Why Amazon Prime shipping is NOT unfair to customers!
This morning I woke up to this story on the news:
Apparently the crack legal team of “Dewey, Cheatem and Howe” has taken on the case of a buyer who complains that Amazon third-party sellers are “cheating” because they charge more for items with Prime shipping than those without.
“For example, if the price of an item is advertised for $10 with $3.99 shipping and the [vendor] wishes to match or top their price, the [vendor] would charge $13.99 or higher.”
Yes, that’s the gist of this lawsuit: that some vendors price their items higher than other vendors, and that’s unfair.
SIGH. OK, I’ve been an Amazon third-party seller for several years now – both with and without the Prime Shipping options. So let me explain how this works in real life, using an example similar to the one this customer is so upset about.
1. I buy a book at Goodwill for $1.99, with the intention of selling it on Amazon with the Prime Shipping option, also called FBA (Fulfilled By Amazon).
3. In order to sell with FBA, I must ship the book to the Amazon FBA Warehouse, at my own expense. Usually I will wait till I have enough books to fill a box, but sometimes, if it’s a fairly valuable book, I will ship it by itself. So I decide to go ahead and ship it to the warehouse by itself. Figure @ $3.00 for the shipping, so now my cost for this book is $4.99 – SO FAR!
4. For the privilege of having Amazon ship this book for me when it sells, I must pay a hefty chunk of the sale price back to them in fees. These fees average about 25-30% of the price I charge. So out of the $13.99 I charge for this book (using the lawsuit’s example), I may pay Amazon as much as $5.00.
5. So $13.99 – $5.00 in fees = $8.99 – $4.99 for my initial purchase price + shipping = $4.00 that I will actually get to keep. My profit as an FBA seller: $4.00.
6. Now if you said, “hey, that’s a great return, you cheater you!”, you’re right, it is a great return! BUT let’s say I decided not to use FBA and instead just charged you, the buyer, directly for the shipping – which this lawsuit seems to think is better for the buyer. So now: my price is $10.00, plus $3.99 for shipping.
7. First, I wouldn’t have to send it to the warehouse or pay any fees. I would simply put up the listing and pay Amazon a Final Value Fee of $0.99 (let’s round it out to a dollar).
8. Amazon will make you, the buyer, pay the shipping costs – $3.99 for Standard Shipping, $6.99 for Priority, etc. But I, the seller, do not have to pay any of this (unless I decide, as a courtesy, to provide more shipping than you pay for – which I am NOT obligated to do). So no shipping costs for me.
9. So here’s that same book, which I purchased for $2.00. I listed it for $10.00. You buy it, and pay $13.99. I receive $12.99, because Amazon takes out their $0.99. Then I ship it to you myself. Even if I use the entire $3.99 for the postage (which most non-FBA sellers do NOT), that’s $12.99 less $3.99. That’s right: my profit as a NON-FBA seller is $9.00 – a whopping $5.00 MORE than the FBA seller who has it listed for the exact same price including free Prime shipping!
10. Also – since you paid for Standard Shipping, unless this book weighs less than 13 ounces, I will probably have to use good old pokey slow US Media Mail, which can can take anywhere from 4 to 14 days. You see, I can’t afford to ship it to you by the same methods Amazon Prime uses. Amazon actually has their own delivery fleets, stationed all over the country, so they can get those items to you FAST – often within 24 hours!
I know there’s been a lot of math and head-scratching thinking involved in this post and I apologize. (I also apologize if I’m off by a penny here and there. Hey, it’s early and I haven’t finished my coffee, plus I’m not much of a mathematician myself!)
But I do know that, as a BUYER as well as a SELLER, Amazon Prime is a HUGE bargain – and people who complain about it just don’t seem to understand it.
Also, the complaining party in the lawsuit says she bought “18 items” during the year she had her Prime membership. Excuse me, but I BUY from Amazon as well as sell there, and I have bought WAY more than 18 items in the past year. And a lot of them I bought specifically because the Prime shipping was cheaper AND faster!
Plus – Prime not only includes shipping on stuff you buy, but also a ton of free streaming movies and TV shows! Come on, how is that not a great bargain??