Monday, October 31, 2011

Why We Don't Include Shipping In Our Prices

The prices shown on our site DO NOT include shipping costs in the price. The price shown is the price for the item itself. We have received some emails and seen forum posts with questions about this topic and wanted to explain our reasoning.

Shipping Costs Are Different for Each User

Shipping costs are not always the same for each user. Shipping usually costs $3.99 for items sold on Amazon. An Amazon Prime customer doesn't pay any shipping. Some eBay auctions are priced based upon the winner's zip code instead of a flat rate. And some sites offer free shipping if you buy a certain dollar amount.

All of these make calculating the shipping cost an imperfect variable because the price the winner actually paid might not be what you would have paid for the exact same item.

Different Users Want To See Different Prices has two main types of users. 1) video game consumers. 2) video game sellers. Both user types would ideally want to see different variables included in prices. Consumers would like to know the total cost of buying a game. So they would generally like to see shipping costs included in the prices shown.

But online retailers mainly want to know how much they can actually get for selling a game. They don't get to keep shipping because they use the shipping cost to pay for shipping the item.

Including shipping costs in the prices would make the prices better for some users but worse for others.

Shipping is a Transaction Cost

Shipping is a cost of completing the transaction. There are lots of other transaction costs that we could account for in our pricing too and adding each one would become prohibitively complex.

For buyers some transactions include all or some of these transaction costs: shipping, sales tax, cost of gas to drive to store, time to find and pickup the item.

Sellers have their own set of transaction costs: listing fees online, credit card processing fees, material costs to ship an item, costs of running a store or warehouse.

Each buyer and seller has different transaction costs depending on where they buy or sell the item and each of these would need to be considered when trying to determine the "best price". Here is an example:

A buyer is considering two options for a video game purchase:
A) item is priced at $4 in an online store
B) item is priced at $5 at a local store

In order to know which game is the best deal the buyer needs to consider the shipping cost for item A and they need to know how far away item B is and what the sales tax rate is at that location.

Including shipping costs in our prices would only account for one of the many transaction costs for buyers and none for sellers. Instead, we chose to include no transaction costs for buyers or sellers and let each user adjust the prices for their own particular needs and costs.


We do not include shipping costs in our prices because it would be an imperfect value, it would make prices less accurate for some users, and it would still not account for all costs. You should take that into account when making a buying or selling decision.

All that being said, we realize for some users seeing shipping costs included can be helpful. We have added a feature to the site letting you add shipping costs our prices.


Anonymous said...

You make a big assumption in setting the shipping price as a transaction cost. You forget the reality of list and sorting, and also the effect that altering the shipping and "handling" price can have on taxation.

here is example of a game currently for 4.99 + 3.99 shipping or 3.88 + 5.95 shipping or 10.62 + free shipping. Here the best deal is only sorted to the top when shipping is included in your sort. They all are the same cost and all have the same shipping coverage. Each item can go to the top of a sort, least shipping, lowest price, lowest price+shipping. So we see that playing with these two numbers is a strategy to gain traffic. When it comes to taxes that seller that shifts the most cost over to the shipping and handling will be helping his customer out because by claiming the work is paying for handling reduces the amount owed on the product. So again it is a strategy to gain traffic to a different population of searchers. A good seller will have his items priced in different locations according to these kind of differing concepts. Who knows maybe the 3 sellers i quoted were the same seller behind the screen.

JJ Hendricks said...

@anonymous - very good points about shipping rates changing how the item will appear on eBay searches. eBay by default sorts by "best option", which takes into account a host of variables but gives a boost to free shipping because customers say they like it (even if the final cost is the same). It is perceived as value for the customer.

Because this is the default search option for eBay, the biggest share of traffic would be gained by using free shipping. But you are right that all three scenarios you mentioned would appear on top with different customizations.

Richard Mohn said...

Without including the shipping cost , essentially makes the data less accurate .. If it where feasable to create such A compilation of data , including prices via Free Ship , and Average prices including Average Shipping. Comparing all Marketplaces.
Or is it that .. The Data simply cannot retrieve the Shipping costs ?

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