Some small businesses losing sales as big competitors keep shipping fees ‘free’

It started with a tulip brooch.

Meg Greenlay made a special listing on her website — for a tulip brooch in a requested colour — and saw the money come in for a custom order.

A message from the client followed: why was shipping $26?

“I said, ‘I’m making a profit of $1.64 right now,” said Greenlay, who’s run Meg Does Pottery for nine years. “This isn’t me being opportunistic as a business. This is literally … how much this costs to ship things in Canada.”

A lengthy back and forth — hours of communication — led to the artist refunding her Toronto-based client’s money and cancelling the order. All for a $25 brooch, Greenlay said.

Earlier this year, consulting firm McKinsey & Company found half of at least 1,000 Americans it surveyed were unwilling to pay shipping fees for their online orders.

Some Manitoba entrepreneurs have fielded lost sales, customer complaints and lower profits amid shopper demands for free shipping.

There’s no data to pinpoint the overall lost sale cost, noted Tyler Slobogian, a policy analyst with the Canadian Federation of Independent Business.

“It definitely limits the competition for small businesses,” he said, adding there’s “no such thing” as free shipping for small companies.

Leiah Bauer offers free shipping on orders above $100 at Apothecandy, her bath and body shop. She pays the shipping fees, lowering her profit margin.

She’s sold wares online for the past 15 years. Bauer adopted free shipping as a promotion around five years ago; it was to match other businesses, encourage customers to spend more and show appreciation for a sale, she said.

She’ll pay Canada Post, UPS or Purolator. Before shipping, she’ll add thank you notes to parcels and drive 20 minutes from her rural home to the post office — costs that aren’t included in the delivery, she added.

Bauer gets flak for routing shipping costs to customers paying less than $100 for an order.

“I do find that there are a lot of abandoned carts when people get to the shipping costs part,” she said. “People are just a little unaware of what the reality of shipping costs are, because it’s so easy to get — again, in quotes — ‘free shipping’ from companies like Amazon.

“It becomes almost an expected thing.”

Greenlay factors insurance, proof of delivery, mileage, carbon neutral offset costs, the shipping label, padded envelopes and boxes, packing peanuts and thank you cards, among other things, into her shipping fee.

She’d have to “secretly increase or not so secretly increase” her items’ costs to cover free shipping.

“If you’re not able to pay yourself or your employees to compensate someone’s wishes or desires of consumerism, we’re missing the point,” Greenlay said.

Small businesses often rely on Canada Post and couriers to deliver their wares. Amazon, by contrast, has a complete system under its control — from warehousing and packaging to distribution by truck, said Barry Prentice, a University of Manitoba supply chain management professor.

Mammoth companies like Amazon have greater volumes of goods to deliver than small shops, Prentice added. Even still, Amazon Prime members with free shipping pay a membership fee. Non-members pay shipping costs.

“Shipping fees are a disincentive, but it’s not a deal-breaker, typically, for smaller businesses,” said John Graham, the Retail Council of Canada’s director of government relations for the Prairies.

Customers will swallow shipping costs if they’re seeking a unique item from a local shop, Graham continued. Firms selling “more generally available” items will have a harder time with the added fee.

Value for goods — price, loyalty points, free shipping, extra gifts — is top of mind for shoppers this year, Graham said.

Local retailers are trying to recoup lost revenue from the year’s Canada Post strike, lower overall spending and tariffs this holiday season, Slobogian from the CFIB noted.

gabrielle.piche@winnipegfreepress.com