Shipping and Handling

SHIPPING AND HANDLING….How much will you pay for shipping when you order something online? It turns out it depends on where you order it from:

“Academic research shows pretty convincingly that people have separate accounts in mind, one for the item itself and one for shipping,” said John Morgan, an economist who teaches at the University of California, Berkeley.

….On eBay, Mr. Morgan found that bidders happily accepted outrageously high shipping charges if they thought they were getting a good deal on the item price of a used CD. Amazon, however, faces the opposite problem: its customers accord more weight to the shipping charge, even if modest, than to the discount on the item itself. Why should this be? Perhaps it is the online customer’s chafing at being asked to pay for the privilege of waiting for a delivery.

One of the results of this is that Amazon spends a ton of money trying to reduce delivery times but finds it difficult to charge customers enough to make up for it. Because of this, its core business ? selling its own books and CDs ? might very well still be unprofitable even though it racked up about $5 billion in revenues last year. Apparently bricks and mortar aren’t quite obsolete yet.