The online revolution was once pitched as a medium of convenience. It could be 3 a.m. and you could wrap up your holiday shopping, spooning a tub of Haagen-Dazs while wearing nothing more than boxer shorts and a pair of bunny slippers. Didn't find what you were looking for? Found it but didn't like the price? The competition and comparison-shopping sites were all just a click away.
But now with prices at the pump showing no signs of letting up, Internet retailers have another selling point. It's no longer simply a matter of just battling it out for a parking space at your favorite suburban mall. It's how kindly your gas tank will treat you both ways. Drivers are suddenly discerning when it comes to how far they will take their joyrides.
Great! Right? Well, every cyberspace cloud has a silvery surcharged lining. Online orders don't magically appear on your doorstep. UPS (NYSE:UPS) and FedEx (NYSE:FDX) have tacked on 6% in surcharges to subsidize the higher fuel prices. Even the largest of retailers that may have the clout to contract fixed rates eventually come to pay the piper. No one rides for free.
But therein lies the rub seasoning. Free shipping has become e-tailing's killer app. Amazon.com (NASDAQ:AMZN) has grown even more powerful -- and profitable -- since it stopped charging its customers for standard delivery on most orders higher than $25. Barnes & Noble (NYSE:BKS) will also ship out book orders for free if they top the same $25 sum.
Others like Overstock.com (NASDAQ:OSTK) will simply charge a flat fee of $2.95 in most cases, regardless of the size -- or girth -- of your virtual shopping cart.
How will these companies respond? Would Amazon lose some sales if its everyday free shipping policy only applied to orders greater than $50? Would bargain hunters flocking to Overstock's clearance bins flinch at seeing $2.95 inch up to $3.95?
These wouldn't be phantom hikes. Everyone realizes that the cost of moving wares around has gotten more expensive lately. Thankfully, FedEx and UPS already have their routes to run anyway, so the damage isn't so much incremental as simply operational. The surcharges are reasonably cheap -- for now. But who will bear the burden of higher retail prices?
Do not gas go
Products don't just grow from the soil beneath the Amazon warehouses. There is nothing organic in that strip mall out in suburbia. Imports now have higher cargo rates to tack on, while even domestic goods have to be moved around the country. Trucking companies have had little choice but to add fuel surcharges, and how could they not? Whether you are shopping online or at a local store, inflation is real, and the added costs have been mostly absorbed by the end user. Wake up! That's you, bub.
With fuel taking a bite every leg of the way, the real winners may be the sellers of goods with the least stops along the way. While Dell (NASDAQ:DELL) naturally has to have components brought in before assembling a new machine, its direct model of delivering custom-ordered systems right to the knuckle-cracking consumer has to be more cost-effective. As it stands, a laundry list of packing slips now accompany personal computers brought into the country and whisked off to a warehouse and on to a retailer shelf before being driven home.
Yet the ultimate consumer-direct prize should probably go to eBay (NASDAQ:EBAY). Think about it. These are simple one-way treks, and eBay is just playing Cupid. Not only is it likely to collect a piece of the transaction's payment-processing fee through its PayPal subsidiary to go along with its auction fees, but its hands are clean in assigning -- much less subsidizing -- shipping costs. That's a matter determined strictly between the buyer and seller. That has eBay serving up nothing but gravy on its way to the bottom line. If you're lucky, maybe you can even hawk some of those gas receipts of when you were paying a buck and change for a gallon of gas.
Fuel for the money
Ultimately, online companies already have distinct advantages. They know their customers better. They have leaner operations. As an investor, knowing that has probably been a lucrative discovery. Amazon, Dell, and eBay have all been worthy Motley Fool Stock Advisor selections, and Overstock was singled out last year in our Motley Fool Hidden Gems newsletter.
This doesn't mean that the pure online retailers have the pie to themselves. After a few fiascoes and false starts, traditional bricks-and-mortar chains are now skilled netizens. While their virtual outlets are often sandbagged with the heavy operating burden of offline retailing and the conflicts of marketing one medium over the other, they can't be ignored. There is a lot more worldly width in the World Wide Web these days.
Yet that is even more reason for the dot-com loyalists to band together around their peers. Rising frustration at the pump will make us all ultimately poorer but this is also the perfect time for online retailers to capitalize on their strengths and make believers out of reluctant homebodies.
Liquid optimism? You bet. Pop open that gas tank. Fill 'er up!
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Longtime Fool contributor Rick Munarriz favors online shopping over trekking out to the mall. Now if only they would find a way to cram a food court into cyberspace! He does not own shares in any of the companies mentioned in this story. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.
