Online Retailers vs. Local Distribution pt. 2

This is the second in a three-part series from HESCO's Director of Strategic Initiatives, Chad DePasquale, that demystifies misconceptions about online retailers vs. local distribution.

Online Retailers vs. Local Distribution: Misconceptions Demystified, Part 2

(Shipping Smoke and Mirrors)

Misconception #2 – Free Shipping is Saving Me Money.

By Chad DePasquale, Director of Strategic Initiatives, HESCO

It’s the old saying, “Nothing is ever free.” In my first article, I touched on how you can save a substantial amount of money switching to HESCO as your preferred electrical supplier from the large online retailers. There were savings of up to 61% when making the switch, and this overcharging is the key to those retailers’ smoke and mirror offering of free-shipping.  In other words, the online stores are charging higher prices for the products so they can fund their “free” shipping offer. This means, you’re still paying for shipping by buying the item at a higher price and thinking you’re saving money by getting it shipped for free. 

delivery truckTake the Sola example from my first article (SDN1024100P, $379.86 from Mouser, $341.94 from HESCO, savings of $34.91 or 9%), and assume they are offering free shipping with the purchase. When you estimate the shipping on the Mouser site, it’s $10.69 to ship UPS Ground (which is 4 days from TX to CT by the way). Mouser has been generous enough to absorb that shipping cost, so you’re saving $10.69 right? Well, not really. If you only shop with Mouser and don’t want to do business elsewhere, then yes, I guess you don’t have to pay the shipping charge, but if you’re an informed consumer and shop around, you’ll know that sometimes the best purchase is not the one that includes free shipping.

Math never lies, so let’s put it through the paces and compare to buying with HESCO. Off the bat, you’re paying $34.91 for the pleasure of purchasing through Mouser, so that is the gross savings if you purchased through HESCO and didn’t factor in shipping. Now, let’s assume Mouser is picking up the shipping; that would mean you’re saving $10.69 on the UPS charge, so we’ll reduce the Mouser product price by that amount to get a price of the item factoring in the shipping savings: $369.17 ($379.86 - $10.69). Now, we’ll compare that to the HESCO price of $341.96 and estimated shipping charge of $9.77 (I can’t forget to mention that this gets to you next day via UPS Ground!) for an all-in price of $351.71 ($341.94 + $9.77). 

If we compare net costs, $369.17 from Mouser or $351.71 from HESCO -- you’re still saving $17.46 (5%) when purchasing through HESCO and paying to have it shipped to you compared to the online stores who are shipping it for free! Not to mention, we have it stocked and you will receive it next day via ground, or you can swing by and pick it up if you need it the same day.

What’s the moral of this article? Never buy anything that offers free shipping? No, not that, because there are times when this does work in your favor. The moral is more of making sure you’re being an informed consumer and looking at the total cost of acquiring an item. The free shipping may be enticing, but a bell should go off in your head as you ask yourself, “How are they able to absorb the shipping costs?” Most of the time, the answer is because of you paying a higher price! 

In my last installment, Think Before You Click, I’ll touch on quantity price breaks and what that really means.

 Chad DePasquale, Director of Strategic Initiatives, HESCO

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