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Free shipping isn't free!

Ever since Amazon took over the world of e-commerce, people's expectations for free shipping has grown in lockstep with Amazon's profits. It’s no surprise, because getting something for "free" is addictive!

But nothing is free; when a merchant offers "free shipping," someone has to pay for it. Either you are paying for it through a price increase, or the merchant is paying for it through reduced profits.

This is where Amazon was genius; they realized that they could afford to reduce profits and absorb the cost of shipping, which undercut the competition. This has made them one of the world's largest and most powerful companies. It has also, naturally, made the marketplace much more difficult for anyone else.

New Mexico Tea Company doesn't begrudge Amazon for being fierce competitors, believing that competition, especially strong competition, leads to better ideas. We have a saying around the store: "The best idea wins", whether it comes from the owner or the newest hire.

Many years ago, we tried to follow suit by instituting free shipping on tea for customers who subscribed to the newsletter. We were able to do this because tea can be packed in a padded envelope, which is the least expensive way to ship something.

In order to try and make back as much shipping costs as possible, we did not offer this program to new customers or people who bought teaware (because these often need to be shipped in boxes). Despite these "tricks" shipping quickly became one of the largest expenses we have. In 2019 the shipping costs took 22% of the profit for online sales.

"Free Shipping" is probably the best idea in terms of eCommerce marketing that has ever existed. There is no doubt that many of you reading this are customers today because of free shipping. We believe there is an even better, by being sustainable, idea that will work for both small and large companies, and benefit customers too!

On March 17th 2020, it seemed clear that in-person retail sales were going to collapse with the impending Covid-19 pandemic “stay at home” order. Luckily, we already had a thriving online business that could take the brunt of this decline while continuing to allow our local customers to buy tea, and maintaining employment for staff. However, there was a problem. The profits from in-store customers were subsidizing the profits lost when offering free shipping online. Something had to change; and fast.

We did not want to cancel the free shipping program. After all, everyone was going through a similarly stressful time in their own lives. Good tea for many people is not a luxury, it's what gets them through the day! Just when you needed us the most, we did not want to pull the rug out from under you.

So, for a lack of any other brilliant idea, we decided to just ask people to pay for shipping if they could. We also gave the option at check-out to get free shipping (like before), or even to "pay it forward" (paying double) if they were in a good place financially. At the same time, we ceased the former restrictions. Now, the free shipping could apply to any shopper and on any order.

This new program could have failed spectacularly. We were offering more, without a guarantee that anyone would choose to pay for shipping. However, it didn't fail; in fact, it worked just as intended!

Since March 17th, the amount we have had to pay for shipping represents just 3% of profits. It still costs us money to offer free shipping, but at 3% it's sustainable, and we don't have to limit the program or raise prices.

Those of you choosing to pay for shipping, and to pay it forward, are actually really making the whole system work! It's not some abstract idea of kinda-sorta helping someone in the future. It's helping out your neighbors and fellow tea drinkers right now by allowing them to choose free shipping!

It is also helping us by allowing us to attract new customers for whom shipping costs are the determining factor behind whether they order or not. And it's helping yourself by enabling a system which will allow you to choose free shipping in the future, if you ever need to.

This post is not here to shame anyone who chooses free shipping! The purpose is to explain how and why the new shipping system works the way it does; We don't treat the free shipping orders any differently than the paid shipping orders, and we don't make any judgments about why someone might have chosen free shipping. Maybe you just had a hard week (or a great week!), and you know what? You deserve it, treat yourself to free shipping! Or, treat yourself to the warm-fuzzies of paying it forward. The choice is yours!

David Edwards
Founder - NM Tea Co.

If you have more questions about shipping check out our Shipping FAQ.

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This article has 13 comments:

Dionne - 4/24/2020
I am thankful for the options. Even though I have moved to TN. I'm still getting my tea from you all!
Kathleen - 4/26/2020
Being able to tell some one about this great tea company that offers free shipping. Is one of the ways I suggest others try your company. Free shipping offer is a strong incentive. You new Shipping price policy gives folks the option of how to deal with the shipping cost. Thank you for giving us options. Once people try your great tea and quality customer service they will become customers.
Kathy - 4/26/2020
Besides the fact that Mango Mist is my favorite tea, one of the reasons I continue to order from NMTea is “free shipping.” Thank you for pointing out how much this takes away from what matters most, keeping small businesses alive! Every little bit we can do to help keep NMTtea available for fans has impact. Pitch in if you can. ??
Allison Jones-Lo - 4/26/2020
I think this is a great system! It enables everyone who love tea to get good quality tea at a price they can afford! Whoever thought of it is brilliant!
Aaron - 4/28/2020
You've been through a lot as a small business over the years - I've always appreciated your honest and transparent communication. David's a great guy, offering a great product - as much as I love free shipping, I'm more than happy to cover mine in order to support NMTC.
Ashley - 4/30/2020
I think having the options is amazing. What a fun and unique way to gift someone something special.
Cassie - 5/3/2020
People would rather pay an inflated cost that includes the shipping price in it - than pay an "extra" fee for shipping. It's crazy, but true!! I appreciated the shipping options given at checkout...but I appreciate this blog post even more! Thanks for being open and honest with your customers. It goes a long way!
Deborah - 5/3/2020
What an amazing idea! You have my business forever.
Joy Davenport - 5/12/2020
I love the pay it forward option - it lets your customers who can give a little extra support to YOUR business at this crazy time as well as offer a helping hand to someone else. I admit, I also admire your attitude about the big guys like Amazon, "fierce competitors" indeed. Hang in there, and keep the Lady Londonderry coming!
Mary Beth - 6/27/2020
I didn’t know & knowing is half the battle. Thank you David for informing Customers regarding shipping charges & how it impacts the financial bottom line. I have been a convert over the last 4 years to your superb Teas & amber sugar-I used to buy from 2 other competitors of yours on the east coast & yes shipping was free after a certain total was reached but the price of the tea was constantly increasing & the amount of tea was decreasing-I found you on an internet search & have been grateful ever since. Thank you for your openness & honesty & caring about your customers. I rather pay shipping than lose you & the quality of your tea to Corporate entities who care little about the consumer. Much gratitude & appreciation-Mary Beth
Sandy - 12/13/2020
Thank you for not only offering the shipping options you do, but also for taking the time to explain how it all breaks down... I don't think many people understand the ways that big business monopolizes the market with unrealistic standards (like "free" 2-day shipping as the new normal), but also, it's rare to get to see examples of just how impactful a pay-what-you-can system can be. This is a beautiful example of equity, rather than equality-- something I wish was more common in our society right now. Thank you for your transparency and for being a small business with heart!
Bob Herren - 8/15/2023
You are running a fine tea business, the teas are great and it good to know you love your customers as much asKeep the good work. you love your tea.
gary - 10/16/2023
Check out www.pirateship.com it saved my company shipping costs tons of money. Kind regards gary 1st time customer of yours


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