How free is "free" shipping?
International online shops like UK clothing retailer ASOS offer local and overseas consumers free shipping and even free returns for unwanted or unsuitable items. That's likely to be because they have large postal discounts available to businesses in their markets. In Australia, many online stores offer free shipping within Australia, or at least to metropolitan addresses.
Commenting on department store Myer's free shipping policy (for orders of $100 or more), spokesperson Steven Carey says "This is one step towards offering consumer more convenience. We've just seen that when free shipping is offered in the online model, businesses grow by five to 10 times, so we want to see that in our business."
But a spokesperson for Australia Post says free shipping is a myth. "We know that free shipping is really hidden shipping. Overseas retailers offer a bundled, all-in-one price. [They're] neither shipping for free, nor at lower parcel rates to their domestic consumers than to consumers in Australia."
While the cost of shipping may well be worked into the business model, we've found that many overseas retailers offer goods at far lower prices than their Australian counterparts, regardless of delivery costs. This may be in part due to the fact that shipping from the US, Hong Kong and NZ to Australia can be relatively cheap.
Compare the pair
Sending a 1kg parcel from Australia to the US costs $63.90 using express post international, and $29.70 via air mail. The same parcel sent from the US to Australia costs about $66 using express mail international, and about $25 using first-class mail international.
An identical parcel sent from Australia to Hong Kong will cost $54.80 to send via express courier, and $25.30 using air mail. The return journey? That'll cost about $30 using Speedpost and $21 sent via air mail.
Sending the same parcel from Australia to New Zealand costs $46.05 using an Australia Post express courier and $21.15 via air mail. The return journey to Australia using New Zealand Post's Express Courier will set you back about $47, but just $13.45 via International Air.
(All amounts in Australian dollars.)
Why do we pay more for the same routes?
According to Australia Post, international letter and parcel post flows are governed by a number of treaties. Australia Post gets paid the same amount for the processing of inbound international mail, no matter what the actual costs of delivery are. That means the pricing of international parcels destined for Australia may be lower than cost price.
Australia Post says it's effectively subsidising the postal cost of inbound international mail that overseas postal services charge. That means it takes a substantial loss on this this type of mail.
According to an Australia Post spokesperson, UK's Royal Mail and the US Postal Service are both working with significant losses. As a result they're facing cuts to their services and potential privatisation. To reduce costs, New Zealand Post will reduce mail delivery days from mid-2015 onwards, from its current Monday-to-Saturday schedule to just three days per week.
Small business woes
Smaller Australian businesses are finding it difficult to compete in the online marketplace, because they can't offer free shipping.
UK retailer The Book Depository incorporates shipping charges into its sales price, taking advantage of bulk mailing discounts. Large UK stores are also able to gain a competitive advantage by skipping several steps in the postal chain. Aussie retailers don't have access to the same kind of savings.
"Australia Post doesn't have that structure," says Tony Nash, CEO of Australian online bookseller Booktopia.
"We do take advantage of some discounts. Volume discounts exist ... pre-organising your parcels and letters into state or post code order is also important."
"The cheaper you make shipping, the more orders you can take," says Nash.
The news isn't all bad
While its international postage rates can be expensive, Australia Post has responded to the need to support the local online shopping market with a fixed-price parcel service.
They've released special flat-rate mailing boxes and satchels in partnership with eBay.
- Flat-rate postage within Australia for small parcels (eg DVDs, books and cosmetics) costs $7.15.
- For medium boxes of shoes and small electronics it's $11.70.
- Large items such as toys, clothing and larger electronics cost $15.05.
- Packaging is extra and is usually bought in bulk – for example a 20-pack of small boxes (BX1, suitable for DVDs and books) is $27.61.
The flat rate services are integrated with Australia Post's Click and Send service, an online portal for domestic and international parcel shipment, and can be bought from auspost.com.au.