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The True Cost Of Free Shipping

MICHEL MARTIN, HOST:

We're going to switch gears now to talk about how free shipping has changed the way we shop, especially during the holiday season. Now that megaretailers like Amazon offer free shipping for priority customers, it has changed what consumers expect when shopping online. To keep up, smaller online businesses have had to change their strategy. But that comes at a cost. Amanda Mull is a writer for The Atlantic, and she recently wrote about this in a piece called "Stop Believing In Free Shipping."

When we spoke, we focused on Etsy. That's a site where individual artisans sell their goods. Earlier this year, Etsy developed a search algorithm that gives priority to sellers who offer free shipping. But Mull says that has not worked for everyone.

AMANDA MULL: Etsy expected people to raise their - the prices of the goods that they sell sort of as a group together, sort of in one big wave once this change was announced. So the people who make the same types of goods on the platform wouldn't be competing against each other at a disadvantage for those who had absorbed the cost of shipping and those who had added it to their prices. But not as many people added it to their prices as Etsy expected. Instead, people are nervous about raising their numbers. They're nervous that people will go to Amazon, that they'll go to Walmart, that they'll go to Target and buy something less expensive instead of buying from them. So everybody's just sort of eating the cost of shipping. Not everybody, but most - a lot of sellers are.

And then the sellers who have stuck to their previous pricing structure and are still charging for shipping - a lot of them have been booted off the first page of search results within Etsy. And if you don't show up within the first couple, that really affects your business. People only scroll so far. People only page so far.

MARTIN: Well, I have to say, though, that, you know, I looked it up as soon as - when - in preparation for our conversation. I went on the Etsy site. And, admittedly, it was not a scientific survey. I looked at the things that particularly interest me, like sweaters. And I saw that there were - you know? Maybe a number of the sellers that came up on the first page offered free shipping, but a lot of them didn't. I mean, I would say maybe - when I did this a couple of times, I saw that maybe a third of the sellers on my first page didn't offer free shipping, and maybe two-thirds did offer free shipping. But I felt that there was a good range of people with different strategies.

So I guess the question is - are there any numbers to show that people are really being hurt by this?

MULL: Companies adjust their algorithms to go, you know, as they go along. So Etsy may have adjusted things to be less punitive towards people who don't offer free shipping. I talked to one seller in particular about what she's seen on the back end in her business. And she is a seller who, you know, has made 30,000 sales on the platform over the course of about a decade. And the first month that Etsy had fully implemented this policy, this past August, she saw a 40% decrease in her sales.

MARTIN: OK. But why can't these shippers just raise their prices? If they believe in their goods, they can say this is worth it and then maybe be transparent about it. This is the cost of the item, and this is the cost of the shipping, right?

MULL: Well, the shoppers don't want to hear about the cost of the shipping. They just want one price. Generally, breaking out the cost of something isn't an effective way to motivate consumers. In fact, that turns them off, generally. People want to see one price. Etsy thinks - and I sort of agree with them - that, over time, Etsy sellers will probably, you know, find a way to, as a group, raise their prices. But they're still - you're working - you've got a bunch of small shippers working against the Amazons and Walmarts of the world who are working at scale.

So while, you know, Amazon might have to tack 25 or 50 cents onto something to account for how much it will cost to ship it, you've still got these individual businesses who are going to have to tack 3 and $4 on. Etsy sellers aren't just competing against each other. They're competing against the rest of the Internet, which creates a problem because they're not working at the scale of the rest of the Internet.

MARTIN: So what I think I hear you saying is what you said in the headline, which is that there's no such thing, really, as free.

MULL: Nothing's ever free.

MARTIN: That is Amanda Mull. She's a staff writer for The Atlantic. Amanda, thank you so much for your reporting.

MULL: Thank you for having me. Transcript provided by NPR, Copyright NPR.