N2 Surplus, an international industrial equipment, parts and supplies distributor based in Roanoke, Virginia, has announced its updated shipping policy, which eliminates the option for free shipping. Though it may sound counter-intuitive, the company asserts that the decision was carefully made to ultimately save their customers money. —
A recent post on the N2 Surplus blog explains the realities of calculating transportation costs. Whether it be by ground, air or sea, anytime a vehicle transports cargo, the cost of fuel and maintenance must be considered in the price of the good. When companies advertise that they offer "no cost" they must inflate the prices of their goods to offset the costs of that service.
In many situations, this can lead to the consumer spending more on an item that was shipped for free than they would have if they paid for shipping themselves. For example, if a customer buys several of the same item from a retailer that provides "no-cost shipping", each individual item has been marked up to account for shipping costs. So rather than saving money by having them all shipped together, the customer ultimately pays more.
“We had a customer in North Carolina who wanted to order an electric motor from us. They asked us to ship the motor overnight and adjust the sale price to reduce the “cost of shipping”. When we did this we realized that the customer could purchase the motor from us with overnight shipping for the same cost as the item with complimentary shipping.” says Neal Brenner, President of N2 Surplus. “In order to sell light weight items in multiples, we needed a way to ensure that the shipping cost was reasonable. Pricing an item with complimentary shipping inflated the cost of the item to the point where it was uneconomical for our customers to buy more than one item at a time.”
The N2 blog post gives more concrete examples using numbers based on USPS pricing to illustrate how their new policy actually benefits customers. The price difference between shipping three items weighing one ounce each and four items of the same weight is only a few cents, but if each item was originally priced with the assumption that it would be shipped alone, then buying three from a company that offers "no-cost shipping" would be more expensive than buying four of the same item from N2 Surplus.
When it comes to some of the large equipment that N2 deals in, transportation costs can be highly dependent on location. As of early 2015, shipping a 20 pound item from Virginia to North Carolina via FedEx costs only $11.10 while transporting to Los Angeles costs $24.80. Companies offering "no-cost shipping" base their prices on the highest possible shipping cost, meaning the buyer from NC would end up paying the cost of shipping to L.A.
Additionally, companies that offer complimentary delivery in the U.S. but require international customers to cover shipping are technically making international buyers pay for shipping twice. If a customer decides to forgo the free option and pays a premium for faster shipping, they are also paying two shipping costs because the initial price is already inflated.
Instead of raising prices based on theoretical shipping costs, N2 is opting to be more open with their pricing and let customers select the best and most cost efficient delivery method for themselves. A N2 Surplus representative assured customers, "It's not about us pocketing an 'extra buck', it's about preferable customer service and providing the customer with real shipping options and transparent costs."
About N2 Surplus: N2 Surplus is a distributor of industrial goods including electronics, automotive supplies, laboratory equipment and much more. Headquartered in Roanoke, VA, N2 Surplus ships products all over the world.
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