Why “free postage” is a myth and why we do not offer it.

Question: “Why don’t you offer free postage?”

This is legit a question we receive quite often, or we are asked why our postage is ‘so expensive’. A message I received this morning said that the postage prices we have are “a bit rich”.

As most small business owners will attest - the expectation for there to be no charge, or at least a minuscule change, for postage, puts alot of pressure on us.

Small business owners have two choices: incorporate i.e. hide some of the postage costs into the product cost, or take a financial hit for postal expenses.

For large businesses who have economies of scale, free postage is a much more feasible offering. But unfortunately, this adds to the pressure put on small business owners, like me.

Let’s break this down into a little more detail.

The likes of Amazon have warped our idea of what it means to shop online. Free shipping has been deemed the tastiest bait for shoppers, and its transformed our online shopping experience so much so that free shipping resembles a requirement, rather than a bonus. But shipping isn’t free for the people who send packages, and an insatiable demand for this perk might be the thing that breaks small business retail for good.

In a 2018 survey by Internet Retailer, shipping charges were deemed the most common reason shoppers abandon their carts, topping the pet-peeve list for nearly a third of respondents. Many resent paying for shipping so much that they’ll buy more expensive items or throw in additional small item they don’t even want—just to clear a free-delivery purchase minimum, says Ron Berman, a marketing professor at the Wharton School at the University of Pennsylvania.

Free shipping is enticing, says Ravi Dhar, the director of Yale’s Center for Customer Insights, because shoppers irrationally hate to pay for certain services—even those that they value immensely, such as speedy and reliable delivery. This demonstrates the economic principle known as “pain of paying,” a psychological discomfort that keeps people from completing purchases.

“The reaction to free shipping goes beyond the normal way of looking at cost and benefit,” Dhar explains. “A 20 percent discount, which would add up to the same $5 or $8 that shipping costs—that’s not as effective as giving free shipping.” In general, Dhar says, shoppers are even willing to pay more overall for the same goods if there isn’t a separate shipping charge.

The main reason small businesses can’t keep up is economies of scale. Thanks to their huge infrastructure, mega-retailers simply pay less per package for shipping.

At Soma, we charge you the prices Australia Post charge for Band 5 Businesses, plus the costs of packaging material, which we try to keep down, and don’t add too many ‘frills’. This is also aligning with our emphasis on making environmentally- friendly choices wherever possible.

For transparency, we do not incorporate any of the postage cost into the product prices. We do not want to trick you by using any pricing manipulation. At the moment we are also not adding anything to the shipping and handling fee for the ‘handling’ component, i.e. labour costs for packaging your cacao. Many (smarter!) businesses do this.

(If any of you are ever interested in the postage breakdown of your order, please feel free to reach out).

This is a very similar expectation to that of having a 1-2 day turnaround to process orders. Again, for small business owners, this is alot of pressure, and results in either a failure to meet that expectation, or sleepless nights to keep consumers happy.

I think this is another example of society going a bit mad. And I hope for the sake of other product-business owners that we start to think twice before we consciously or subconsciously have these expectations.

If there’s any small business owners like us reading this (hello!!) we’d love to hear what your experience with this is.

There’s no such thing as a free lunch…