Zappos Zaps All Incentive Sites

March 5, 2009 · 0 comments

Popular online merchant announced this week that they would no longer participate in any rewards programs. Shoppers, who had been enjoying cashback incentives of up to 10%, will have to settle for the benefits being offered by Zappos’ new VIP program (if you didn’t get in on the private beta, you’ll have to go on a waiting list): Zappos VIPs receive free overnight shipping on all orders delivered to the continental U.S. (which costs $25 per order for non-VIPs).
The reason for this decision, Zappos told its former affiliates, was “to limit the amount of re-marketing costs to our repeat customers” and “to focus our attention in getting customers going towards our own ‘VIP’ program.”
This is what I don’t understand: How is spending an additional $25 per order for overnight shipping to your VIPs (repeat customers) going to save Zappos 5-15% (the current affiliate commission they offer through Commission Junction)? Zappos says that their average order size is $150. Let’s do the math.
If the *average* order is $150, that means they’re going to be coughing up $25 to overnight-ship just as many $50 orders as $250 ones…but hey, they’ll avoid paying 15% on those $50 orders ($7.50)! Spend $25 to save $7.50? Where’s the logic in that?
Yeah, I know, just because Zappos *charges* non-VIP customers $25 to overnight an order doesn’t mean that’s the actual cost they incur. I Googled and found that the average pair of shoes weighs 2 pounds, which according to USPS’s shipping calculator would cost between $16 and $28 to ship. So in this scenario they’re still paying at least $16 to save $7.50.
But you know what? On their average order of $150, Zappos could potentially lose a lot of money. If the average pair of shoes on is $50, then the typical average order would be three pairs, at 2 pounds apiece, or 6 pounds. To overnight this, according to UPS, would cost up to $44, depending on the destination. To save paying 15%, or $22.50? Why? And on a $250 order (5 pairs of shoes, or 10 pounds), they may have to pay as much as $58 to avoid paying $37.50 in commissions.
Now, I don’t know if I’m the “average” shopper, but when I buy shoes online, I don’t need them TOMORROW. Fact is, when you buy shoes online, you don’t even know for sure if they’re going to fit! So, overnight shipping is a huge cost to the company without a huge benefit to the customer.
I think Zappos is a great company, and I follow their CEO on Twitter and think he’s a super-cool, down-to-earth guy. But all things being equal, do I want to buy shoes from Zappos and get free overnight shipping, or go with one of their competitors that participates in a rewards program, like,, or, and earn 10% cash back while getting still-free-but-not-overnight shipping? I’m not in THAT big of a hurry for shoes that may not even fit!
But maybe it’s just me. I welcome your comments.

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