How and why e-commerce sites like Flipkart, Amazon, ebay, Homeshop18 etc. provide free shipping on products (cost between INR 200-400) when courier charges in India are so high? Don't they get loss?

One of my brother in law was keen in buying some book(Eternally talented India, 108 Facts), which i bought in Delhi Railway station for Rs.250, and the same is costing Rs.399 in flipkart. What i am trying to say is that if the seller can deliver the item to ecomm sites far below the MRP, these people can provide free shipping and other discounts to you, else they will manipulate the MRP itself.

E-companies have not yet arrived at the breakeven point.If we talk about Logistic cost. Yes they do incur costs for that but not that much as compared to the one that would cost to an individual.E-commerce companies have now come up with their own fleet of Logistics for minimizing their Transportation costs. Amazon- Amazon Transportation services Flipkart- Ekart Snapdeal- Go Javas They operate on bulk shipping model. Its all about Economies of Scale.Ecommerce Logistics are shaping up and the costs are expected to be reduced in the coming years.Assocham - PWC recent study highlights the investment of $8 billion in infrastructure, logistics in India by 2020. With E-Commerce expansion to Tier II and Tier III cities, there would be increase in demand for air cargo connectivity to towns.

E-Commerce giants like Flipkart and Amazon have tie ups with courier companies. There are lots of reputed courier companies which get most of their business from these e-commerce giants. Also, there is a difference in sending a single item or many items together to particular location so bulk delivery came into play. So the E-commerce and courier companies kind of work for each other. This is some what similar to facilities provided by an organization to its employees. For ex an organization provide health or life insurance at a lower premium to its employees because the organization can negotiate the premium with the an insurance vendor in terms of business they will provide to them. Also the vendor will naturally be able to generate lot of business from these organization so they provide discount.Its a great marketing strategy employed by various E-commerce to remove shipping cost completely once the total purchase increased a certain threshold value. This increases the number of items purchased as the consumer will avoid paying extra. The shipping cost is also dependent on whether the items are send directly by dealers or by the company as the latter will have more number of orders to a particular location as compared to the former.  The cost is also dependent on the frequency of purchase of a product. Product under beauty and health segment generally have no shipping cost as they are bought more frequently as compared to other products.Discounts - These e-commerce purchase products in bulk, do not have brick and mortar shop which reduces the construction or rent cost as they only need to maintain a warehouse. Plus, the various advertisement displayed on their webpages adds to the revenue.  The online seller directly purchased their products from the manufacturers which saves them the distributer and retailer cost so b2b cost are different from b2c cost. They also give importance to user base more than the profit.

It is a business strategy. You give a product for less than the price ( by having higher discount).giving free delivery will help in short run for customer. What will happen in small retail stores will go away and after some time they will charge courier charges., as it is happening now. You will have any book with not less than 70 to 80 rs charges. In the long run customers are lossers. There is no small shops you are lost.

Yes, they will get a loss if they are shipping just one item, but, when they send out 100 shipments on the same route they share the cost of distribution. In fact, Flipkart has its own service called E-kart which is its logistics wind and hence what costs you Rs. 200 outside, it costs them hardly Rs. 40–50 or even less based on how many shipments on the same route that go at one time. Therefore, it is a standard operations research problem for which they have algorithms to determine optimized distribution route that helps them bring distribution costs low. Further, they do charge a commission from seller on each item sold on the store so it will further compensate their costs of shipping to some extent. Ultimately, it is the number game due to which they are in market and above all they have strong backing of VC funds that gives them confidence and boost to take risk and invest money towards customer acquisition so even if they lose money on a few deliveries eventually in long run your buying habits change and you don’t think of even going to a local store and just use their platform to place and order online for the sake of convenience.

For the most part marchant/merchants who are offering their items on ecommerce webpage making profit.They buys direct outfitted items from makers at low rates and offers their item online at high cost.Thats why they are not taking delivery charges upto Rs 500 to customer.Dispatch organizations charge around Rs.30-50/ - for an item conveyance of 500gm item, since they conveyance more than a million stock on regular schedule regardless of the possibility that an item is of a value scope of Rs.200-400/ - then can undoubtedly accomplish make back the initial investment in income even without charging any conveyance charges from clients.

The E-Commerce websites do suffer some loss for a return/exchange scenario but the thing here is that in reality they are only operating a logistic service and not taking the losses but only the profit as commission on every product. Commission percentage is in the hands of the seller which is different per product. Also come in between the discounts offered by these channels and the sellers can participate in these ‘sale’s that happen. Estimations by big analysts have come against favour of E-commerce portal lately. SO in the end they probably are suffering losses.

Currently Shipping Charges are in range of 4-8% of Average ticket size of multiple e-commerce companies. Pen drive example might not be the right one as there are quite a few products which are sold at losses also just to give customer experience of online shopping as customers are likely to order low value item as their first order before the trust builds and subsequently the order value increases. However, for e-commerce companies to turn profitable, they will have to take a call on doing away with free shipping option, may be 3-5 years down the line when the market consolidates. Like earlier there was no minimum order value for free shipping, but now Flipkart, Snapdeal etc have put a minimum order value threshold so in the long run, this free shipping will also be removed, it might be given to customers as a Value add in the loyalty program such as Flipkart first etc.

No as they dispatch their products in huge amounts (bulk) saving their shipping costs. Also they have tie ups with different companies so the rate they get is way too different than the normal rates.