Zappos Zaps All Incentive Sites
Popular online merchant Zappos.com announced this week that they would no longer participate in any rewards programs. Shoppers, who had been enjoying cashback incentives of up to 10%, will have to settle for the benefits being offered by Zappos' new VIP program (if you didn't get in on the private beta, you'll have to go on a waiting list): Zappos VIPs receive free overnight shipping on all orders delivered to the continental U.S. (which costs $25 per order for non-VIPs).
The reason for this decision, Zappos told its former affiliates, was "to limit the amount of re-marketing costs to our repeat customers" and "to focus our attention in getting customers going towards our own 'VIP' program."
This is what I don't understand: How is spending an additional $25 per order for overnight shipping to your VIPs (repeat customers) going to save Zappos 5-15% (the current affiliate commission they offer through Commission Junction)? Zappos says that their average order size is $150. Let's do the math.
If the *average* order is $150, that means they're going to be coughing up $25 to overnight-ship just as many $50 orders as $250 ones...but hey, they'll avoid paying 15% on those $50 orders ($7.50)! Spend $25 to save $7.50? Where's the logic in that?
Yeah, I know, just because Zappos *charges* non-VIP customers $25 to overnight an order doesn't mean that's the actual cost they incur. I Googled and found that the average pair of shoes weighs 2 pounds, which according to USPS's shipping calculator would cost between $16 and $28 to ship. So in this scenario they're still paying at least $16 to save $7.50.
But you know what? On their average order of $150, Zappos could potentially lose a lot of money. If the average pair of shoes on Zappos.com is $50, then the typical average order would be three pairs, at 2 pounds apiece, or 6 pounds. To overnight this, according to UPS, would cost up to $44, depending on the destination. To save paying 15%, or $22.50? Why? And on a $250 order (5 pairs of shoes, or 10 pounds), they may have to pay as much as $58 to avoid paying $37.50 in commissions.
Now, I don't know if I'm the "average" shopper, but when I buy shoes online, I don't need them TOMORROW. Fact is, when you buy shoes online, you don't even know for sure if they're going to fit! So, overnight shipping is a huge cost to the company without a huge benefit to the customer.
I think Zappos is a great company, and I follow their CEO on Twitter and think he's a super-cool, down-to-earth guy. But all things being equal, do I want to buy shoes from Zappos and get free overnight shipping, or go with one of their competitors that participates in a rewards program, like Shoes.com, ShoeBuy.com, or ShoeMall.com, and earn 10% cash back while getting still-free-but-not-overnight shipping? I'm not in THAT big of a hurry for shoes that may not even fit!
But maybe it's just me. I welcome your comments.
Date: March 13, 2009 2:21 PM
Well for one thing Zappos ships via UPS, not USPS. The United States Postal Service is really only cost-effective when shipping letters and small packages < 2 lbs. When you start getting into 2 lbs or higher it's usually much cheaper to use UPS, FedEx or, my favorite, DHL. Also, with any of the above mentioned companies you can get a business account. This can give you significant discounts on rates based on the amount you ship per month. So if Zappos is shipping a huge amount of packages each month they're going to receive a much better rate than the one you'd see inputting the package specs into UPS's website. Of course, this is just my experience while I was a powerseller on Ebay and also being in charge of packages for my workplace. Also, I don't know how all of this pertains to Zappos $25 vs. 15% situation. Just thought it might help clear up some confusion.
Date: March 18, 2009 7:47 PM
i can get the same shoes from other sites like shoebuy.com and shoes.com and still get affiliate points thru incentive sites. i will just not shop at zappos any more.