Tiny Enable Holdings (OTC BB: ENAB), the parent company of would-be eBay
Good luck with that one, dude.
Sure, charging $1.95 per order sounds like a great deal beside direct competitor Overstock.com's
Great, Patrick. But both of you are missing the point. If you're not willing to do free shipping, you might as well stick with passing on the full FedEx
Walking the talk
In Predictably Irrational, Duke professor Dan Ariely shows how Amazon.com
And there's plenty of evidence for the awesome power of "free" in that book. Here's a free $10 gift certificate, and here's a $20 certificate that would cost you $7. Nearly everyone would choose the free $10 certificate, even if the other option is a 30% better deal. In Dr. Ariely's experiments at local shopping malls, everyone swung that way.
Change the equation ever so slightly, and you can choose between a $10 gift coupon that will cost you $1, or a $20 option that sets you back $8 up front. Suddenly, people get all rational about this choice and pick the $12 net about 64% of the time. Change the purchase prices to $5 and $12, respectively, and 71% will go for the big-ticket item that makes them $8 richer rather than $5. These experiments were repeated to account for the hassle of hauling the wallet out of your pocket, but FREE! gift certificates were still special.
So again, good luck with that "cheap shipping" strategy, RedTag. I think you would have been much better off slapping a massive "FREE SHIPPING!" banner on your front page from day one. Assuming that you actually make a gross profit on each item you sell, however small, you could make a very nice living off the massive sales increases I'd expect. Short-term shipping promotions are all good, but they don't have the same mass-psychology effect that a straightforward "we ship your stuff for free" policy would.
Next time you see some company ascribing great expectations to its latest sales and marketing campaign, check to see whether there's anything "FREE!" about it. Retailers like Overstock could go with free shipping, while service companies such as AT&T
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Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure would take the better total deal every time. Well, in theory.