Peapod, Drugstore.com and Others Sweat Higher Fuel Prices
By George Anderson
The price at the pump has kept going up and e-tailers are caught between the proverbial rock and hard place.
If companies pass on costs to customers in the form of higher delivery fees or item prices, they face the prospect of lost sales. If they hold the line, they face reduced profits because of higher fuel costs.
The grocery delivery service Peapod is one of the company’s facing this dilemma. It has seen its fuel prices rise along with everyone else but has yet to pass the cost on to customers in the form of higher fees.
“For now, we’re riding it out,” said Elana Margolis, a spokesperson for Peapod.
Drugstore.com has also chosen to incur higher fuel costs rather than pass them on to its customers. The online drugstore’s filing with the SEC in March included the caution: “Shipping costs, which are included in cost of sales, continue to exceed the amount we charge customers for shipping. We expect to continue to subsidize a portion of our…shipping costs for the foreseeable future, through free shipping on non-prescription orders of $49 or more, as a strategy to attract and retain customers.”
Moderator’s Comment: Given the unenviable choice between charging shoppers more to offset fuel prices or taking the costs out of sales without a price
increase, which do you choose? Will most consumers understand and accept higher prices if a retailer explains the cause or will they simply go to another store/site that hasn’t
raised its prices? –
George Anderson – Moderator