
A free shipping mystery - Immortalin
http://romain.goyet.com/articles/free_shipping_from_china/
======
scholia
The postal service is a networked delivery service, just like the Internet.
The difference is that the data packets are physical envelopes.

Now, the cost of running the postal service is the cost of supporting the
whole network of delivery vans, sorting offices, collections and so on,
including all the staff.

The cost of supporting the network is the same whether it carries a very large
number of packets or zero packets (up to the point where you have to add
infrastructure to cope with extra traffic. Yes, like the Internet).

This economic structure means you can carry traffic at a marginal cost if you
know the cost of supporting the whole network is covered.

All of which was worked out before Sir Rowland Hill launched the Uniform Penny
Post in the UK in 1840. This disrupted the whole messenger business (where you
paid for distance traveled) and was widely copied everywhere else. After that,
nations formed a Universal Postal Union on the basis that "we'll deliver your
letters if you deliver ours" (like the Internet).

In the early days of the public Internet (early 1980s), I used to explain how
it worked by comparing it to the penny post. It's nice to be able to do the
reverse ;-)

~~~
monochromatic
That only gets you so far though.

> assuming it takes the mailman as little as 10 seconds to deliver the
> package, and given he is paid the minimal legal wage here, that would
> already cost… 3 cents already!

The marginal cost for delivering that button (even assuming the button itself
was free) was more than 3 cents.

~~~
jrockway
What if it's like airlines, where the full-fare and business class passengers
subsidize the economy class? Maybe for every 3 cent button, someone is paying
more than the marginal cost for their shipping, so it all evens out in the
end?

~~~
xanderstrike
That's what I'm figuring. AliExpres's bread and butter is dirt cheap computer
components and wholesale chargers and stuff for gas stations and the like.
Their margin on that $100 android tablet is big enough to cover the shipping
loss on hundreds of $0.03 buttons.

~~~
nebula1
Aliexpress won't loss money, but vendors do.

~~~
tempestn
Then why would they sell the 3-cent buttons?

~~~
cconcepts
So that people who need a 3-cent button use the service, are impressed by it
and become higher margin customers later on.

~~~
tempestn
Is there really any vendor loyalty on a site like AliExpress though? It just
doesn't seem that likely to pay off. On the other hand, I assume the amount
the vendor is losing on a transaction like this is also minuscule, so maybe it
would.

~~~
cconcepts
I feel like I'm subconsciously much more loyal to services I have used than I
would otherwise like to think. There is so much other stuff going on and I
just can't be bothered going through the (probably easy) task of understanding
a new service. So I just go back to the service that I've already used, know
works, and does amazing things like ship 3 cent buttons for nothing.

~~~
tempestn
But it's not the service you need to be loyal to in order for this to pay off,
it's the specific vendor selling that 3 cent button, since they're the one
losing money on the transaction.

------
franciscojgo
Here's an article from 2014 that explains this "loophole"
[https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...](https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-
postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-
china/)

~~~
tomp
From the article:

> All this should be a reminder that any trade deal has winners and losers and
> unintended consequences.

Obviously, whoever you subsidize is a winner. If you're setting up barriers to
trade (e.g. tariffs), foreign sellers/manufacturers lose. If you're
subsidizing imports, domestic sellers/manufacturers lose.

Why can't we just _not subsidize anyone_?! Free trade is supposed to be just
that, _free_. Instead, we have the TPP & TTIP, which will create yet new
injustices and new sets of winners and losers.

~~~
mey
Free trade requires both sides to be equally free. Tariffs are one of the
defenses against another nation massively subsidizing an export. Getting all
countries to play fair (in this case neither subsidizing or taxing) isn't
going to happen. You also run into the interesting situation of what is a
subsidy that impacts exports/imports?

For example, post great depression america started tax subsidy for farmers to
ensure a stable food supply. That hurts imports of the same product. Another
interesting example is minimum wage, it makes imports more attractive, as
domestic labor costs go up. Not getting into what is right/wrong, simply that
economic incentives are not uniform and may be defensive. Hence international
trade tries to deal with that via accords, treaties, tariffs etc.

Not to mention to that tariffs are a source of revenue for the respective
government.

~~~
astrostl
Hong Kong practices unilateral free trade, and it sure hasn't seemed to hurt
them.

~~~
robryan
Assuming you benefit greatly from free trade. If everyone operated with
completely free trade there would be big winners and big losers.

~~~
cturner
It is not a zero sum game. free trade lets specialisation scale better, and
there are outcomes where everyone wins.

------
Animats
It's a combination of subsidies in China [2] and really low Universal Postal
Union rates for terminal delivery from China to the US.[1] Terminal delivery
in the US is about $1/Kg. Market rate from Shentzen to Long Beach to ship a
container is about $1200 right now.

[1] [http://fortune.com/2015/03/11/united-nations-subsidy-
chinese...](http://fortune.com/2015/03/11/united-nations-subsidy-chinese-
shipping/) [2]
[http://cep.lse.ac.uk/pubs/download/cp396.pdf](http://cep.lse.ac.uk/pubs/download/cp396.pdf)

~~~
the-dude
In the Netherlands our postal service has already stopped delivering packages
from China to your door ( very recently ). They just slip in a statement 'pick
up here & here'.

I guess they thought it was too much work too.

~~~
jpenninkhof
Still getting my sub-dollar stuff from China delivered at my doorstep in the
Netherlands. Then again, I'm A3 at Ali ;)

~~~
voltagex_
What's A3? I went through a phase of ordering ridiculous amounts of stuff from
AliExpress (sure, I'll buy 1000 resistors for $2!), but the postage times went
from ~2.5 weeks to 4+ weeks (CN->AU)

~~~
Tepix
It's a rewards program. A3 means you have earned more than 500 points in the
last 365 days. You earn 1 point per $1 spent (you only earn reward points for
orders over $2), 1 point per feedback given and 5 points per day you buy
stuff. With A3 you get Fast refunds. It has no effect on the speed of
shipping.

I've found that Malaysia Post is the worst, they often take 60 days until a
package is delivered.

------
tyingq
The secret is government subsidies. Not just from China to Chinese businesses
either. Some driven by the UPU program through the UN[1], as well as
individual receiving country's programs, like the "ePacket" program where US
bound shipments from China get artificially low rates from the USPS.

[1][http://fortune.com/2015/03/11/united-nations-subsidy-
chinese...](http://fortune.com/2015/03/11/united-nations-subsidy-chinese-
shipping/)

------
throwaway2048
The chinese postal system offers extremely low government subsidized rates.
This isn't just Alibaba, almost everybody shipping out of china offers free
shipping.

[http://www.ems.com.cn/mainservice/ems/e_guo_ji_e_you_bao.htm...](http://www.ems.com.cn/mainservice/ems/e_guo_ji_e_you_bao.html)

for reference 6RMB=0.91 USD

Larger parties are able to obtain even lower rates.

------
vdnkh
As an aside, I've been screwed several times by Prime's "guaranteed two-day"
shipping. I had package which was very late December last year. When I went to
the USPS tracking page to check the location, it turns out Amazon had
requested the _8 day_ shipping option. After several angry calls I finally had
the item cancelled and a new one on the way with Saturday shipping (the lower-
tier rep said that it wasn't possible, so I elevated to the manager). Lo and
behold, about a month later my original item showed up and I had to return it
immediately. This was my worst experience, but not my first with late
shipping. I've never had so much as a prime extension offered for my trouble.

~~~
CPLX
The problem might be Amazon here in this specific case, but I'd hazard a guess
that this is just a subset of the _massive_ drop-off in service that Amazon is
experiencing due to a major transition to using USPS instead of UPS.

Here in NYC Amazon delivery has gone from being amazing and magical to nearly
worthless seemingly overnight with this change. UPS (and Fedex) didn't seem to
have any trouble delivering even to challenging buildings without doormen,
giving accurate tracking etc. Now every time I see USPS as the option I cringe
knowing the package won't be delivered, there won't be a door tag left, and at
some random arbitrary time the status will change to "attempted delivery" even
if someone was sitting on the front porch waiting for it the entire time.

It's getting really bad, we'll see how long it takes Amazon to figure it out.

~~~
glenntzke
NYC's USPS is notoriously unreliable, especially for those of us without the
luxury of doormen. Despite living in a nice neighborhood with a vestibule that
would certainly house a package just fine - and then include that the postman
has keys to get to _just outside my apt door_ \- USPS packages are routinely
lost, yet "delivered".

Amazon at least mitigates this loss risk by unquestionably resending the
package without additional charge. This exercise has grown tiresome.

~~~
copperx
> Amazon at least mitigates this loss risk by unquestionably resending the
> package without additional charge. This exercise has grown tiresome.

It's interesting that Amazon finds this to be cheaper than shipping it
properly to begin with. Although it makes sense if packages sent through USPS
are low-value and not just small.

~~~
ikeboy
They can get refunded from usps insurance, I believe.

------
PanMan
This also surprised me: I ordered stuff on AliExpress that I wouldn't ship
back to China for € 0,70, even if the item was free (which electronics
aren't).

I asked around and it turns out that postal services in rich (EU) countries
have a special, heavily sponsored rate for 3th world nations. This wasn't a
problem with the occasional letter from Afrika, but the post services didn't
really saw this coming: Mass free shipping from china. Apparently the EU
wanted to get out of this, but china refuses (and seems to be able to, for
now).

Enjoy it while it lasts :)

~~~
3princip
I've ordered lot's of packages from AliExpress, mainly low value items (<10$)
and shipping ranges between 0 and 2$. We're not in the EU (Serbia) and not too
rich either. Maybe there's an old agreement we inherited from Yugoslavia but I
doubt it.

In fact, I ordered a USB lamp worth 2$ with free shipping just to verify it
was possible. It arrived 3 weeks later (btw 3 weeks is the travel time China-
Serbia for all packages so far, give or take a couple of days). It boggled my
mind that someone is building these things (the connector, wires, led's,
plastic and metal alone is worth that money surely), packaging them and
sending for such a small amount (not as crazy as the example in the article,
but pretty crazy for me).

------
applecore
If you discover a product that sells for ten times more on Amazon than
AliExpress, your first instinct should be to arbitrage the opportunity by
ordering the product and selling it on Amazon (and letting Amazon handle the
fulfillment: [http://services.amazon.com/fulfillment-by-
amazon/benefits.ht...](http://services.amazon.com/fulfillment-by-
amazon/benefits.htm)).

~~~
q3k
No, don't. When I go to Amazon, it's not for goods dropshipped from China.
It's for things I want delivered quick and from reputable manufacturers and
sellers.

We already have this problem in Poland with Allegro (local eBay equivalent),
where people automate this at a large scale. You and up scrolling past tons of
these items, because a) you don't want to wait 20 or so days for it to arrive
from China b) you know you can get it cheaper from Aliexpress anyway.

Different sites, different targets.

~~~
xur17
I think the op was referencing buying a bunch, shipping them to Amazon, and
then selling them via FBA, so people can buy it with prime shipping.

~~~
Pxtl
Ali has already beat you to that and has Amazon fulfill some of their larger
items.

------
randrews
Same reason chip manufacturers offer free samples.

Some portion of the people who buy one 3-cent button are going to come back in
a couple weeks and order forty thousand 3-cent buttons. Free, fast shipping on
the first button is to entice you to use that button for your design instead
of someone else's.

------
AcerbicZero
Couldn't this just be a variation on the classic loss leader sales strategy?
It also reminds me of what Amazon originally* did, get someone to sign up for
an account, buy a widget at or around cost, ship for free, and then make the
money back on the more expensive larger items as you become the "go to" for
whatever someone needs.

*I say originally, as my experience with Amazon has been on a downward trend for at least the last two years.

~~~
franciscojgo
Exactly. Loss leader, plus the fact that they now have a list of customers
that are not only active and recurring but quite literally pay Amazon to buy
from them. The avg yearly purchases of an Amazon Prime member is more than
double the site avg.

I also think there's a sense of membership that if you are paying you might as
well enjoy the benefits.

I personally enjoy Amazons packaging. I know my items will be well packaged,
whereas there's always a surprise on Ebay or other store. I have chosen ship
with Prime (Fulfilled by Amazon) on items that other Amazon sellers have
cheaper.

It's just more consistent and efficient. And that's sort of a benefit.

------
bkeroack
China subsidizes shipping for domestic businesses either a) explicitly as a
part of economic policy, or b) implicitly/de facto via corruption.

In other words, for the business selling you the item, shipping is free. It's
the Chinese citizen/taxpayer that foots the bill. This shouldn't be surprising
since China, eg, is notorious for devaluing their own currency as a means of
boosting exports. This is effectively a tax on the greater populace for the
benefit of their manufacturing sector.

------
gohrt
This thread is full of good ideas and information about $1-$3 products and
int'l shipping agreements, but the "$.03 button" mystery is almost certainly
simply an edge case that no one cares about. It's a rare purchase that is
subsidized by the massively larger volume of people buying 1000-button batches
or what-have-you.

------
chippy
I thought the mystery was that China Post created something called "ePacket"
to subsidize post to international destinations for online only shipments.

Amazon does not like this at all and are currently lobbying the US Govt to
stop it.

------
Someone1234
I agree with the article, the term "free" is widely misused. Which is strange
given the available options in the English language: bundled, included,
prepaid, incorporated, et al.

If something costs $99 it isn't free. Free is no cost. $99 is not no cost,
therefore $99 is not free. Just as text messaging isn't a "free" part of your
$30/month cellphone plan, it is an _included_ part however.

~~~
secstate
And furthermore, what you often find with "Prime" products is that there are
alternate sellers shipping "like new" versions of the products that the same
price as the Prime offer, but have shipping split out. For example:

$14.99 prime item

$10.99 + $4 like new used item

~~~
mod
You can also often just find the item at a lower price from a non-prime
seller, with no strings attached. Just don't have free 2-day shipping.

------
tarikjn
This is mostly do to the Universal Postal Union Convention, it was discussed
in details on this thread:
[https://news.ycombinator.com/item?id=9795017](https://news.ycombinator.com/item?id=9795017)

------
dsugarman
on a tangential note about free shipping, aside from this China mystery, there
is no such thing as free shipping. free shipping is a marketing ploy which
makes you feel like you are getting some value where you actually lose it.
when you add the shipping component of an online purchase into the item price,
it removes the ability for you to save when you purchase multiple items. each
one is priced as if it were being shipped on it's own.

~~~
kwhitefoot
Yes and it works well because it means that I can more easily see what I will
be paying for the goods. As far as I am concerned the price of the goods is
the cost to me of getting it to me, I'm not interested in who gets what slice
of the pie.

As for multiple items, the same applies, I am only interested in the total
cost to me, the supplier and the computer should do the arithmetic for me.

This is essentially the same argument as the stupid business of quoting ex-tax
prices in shops; I'm glad this no longer happens in European shops and online
stores, it annoys me every time I go into a dollar store in the US and hand
over a dollar bill only to be asked for another seven cents or whatever it
happens to be in that state.

------
krschultz
_AliExpress is losing money on such sales. But why bother, then?_

It has to be this. I work at an E-commerce company. We often do the math on
just exactly which items make a profit for us vs which don't. It's not always
obvious until you really dig into the exact costs of handling the items. I
believe Alibaba has a lot of 3rd party resellers, it's possible they haven't
done the math themselves.

~~~
chippy
I imagine they are hoping to get some business from Amazon. A loss leader.

------
mickelsen
Many of these 30 cents button / iPhone cable sellers are usually users with
less feedback as well, and they need a cheap way to gain more reputation in
Aliexpress or eBay. This is a way to do it and as you get more completed
transactions, your seller account gets upgraded and gets better rates. I Won't
touch the shipping part which I think is already well covered in the comments.

------
rargulati
Stems from the USPS/China Post ePacket agreement:
[http://www.ecommercebytes.com/cab/abn/y15/m10/i09/s02](http://www.ecommercebytes.com/cab/abn/y15/m10/i09/s02)

It's actually cheaper in many cases to ship from China-->US than US-->US

Newgistics handles AliExpress's inbound here in the USA. AliExpress-->China
Post-->Newgistics-->USPS: [https://newgistics.com/news-archive/aliexpress-
selects-newgi...](https://newgistics.com/news-archive/aliexpress-selects-
newgistics-for-u-s-deliveries/)

Source for the above: Matthew Hertz from Shyp

------
cha5m
A possible explanation to this could be that AliExpress is simply trying to
attract people to their platform by any means possible.

This means subsidizing purchases to draw users in.

I just considered buying that 3c button just because of how cheap it was, and
this would have required me to register with them, and enter my cc number.
This means that purchasing stuff from them in the future would be easier and I
would be more likely to do it.

This could explain the free shipping on the China leg, and then as was
mentioned there is a treaty that allows for nearly free shipping in the US by
Chinese companies.

------
tikwidd
Looking at the same single 13mm button on AliExpress from New Zealand, I also
get the free shipping offer, 15-34 days via China Post Air Mail (I can also
choose the DHL Express 3-6 day shipping for a mere $157.45 USD!)

I've noticed how common free shipping on AliExpress is and wondered the same
thing as OP. Typically shipping to New Zealand is very costly due to
remoteness. We do have a free trade agreement with China, not sure that would
make a difference.

~~~
lucaspiller
AliExpress is basically eBay-for-China so it's not quite the same comparison
as to Amazon. It's up to the seller, but yes pretty much all products I've
bought have free shipping.

------
teekert
I have often bought stuff from deal-extreme, miniinthebox, lightinthebox,
banggood, etc. They always ship for free to the Netherlands. It does often
take more than a month to arrive though. I always assumed they just throw
everything in a big container that goes out on a ship and that the whole
operation is sponsored by the Chinese Government.

Edit: Pro-tip: Don't buy phone chargers, naively I left a Raspberry Pi running
on a small chinese one and found it the next day burned black on the inside
with the cable blown out.

By the way, the discuss on HN link at the bottom of the article links here:
[https://news.ycombinator.com/item?id=10331114](https://news.ycombinator.com/item?id=10331114)

~~~
robocat
> Don't buy phone chargers

Agreed. I had a cheap USB charger that was working fine suddenly explode on my
desk with droplets of molten metal ending up welded to my phone screen. Never
again!

------
jeena
The Story of Stuff: Externalized Costs and the $4.99 Radio

[http://www.huffingtonpost.com/annie-leonard/the-story-of-
stu...](http://www.huffingtonpost.com/annie-leonard/the-story-of-stuff-
extern_b_490351.html)

~~~
shoo
> Who paid for that $4.99 radio? Some people paid with the loss of their
> natural resources. Some paid with the loss of clean air, with increased
> asthma and cancer rates. Some workers paid by having to cover their own
> health insurance. Kids in Africa paid with their future: a third of the
> school-age children in parts of the Congo now drop out to mine metals for
> electronics.

the Stafford Beer quote "the purpose of a system is what it does" springs to
mind.

what's the purpose of our economic system? to extract physical wealth from the
environment and distribute it selfishly and unequally.

can we imagine other ways of running things? yep. one old idea is a centrally-
planned globally optimized economy. e.g. model the USSRs economy as one giant
optimisation problem, solve for the things you need to get people to do, then
encourage them to do it one way or another. perhaps a more modern spin on
things is china's "citizen score" system. if that was deployed and working
tolerably, you might not need currency any more. citizen points might do fine.
it'd sure have other very unpleasant problems, but it might be an improvement
over the capitalist system in some respects.

are the alternative systems reachable from the current system? that's more of
a challenge!

------
randomgyatwork
I sent a letter from Japan to Canada for 70 cents. Sending the same letter
from Canada to Japan would cost at least $2.50

China must simply have cheaper shipping rates, obviously not 3 cents, but
probably a fraction of what you are used to spending.

------
nissehulth
I'm in Sweden and I've ordered stuff like a single USB cable from China at a
price less than USD 1. Still, free shipping, and $1 wouldn't even buy me
domestic letter postage.

If the item is small enough, it usually arrive in a padded envelope in my
mailbox. Bigger items I may have to pickup at the post office. Most often, it
arrives within 2 weeks.

I suspect that postal services in different countries have some kind of
peering agreement. That they simply assume that the amount of mail would be
pretty much the same in both directions and because of that, they don't really
charge each other.

------
zeroblue
Someone posted this on an earlier thread about the article:

[https://en.wikipedia.org/wiki/Free_trade_zone](https://en.wikipedia.org/wiki/Free_trade_zone)
China uses free trade zones extensively. This means that some items a moved in
bulk to domestic staging areas, so not everything is leaving from China, I
believe that there are requirements that they be postmarked from China due to
import export rules. Second, China's postal system is heavily subsidized and
therefore much of the costs are hidden in the system.

------
dTal
I have often wondered this when ordering sub-$1 model helicopter parts among
other things from BangGood.com. It's so much cheaper than any local source
(2x-5x cheaper) on almost any item, even consumer electronics, it boggles the
mind. How can this work economically? Or from another perspective, what's so
broken locally? Is it just that Chinese labour costs less, and if the local
supplier is buying in then it's also cheaper to just buy direct?

------
voltagex_
>I received my package around 10 days later, in perfect condition.

That's amazingly fast - I don't understand why it's faster to send things from
Hong Kong/China to the US than from the same to Australia. I've had things
from AliExpress take upwards of 35 days to get to me (in a "metro" area of SE
Australia)

------
Cthulhu_
I think companies like AliExpress and such use the free shipping as bait; what
they really aim for (I think) is having people thinking "Hey, I could resell
this button for 25 cents!" and order a million of them. Then you get the bulk
sales which is what the chinese webshops can make a profit off of.

------
azevedomarti
I just had a lesson about e-commerce in the last semester. My professor said
it would be much better if the price includes the shipping fee (if the fee has
no big variation) since customers hate calculating the total price by
themselves. They would also feel paying less if they do not see the extra
cost.

~~~
kbart
A bad advise I'd say. What if costumer compared prices online without taking
much notice if price included shipping or not (I often assume it does not, as
for not living in a big country I often have to pay extra anyway)? You'd end
up somewhere in the bottom of the list. Also, what happens when you buy 10x of
the same item (sure, you can advertise "buy 3, get 1 for free!", but that's
even more obscure)?

------
mesozoic
Yeah honestly it's amazing. I've ordered some stuff from there and at that
cost I can't believe it makes it to me. Though the post office does require a
signature on a lot of these and then holds it hostage and it's not worth me
making a trip to the post office to retrieve my $1 item.

------
childintime
I'd like to have my business mail printed as a service in China and have it
sent to the US, or Europe.

------
rndstr
I occasionally order things from AliExpress and I recently managed to exceed
the pickup deadline at my local post office by one day on a $3 item. They
notified me on the day of arrival by email but somehow couldn't remind me
towards the deadline. Anyway, they just sent it back!

------
kerv
I once bought a iPhone charge cable from ebay, free shipping from china for
$0.01. I won the auction a couple hours later. 6 weeks later it arrived!

No idea how it is possible. The bubble wrapping protecting it from shipping is
worth more than what I paid.

------
prirun
It's the same way BackBlaze makes money yet sells unlimited backup for $5/mo.
If everyone had 1TB backups, it wouldn't work, just like it wouldn't work if
Ali only sold 3 cent buttons.

------
atirip
They most likely buy shipments in bulk. Volume is predictable, so they ask
postal office(s): approx y packages, approx x size, how about z dollars in
total for a year?

------
fiatjaf
Of course there are subsidies and complex discount + partnership relations
involved, but in the end the question is simply: WHO is paying for this?

~~~
fiatjaf
This article[1] linked somewhere in this thread explains part of the problem.
But why not just the US, but many other countries, including Brazil, the most
international shipping unfriendly country in the world [2], are getting free
shipping on DX and AliExpress packages.

[1]:
[https://www.washingtonpost.com/news/storyline/wp/2014/09/12/...](https://www.washingtonpost.com/news/storyline/wp/2014/09/12/the-
postal-service-is-losing-millions-a-year-to-help-you-buy-cheap-stuff-from-
china/)

[2]: [https://community.ebay.com/t5/Archive-International-
Trading/...](https://community.ebay.com/t5/Archive-International-
Trading/Problems-shipping-to-Brazil/qaq-p/3128783)

------
krisgenre
An excellent article. Something I have myself been trying to figure out ever
since I got a $0.4 iPhone 4S case shipped for free to India.

------
saosebastiao
My background is supply chain and logistics, currently working for Amazon. The
simple answer here is that they are losing money. I'm not familiar with Ali
expresses rules, costs, inventory practices, or shipping arrangements, but I
can absolutely guarantee you that there is no way that there was any profit
made on this item. The price is just too low. Now to answer the more important
questions:

1) Why? Because large marketplaces are monumental beasts to manage, so they
come up with a variety of rules that simplify operations. Amazon does this
with FBA: if your item is above a certain size/weight threshold it costs one
price, otherwise it costs another. Those thresholds don't make sense from a
rational optimization perspective, because costs for storage and shipping are
only loosely coupled to those sizes and weights but can vary wildly based on
any number of other factors including distance, shipping speed, inbound and
outbound processing costs, etc.. In many cases, the combination of factors is
just right and Amazon loses money. But they keep it a 2-tier structure because
it makes it easier to manage the business, and makes it easier for FBA sellers
to understand it.

2) How? Their costs probably are monumentally lower than most people think, so
that mitigates the damage from people buying items like this. They have
special import arrangements (and seeing as it is china, they probably have
export subsidies as well), pre-negotiated rates with carriers, and likely do a
significant amount of pre-sorting and aggregation themselves which gives
significant leverage in negotiation of those rates. Amazon does this with
their sort centers: Instead of dumping 20k packages on a UPS truck with 15k
different zip codes, they will sort them off of the outbound line into pallets
with small geographic clusters of destinations. These go to sort centers which
aggregate similar pallets from other areas. Then we drop those pallets off
right on the doorstep of the local post office. When they do this, they get
massive discounts on delivery, and often delivered the same day that it gets
dropped off.

Furthermore, sometimes money-losing items have a way of lowering the barrier
to future purchases. While there is some truth to this notion (If you can get
someone to buy once, their subsequent conversion rates skyrocket), some
companies take it overboard...literally trying to buy new customers that will
someday be suckered into buying from you at a higher but more profitable price
point. In reality, the loyalty of penny pinchers (the target market for this
strategy) is near zilch. You lose money on them, and they might buy from you
again, but you still have to work at being the low cost choice.

Jet.com is currently pursuing the strategy of selling dollars for 90 cents,
but hoping that it encourages loyalty and hoping their cost structure will
magically (hehe) lower itself towards a level of profitability someday. Here
is for those betting for or against their future: Cost structures don't
magically lower with size. Some costs do, some costs get worse. You have to
work very hard and very intelligently to ensure that costs stay in check as
you grow, and work even harder to make them go down. IMO, with assumptions
like that they are well on their way to a fast bankruptcy.

------
bedspax
0.03 cents is a very low CAC.

------
la6470
They have a volume agreement with the postal services. So for example every
month they pay 100$ for shipping 100 items. However if some month they have
only shipped 90 items they still have room to include another 10 items no
matter what they sale it for. The real story is that they are giving things
for free and no one can beat them. How do I know this? Just through some
rational thinking.

------
shiftpgdn
I am 90% certain that a majority of international dealing Chinese vendors
simply use counterfeit postage.

~~~
andyana
I was under the impression that there is a yearly accounting process that
occurs between countries that accept mail from each other. So, while the
counterfeit postage would allow the mail to be delivered, questions would
eventually be asked.

~~~
ars
There is no yearly accounting. The treaty is that countries deliver first-
class postage letters and packages for free, for each other.

The idea was that there is an equal amount of packages shipped each way, so
the post office makes up the difference in packages sent. That used to be
true, and now isn't, but the treaty stayed.

------
boxidea
I'd bet the short obvious answer is that it doesn't cost them anything to ship
small, lightweight products like this.

The plane was already flying from China to wherever, filled with AliExpress
merchandise. They may have paid for the whole plane instead of just by weight.
So adding this product didn't add any tangible extra weight or cost.

Then the mail carrier or whoever is already going on that route. I doubt he
gets paid per package, so adding another small package is no big deal and
doesn't add extra time/cost.

Unless someone is ordering 1million buttons, then the weight starts to add up.
But then so does the cost of the buttons, which at that point would cover the
shipping.

I'm generalizing a bit since I don't know the specifics of the shipping
industry. But this makes sense to me.

~~~
mikeash
That works, until the plane really is full and you need a new one, or your
letter carrier really is fully occupied and you need a second person.

It makes little sense to give nearly everyone free shipping, but charge every
100,000th person $50,000 because their item was the one that needed a new
plane. So instead, they divide the cost across all the stuff that gets shipped
so everyone pays a share. That per-item cost is typically more than what these
sellers are charging, thus the questioning.

~~~
gohrt
There is no single optimal way to divide the cost among all the passengers.
See also: airlines, and capitalist vs socialist economies.

