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Q:'s Shipping ( Answered 5 out of 5 stars,   2 Comments )
Subject:'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.

Subject: Re:'s Shipping
Answered By: leapinglizard-ga on 12 May 2006 10:53 PDT
Rated:5 out of 5 stars
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

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

Amazon: Amazon Prime FAQ

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

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

    FedEx integrated its industry-leading tracking information
    directly through the Web site to provide a seamless
    experience for customers from order to delivery. FedEx
    representatives also provided support at each
    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 Customers

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

    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 Hard

    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

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

    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

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.



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earnestpooky-ga rated this answer:5 out of 5 stars
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!

Subject: Re:'s Shipping
From: purplecloud-ga on 16 Jul 2006 16:45 PDT
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.
Subject: Re:'s Shipping
From: ak1234567-ga on 29 Oct 2006 09:29 PST
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.

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