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Not-so-Free Promotions

By: Morning Star

Browse, add to cart, check out, wait for shipment, expect delivery, and rate product. This has become our common routine amidst the rise of online shopping applications and websites in the country, boosted by the COVID-19 pandemic.

According to the report by meta-search websites iPrice Group, App Annie, and SimilarWeb, the Philippines saw an increase in the use of online shopping applications by 53% in second quarter of 2020. The total recorded sessions in shopping applications reached 4.9 billion, compared to around 2.5 billion in the first quarter of last year. This was the highest increase in Southeast Asia with Thailand and Indonesia having 50% and 34%, respectively.

By the fourth quarter of 2020, Shopee had an average of 51,898,300 monthly web visits, followed by Lazada with 39,407,700. The sudden surge of users to online shopping is due to the accessibility, convenience, and, most especially, promotions.

Promotions and deals, such as free shipping and cashback, are marketing strategies designed to attract new customers and retain existing ones. In fact, an online shopping platform with “Free shipping!” as its most famous tagline, shipping is never really free. Apart from its Seller Transaction Fee, which is equal to 2% (+VAT) of the total buyer’s amount for every successful transaction, there are additional fees deducted from shops or sellers that would like to participate in the cashback and free shipping program.

Based on the guidelines of the e-commerce platform, sellers who wish to join the cashback program, a participation fee of 2-3% – capped at Php 100.00 – is deducted from all successful transactions. As for the free shipping program, a participation fee of 5% is deducted.

On the other hand, adding to cart on the other famous platform, a seller payment fee is computed based on the price of the item instead. This allows the sellers to promote their items and attract more customers. However, the free shipping promo is offered with a minimum amount of purchase.

Nonetheless, with these promotions that seem to provide comfort for us buyers, these are still marketing strategies that aim for profit, which have been long applied in both physical and online stores.

Erasing the shipping fee from the picture allows us to think that we are paying only for the item that we have purchased. But, looking at the bigger picture, that is not always the case. First, the shipping fee is already added in the total payment, which ensures revenue for the online shopping platforms – even with the promotions. The shipping fee is based on the weight and size of the items.

Also, many free shipping vouchers do not cover the whole cost of the shipping fee. Depending on the delivery area, these vouchers only cover 50 to 80 percent of the total shipping fee that we need to pay, which leads to more expenses.

Due to the participation fee, sellers are likely to increase the price of the items that they have posted on the site to earn their expected income. Therefore, we pay more compared to the original price of the items, which defeats the purpose of saving money by using the vouchers.

Since cashback promos are coins that can only be received after a successful transaction, we tend to purchase again and again and claim these coins in the following transaction. If there is another cashback promotion by that time, it just chains us to the online shopping application as we would like to use the promos and not put them to waste. It also encourages us to visit the platform to check for items that we can purchase every day.

Meanwhile, with the minimum amount of purchase, we tend to hoard items just to reach the minimum spending to avail the promotion. Since we want to enjoy the free shipping deals, we choose to add more items in the cart than be content with what we have planned to buy initially. These items may be or may not be essential in the first place.

Promotions and deals may be tempting to get ahold of. However, online shopping is still a battle between necessity versus desire as these promotions are still a marketing strategy to get buyers to spend more and save less. We should not give in to the bait. Free shipping vouchers may be useful for purchasing essentials but buying unnecessary items just for the sake of not wasting the promotions leads to wasting more money.

We must be careful of free promotions that are not so free.

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