As exciting as e-commerce is, it’s still a bricks-and-mortar world when it comes to the average American shopper. So some of the most powerful lures in online retailing these days focus on cheap shipping.
“Fixed shipping fees make the purchasing decision cleaner for consumers,” says Matt Rutledge, CEO of Woot Inc., a Carrollton, Texas e-tailer of consumer electronics and other gear. “For them, you’ve got to make it akin to driving out to buy something at the store. It’s neat and clean.
“The further away that you can tuck shipping distastefulness from the online-buying experience, the better.”
That bit of psychology explains the popularity of e-tail icon Amazon.com’s flat-fee Prime shipping service, launched in 2005. For $79 a year, members get unlimited, free two-day shipping with no minimum purchase.
The times, they have a-changed
Once upon a time, not very long ago, e-tailers thought way differently about shipping fees. Many sites showed their high shipping fees only near the end of a transaction — a margin-enhancing “gotcha” — to make up for one of the high costs of selling on the Web. But savvy consumers who spent a little time comparing prices often found that shipping fees wiped out the “deal” they thought they were getting.
Today, the Web is still a low-margin environment, but Prime, among other models, was a response to higher consumer awareness of — even preoccupation with — stiff and often padded shipping charges.
“People who are online love free shipping, and if there’s a shipping charge, they like to know what it is before they totally check out,” says Miki Dzugan, president and marketing chief of Rapport Online, an Internet consulting firm in Sedona, Ariz.
Some cold, hard facts
A recent Jupiter Research survey found that free shipping is the top promotional method of encouraging online buying. In another recent study, rival market-research firm Forrester Research reported that 57 percent of abandoned online shopping carts were tied directly to surprise shipping fees at the end of a purchase.
Forrester also found that 88 percent of the online shoppers surveyed have left items in a cart without completing the purchase.
What’s the math?
Reporting on Prime, Inc. magazine asked Amazon founder and CEO Jeff Bezos how the company can afford “the guy who pays you $79 so he can order a $3.99 razor whenever he needs one.” Bezos said, “It all works out. Somebody else will order an $800 digital camera. On average, it’ll pencil out OK.”
Jason Billingsley figures that for a return on investment for the average Prime customer, he must order only six to 10 times a year, depending on order size and content. Billingsley, vice president of marketing for Elastic Path Software, in Vancouver, says that’s because the typical cost of two-day shipping in North America is $7 to $10.
“Amazon’s genius in launching Prime was that it essentially became like a buyer’s club, or an insurance policy,” Billingsley adds. “You may or may not use up your quota. It also promotes loyalty to Amazon, because there’s little need for consumers to look around for free-shipping offers.”
Other takes on the tack
Yoox.com, a fashion and accessories e-tailer, charges $7.95 for regular shipping and $14.50 for express — no matter the order. “That’s because we continually want to have the best customer care and be fair, and not dissuade people from buying more product from us for larger amounts of money,” says Hilary Bowers, co-founder of the New York City-based company. “It costs us far more than that to ship most orders.”
More e-tailers are moving right past flat-fees to free shipping. Petsmart, the online pet supplier, offers it for orders of more than $75.
“We’re crossing some kind of new threshold here,” says Mark Taylor, chief logistics officer of RedRoller, a Norwalk, Conn., provider of software that compares shipping costs. “Customers are the ones that are winning.”
Article provided by: Startupnation
Credit where it’s definitely due: this post was inspired by a Twitter conversation with Box CEO Aaron Levie.
Don’t look now, but something remarkable is happening.
Instagram had twelve employees when it was purchased for $700 million; all of its actual computing power was outsourced to Amazon Web Services. Mighty ARM has only 2300 employees, but there are more than 35 billion ARM-based chips out there. They do no manufacturing; instead they license their designs to companies like Apple, who in turn contract withcompanies like TSMC for the actual fabrication. Nest Labs and Ubiquiti are both 200-employee hardware companies worth circa $1 billion…who subcontract their actual manufacturing out to China.
Warren Buffett has long advocated investing in businesses with “moats” around their business model. Often that moat is an economy of scale; the notion that a hundred widgets cost a dollar each but a million widgets only a dime apiece.
Obviously that doesn’t apply to software, or music, or other virtual goods. What’s less obvious is that as time goes by, and technology and interconnectivity advance, it applies less and less to the physical world as well. Industrial capacities that not long ago were available only to gargantuan corporations are today open to anyone and everyone. Amazon, Microsoft, Google, and the OpenStack providers compete to rent economies of scale for web services. Foxconn et al essentially do the same for electronics. So what happens when this trend expands into other sectors? What happens when there are Foxconns for furniture, or cars, or houses, or retail stores? And a Dronenet for transporting physical goods?
What happens is that moats dry up, and are bridged, and previously impregnable incumbents start looking very vulnerable to disruption indeed.
But wait. This is all too small. Let’s think bigger yet.
Compare and contrast Intel with ARM. The former is, historically, a vertically integrated design-and-manufacturing monolith which owns and controls everything they do, whereas the latter concentrates on being the best at the one thing they do. I have enormous respect for Intel but it seems clear that the world is trending towards ARM’s more decoupled model, wherein their designs (like TSMC’s manufacturing capacity) are made available to any and all customers.
The logical conclusion of that trend, however, is far more transformative than a mere reduction in optimal corporate size and scope: it’s this–
I might paraphrase that as “property isn’t theft; property is an inefficient distribution of resources.” It signifies a dichotomy between two very different modes of thinking–one where you own things, and one where you just use them, and share them when they’re not in use. This is old news in the tech world, which has been dispersing monolithic dedicated channels into hordes of flexibly routed packets for decades…
Fibers always come in pairs. This practice seems obvious to a telephony person, who is in the business of setting up symmetrical two-way circuits, but makes no particular sense to a hacker tourist who tends to think in terms of one-way packet transmission. The split between these two ways of thinking runs very deep and accounts for much tumult in the telecom world.
…but it’s enormously foreign and disruptive, verging on revolutionary, to most everyone else. (Indeed, a whole lot of people have probably just mistaken it for communism. It’s not.)
We’re getting pretty abstract here. Let me pick a particular example: this column by Casey B. Mulligan in the New York Times this week, which concludes that “driverless cars … will increase the number of vehicles on the road.”
It’s a fairly smart piece that suffers from what I call “unidimensional extrapolation,” and so misses effects like the trend I refer to above. Widespread use of driverless cars will inevitably lead to a sharp rise in ownerless cars. A major reason for owning a car is that you don’t need to go get one when you need one. Which sounds like a tautology today, but won’t when shared driverless cars will be able to zoom to your house on five minute’s notice when you need to go to the mall for an hour.
Ultimately, I’m confident that driverless cars will lead to much lower car ownership in urban areas; instead, large numbers of people will have fractional ownership of sizable pools of driverless vehicles, à la Berkshire Hathaway’s NetJets, and just summon them when they need them. This will codify and formalize the running cost of using a car…and since you won’t pay for them when you’re not using them, it in turn will lead to fewer cars on the road.
That’s just one example. More generally, I think it’s hard to deny that both industries (AWS, Foxconn, etc) and individuals (from AirBNB to Zipcar) are increasingly moving towards collective usage of large pools of widely accessible shared resources. Economies of scale as a service, as Aaron put it. So far the effects are limited to specific sectors and domains — but it’s only a matter of time before this wave of change reaches, and profoundly disturbs, entire industries hitherto untouched by its force.
One of my favorite social media platforms is twitter. I’ve connected with so many people from all over the world. The technology is pretty amazing because it provides entrepreneurs the ability to get their products or services in front of people quicker, and go around the traditional layers of media that are out dated and slow.
That’s how I met David Clark, inventor of Kool Clipz. He reached out on twitter and shared his entrepreneurial story. This “bobby pin” on steroids works just like he advertises. My wife talked me into running a leg of the upcoming Akron Marathon, so this was perfect timing. David shipped me some Kool Clipz to try out and in about :15 seconds realized the niche his product was filling. It clips and holds your headphone wires providing a “wireless” feeling. My headphones weren’t flapping all over the place… It really works.
An entrepreneur’s smartphone and tablet are stuffed with sensitive information, from customer lists to business strategy notes. Loss or theft isn’t the only way it can fall into the wrong hands. Cyberthieves and unprincipled or ignorant companies could use apps to take data without your even realizing it.
Mobile apps — whether for business or entertainment — can upload your contact lists and access your location and email, though in almost all cases you must give them permission to do so. They may also store personal and other sensitive information, and sell it or share it, without your knowledge.
Your phone is “highly personal and facilitates a huge level of data collection,” says Sarah Downey, a privacy analyst at Abine Inc., a Boston-based privacy software firm. You owe it to yourself, your business and your clients — especially if your company promises them confidentiality — to keep your devices free of malicious apps and to put privacy protections in place.
Here are five tips to consider before downloading a new app on your device:
1. Shop wisely.
Despite the media hype, malware on mobile devices is not yet a significant problem. Although malware incidents are on the rise, the majority involve apps acquired from random, untrustworthy websites. Most have targeted the Symbian operating system and, more recently, Android. You can reduce your risk of downloading an outright malicious app to almost zero by acquiring apps only from your operating system maker’s app store.
Google scrutinizes the security of apps sold through Google Play (formerly the Android Market), takes user complaints and removes apps that violate its policies. Apple also vets apps before allowing them to grace its App Store which, experts say, has never distributed a malicious app. Microsoft does the same in its Windows Phone 7 marketplace.
2. Be cautious.
Before downloading an app from a company you’ve never heard of, do a quick web search to make sure it’s legitimate and reputable. People love to complain online, and their grumbles could protect you from a bad actor — or a sloppy newcomer that ignores user privacy.
3. Be socially discerning.
Don’t use your personal Facebook or Twitter account to sign in to a business app. “You want to keep a separation between church and state,” says Pam Dixon, executive director of World Privacy Forum, a San Diego-based advocacy group. “We don’t know all the dangers yet … You need to make sure client data is not getting sucked in [to social networks]. It could be a real competitive issue down the road.”
4. Demand privacy.
Don’t buy an app it if requires permission to access data or take other actions you find intrusive or unnecessary. Few apps need your contacts list or physical location. Even fewer need to access your emails, send text messages or listen in via your microphone.
App developers often seek more permissions than they need in case they might want them for a new feature down the road, Downey says. Many apps don’t have privacy polices (though more will soon), and they often fail to disclose or are vague about how they’ll use your data.
Also, check privacy policies, the documents that give you legal recourse if data are misused. You can use your computer to visit the app store, find the app and click through to the developer’s site to look for the policy. If necessary, email the app maker for more information. Does your note-taking app store a copy of your scribblings on its own servers? Does your project planner transmit your client list?
If you’re not comfortable after your due diligence, don’t install the app and let the maker know why. Mobile privacy is new territory that’s beginning to get public, corporate and government attention.
5. Check your existing apps.
It isn’t quick, easy or fun, but it is helpful to review the privacy policies and permissions given to apps you already own.
Android users can review permissions for individual apps by going to the Settings screen and choosing Device and then Apps. Both Android and iPhone let you adjust or totally turn off their GPS location features within settings. With iPhone, you can see which apps access location and turn each one on or off. Apple plans to provide a similar tool for adjusting permissions to access contacts lists in a future operating system update.
Independent resources for understanding app privacy and security are limited. WhatApp.org has some useful expert reviews but covers a very small number of apps. Common Sense Mediareviews games and other apps popular with kids.
Concerned users may want to consider security software to defend against mobile malware, including spyware apps like FlexiSPY, which are most often planted by jealous lovers but presumably could be installed by corporate spies.
Lookout Inc., a mobile security software maker, offers Privacy Advisor as part of its premium security software package for Android phones and tablets ($3 a month or $30 a year). Privacy Advisor provides a list of which of your apps can access private data, along with reports that explain the risks and capabilities of each app.
Riva Richmond is a freelance journalist who has covered technology for more than 10 years. She writes regularly on electronic security and privacy for The New York Times and its Gadgetwise and Bits blogs. She has also written extensively about small business for The Wall Street Journal and was previously a technology reporter at Dow Jones Newswires.