest Applicable Per-Shipment Cost) + (Number of Items x Per-Item Cost) = Total Shipping Fee Amazon: Domestic Shipping Rates http://www.amazon.com/exec/obidos/tg/browse/-/468636/ref=br_bx_c_1_0/103-8257266-7362234 In practice, many people will pay no extra charge for shipping because take advantage of the Super Saver Shipping program, which offers free ground delivery on orders of \$25 or more. Another popular shipping promotion is Amazon Prime, which offers free two-day shipping on all items for a flat fee of \$79 a year. Amazon: Super Saver Shipping http://www.amazon.com/exec/obidos/tg/browse/-/527692/103-8257266-7362234 Amazon: Amazon Prime FAQ http://www.amazon.com/exec/obidos/tg/browse/-/13819211/103-8257266-7362234 So Amazon does charge very low shipping fees. One reason it can do so is that it runs its own distribution network, with highly automated distribution centers located across the United States. In theory, Amazon's efficient logistics lead to savings, which it can pass on to customers in the form of low shipping fees and other incentives. It's the online retailer's fixation with refining the way it picks, packs and ships items that has enabled it to challenge one of the largest barriers to e-commerce: shipping fees. Amazon helped to pioneer the free-shipping concept when it offered free shipping on orders of \$99 or more during the 1999 holiday season. Jack Nugent sorts boxes ready for shipment. The Nevada center, Amazon's largest, spans 13 football fields. The company extended the offer to customers year-round in January 2000 and lowered the threshold to orders of \$25 or more later the same year ? an offer that still stands. Free shipping, combined with deeply discounted items, became a powerful incentive for customers to shop at Amazon, helping the online retailer recharge sales growth. The Seattle Times: Pick, pack and ship ... and deliver profit http://seattletimes.nwsource.com/html/businesstechnology/2002125730_amazon21.html Amazon entrusts the final-mile delivery of shipments to courier services such as FedEx, which can work closely with Amazon's distribution centers for large delivery projects such as the release of a new Harry Potter book. FedEx integrated its industry-leading tracking information directly through the Amazon.com Web site to provide a seamless experience for Amazon.com customers from order to delivery. FedEx representatives also provided support at each Amazon.com distribution center to help facilitate any automated-shipping and package-processing needs. FedEx: Press Releases: FedEx Ready to Deliver Harry Potter Magic Directly to Thousands of Amazon.com Customers http://www.fedex.com/us/about/news/pressreleases/archives/pressrelease231715457.html?link=4 In general, however, industry analysts say that Amazon's low-cost shipping programs are causing it to lose money. The Amazon founder Jeff Bezos and other Amazon executives defend their low shipping rates on the grounds that what is good for the customer will, in the long run, be good for the business. In other words, Amazon hopes to attract such a large customer base with its shipping promotions that it will eventually make up its losses through customer loyalty and economies of scale. Bezos acknowledged that Amazon's new shipping policy will be expensive in the short run, but could bring in new customers. "There could be a whole new pool of customers for Amazon if we can offer a new class of shipping," said Bezos. "Given our cost improvements, we believe this is a bet worth taking." CNET: Amazon posts its first net profit http://news.com.com/2100-1017-819688.html Outbound shipping-related costs totaled rose 20% in the quarter to \$280 million. Net shipping loss expanded 17% to \$91 million because of Amazon Prime and other free shipping orders. This basically means the transportation element of the business is subsidizing product sales. Supply Chain Digest: Logistics Cost Increases Hit Amazon.com Hard http://www.scdigest.com/assets/NewsViews/06-02-03-1.cfm One hope is that reduced prices, both on products and especially on shipping, will capture new customers and cement the loyalty of existing ones. Thanks to free-shipping offers such as its Amazon Prime program, which gives customers free two-day shipping on most orders for \$79 a year, Amazon incurred a shipping loss of \$78 million in the quarter. Moreover, it began offering free trial memberships in Amazon Prime, which could further hike shipping losses this year. BusinessWeek: Amazon's Costly Bells and Whistles http://www.businessweek.com/technology/content/feb2006/tc20060203_222987.htm In sum, the reason Amazon can charge such low shipping fees is that it is willing to lose money in order to attract new customers. Jeff Bezos sees this as giving "money directly to the customers" rather than to advertisers. Look at something like free super saver shipping -- our free shipping on orders over \$25. That is something we very methodically experimented with for a full year. At first, orders over \$99 would ship free, and then orders over \$49 would ship free, and then orders over \$25 would ship free. We knew that customers would like that, so it was a question of, would it drive enough sales to make it worthwhile? We compared it with a television advertising campaign: We picked two markets, Minneapolis and Portland, Oreg., and for a year we did television advertising just in those markets. We wanted to see if we would get a sufficient lift in sales to justify television advertising, and to compare that with giving the money directly to the customers in the form of free shipping instead of to the television networks. That's a very customer-experience-focused experiment, and when we were done we decided we would make the \$25 free shipping indefinite. Inc: America's 25 Most Fascinating Entrepreneurs: Jeff Bezos http://www.inc.com/magazine/20040401/25bezos.html It has been an interesting challenge to answer your question. If you have any concerns about the accuracy or completeness of my research, please advise me through a Clarification Request and allow me the opportunity to fully meet your needs before you rate this answer. Regards, leapinglizard Search strategy: amazon shipping loss ://www.google.com/search?q=amazon+shipping+loss&start=0&ie=utf-8&oe=utf-8&client=firefox-a&rls=org.mozilla:en-US:official amazon fedex distribution ://www.google.com/search?hl=en&lr=&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=amazon+fedex+distribution&btnG=Search bezos free shipping good customer ://www.google.com/search?q=bezos+free+shipping+good+customer&start=0&ie=utf-8&oe=utf-8&client=firefox-a&rls=org.mozilla:en-US:official amazon distribution network ://www.google.com/search?hl=en&lr=&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=amazon+distribution+network&btnG=Search amazon delivery logistics ://www.google.com/search?hl=en&lr=&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&q=amazon+delivery+logistics&btnG=Search```
 earnestpooky-ga rated this answer: ```Hi, sorry for the late rating. I missed the mail somehow. Thanks for the answer, it really helps a lot. Now I know where to start. Thanks!```

 ```A minor clarification to an otherwise complete answer... Amazon's free shipping policy for orders over US\$25 does not apply to international orders. I live in Taiwan and have to pay the full shipping costs.```
 ```Interestingly--in light of the significant impact that Amazon's shipping policies seem to have on their overall profitability--it appears that they have now decided to "degrade" their standard shipping service in order to encourage people to pay extra for "2-day" or to subscribe to "Prime." Here is a simple example. Based on long experience as an Amazon customer, I know that if I order a book on Sunday they can certainly send it out on Monday. I also know that in many cases (because they have distribution centers nearby) even the most modest USPS shipping service will reach me in two days. But this means I have no incentive to pay extra for 2-day delivery. Within the last few months, apparently, Amazon has decided to create such an incentive by delaying by at least one day an order that is merely "standard shipping." So if I order a book on Sunday and offer to pay for 2-day shipping, they will say "Expected shipping date Monday." Same book, ordered at the same time with standard shipping, they will say "Expected shipping date Tuesday." (These "standard shipments" via the USPS seem to be subject to mysterious additional delays as well. So that--in my example--Amazon will send their usual e-mail on Tuesday that "Your order has been shipped." But if you try to track the shipment on Wednesday via the USPS system they report only "Electronic shipping data received"--and another 24 to 72 hours may elapse before the USPS has any record of a package actually in their hands.) Amazon makes no bones about much larger built-in delays in the case of "free shipping," which seems fair enough, but they don't want to acknowledge that "standard shipping" now includes a built-in delay as well. In fact, they deny it--but my recent experience in this regard has been absolutely consistent.```