The Hidden Cost of On-line Shopping

Photo by rupixen.com on Unsplash

Hello everyone.

In this week’s post of Doing More with Our Money, we will talk about the hidden cost of on-line shopping.

With the Covid-19 lock down, many of us have been ordering a lot more on-line, including groceries, take-out and many other things.

Hidden costs with on-line purchases isn’t new.

Remember when you would buy concert or other event tickets that were listed at $100, and by the time the transaction was complete you were paying something like $150!?

As an avid concert goer, that always frustrated me!

Last year Ticketmaster Canada had to pay a $4.5M fine due to “misleading pricing claims for its on-line ticket sales….The Competition Bureau found Ticketmaster’s advertised prices did not reflect the true cost to the consumer as the on-line ticket service added mandatory fees later in the purchasing process that often added more than 20% to the cost and in some cases over 65%”1

While not necessarily as significant, many other online purchases have hidden costs as well.

Where else on-line could we be paying more, with unexpected charges or additional costs showing up?

Let’s look into ordering from:

  • Take-out Delivery apps
  • Retailer’s websites
  • Grocery Delivery apps

Take-out Delivery apps

Unable to go to restaurants recently, I’ve certainly ordered my share of take-out. Sometimes I use delivery apps like Uber Eats, Foodora, DoorDash, etc.

I’ve found there are often two types of hidden costs in these apps.

The first is in the Delivery Fee.

Uber Eats app – Popeyes

Let’s look at this example from Uber Eats. Randomly picking Popeyes, I see the app highlights a $0.99 Delivery Fee. Wow, great! That makes me think there is some kind of promotion or something for such a low delivery fee.

But this is misleading, as another charge shows up when you go to checkout. They’ve added a Service Fee of $3.70 that I wasn’t expecting.

Uber Eats

The app explains “Orders delivered with Uber include a Service Fee. This fee equals 10% of your subtotal.”

Ok, I get that, but I started the order thinking the Delivery fee was only $0.99.

Shouldn’t the app have said ‘$0.99 + 10% of order Delivery Fee’ before I started selecting items?!

I really don’t like how they sneak that extra fee in at the end.

Why do they do it?

Often the full delivery or service fees aren’t clearly highlighted up front, as they want us to first decide on a restaurant, pick out all the items we want, and get to the point where we are going to go through with the order, regardless of the hidden costs that show up at the end.

By that point we’ve made too many decisions and are salivating for our dinner to back out of the order.

That, and often people don’t even notice the extra charges.

Of course, the cost is further increased from the unavoidable taxes and a tip to the driver. I don’t see those as part of the delivery fee, but they are costs we need to be conscious of when placing the order.

For tipping, I often change it from the pre-selected tip of 15%.

I believe tipping in-restaurant should be a percentage of the bill, but delivery tips should be more about the dollars.

If I’m only ordering a small lunch that comes to $12, I don’t feel $1.8 is enough of a tip for the driver. If I’m ordering a $120 meal, I feel $18 is too much for the driver.

Plus, I don’t think it’s appropriate for one driver to get $1.8 and the other $18 for doing exactly the same work.

That said, you do what you feel is best, just make sure to tip!

The second hidden cost I often find in delivery apps is with the menu item prices. Did you know that often each item is priced higher on the app compared to when you order directly from the restaurant, or dine-in?

UBER EATS & RESTAURANT WEBSITE

For example, another random selection, this time a a local Sushi restaurant. The three platters on Uber eats list at $38, $37 and $46. Those same platters on the restaurant’s website are $2 less at $36, $35 and $44.

If you want more info on this, spot check your favourite restaurants, or read this news report. The article mentions that “often significant price differences for the same menu item between the restaurant’s own website and food delivery apps, as well as among third-party apps themselves.”2

I’m not picking on Popeyes, the Sushi place or even Uber Eats (ok, maybe I’m picking on Uber Eats a bit). This occurs across many restaurants and delivery apps.

My intent is to raise our awareness of the additional costs.

With that knowledge, order as often as you like, or don’t. It’s up to you.

That said, I think we should support our local restaurants by ordering directly from them where-ever possible.

Reason being, the delivery apps usually take a large cut. I’ve been told by restaurant owners, and see in this article that Delivery apps charge restaurants as much as 30%+!

No wonder restaurants have to increase the price of menu items on the apps…If they didn’t, they’d likely be losing money on the order!

Retailer’s Websites

It’s natural to assume that most retailers price items the same on-line as they do in-store. In many cases that’s true.

But often it’s not.

Here are a couple examples from Costco Canada, comparing prices on Costco.ca vs in-store.

Costco.ca

Kirkland Paper Towels – on-line cost of $23.99 + $3 ‘Delivery Surcharge’. If you order $75 or more, no surcharge is added.

Therefore, it’s easy to assume that placing a large order is the same as buying in-store, except you get to do it at 2AM sitting in your underwear!

Think again.

Receipt from Costco store

In-store, that pack of Paper Towels costs $19.99. On-line is $4 (and 20%!) higher!

Bath tissue is similar, with an in-store cost of $17.99 vs on-line of $20.99 (+$3 and 17%!).

Could it be just the big bulky items like these massive packs of bath tissue and paper towel?

The only other item from my in-store receipt they carry on-line is a smaller item, the two pack of Aveeno moisturizer. $18.99 in-store, $21.99 on-line (+16%), so it’s clearly not just the larger items.

This reveals two secrets! Hidden costs associated with on-line shopping, and why my skin is so soft!

I’m also not picking on Costco. I’m a big fan of their shopping experience, in-store pricing and products. Have you tried the Kirkland Pralines I bought two of? So good!

Higher pricing on-line occurs with many retailers. Sometimes it’s the retailer’s themselves setting the higher pricing to try to offset the costs of getting the product to you.

Other times it’s the supplier or the third-party distributor setting the prices.

In fact, often those suppliers and third-party distributors manage many aspects of the item listing, including pricing, warehousing and shipping.

I’m not saying don’t buy on-line, especially with today’s Covid-19 related shopping challenges. Just make sure you have a full awareness of the additional costs you incur.

Grocery Delivery apps

Instead of buying directly from the retailer’s website, many of us having been using Grocery Delivery apps such as Instacart or Inabuggy.

Using the Walmart items from last week’s post ‘Bulk Buying’, I spot checked Instacart’s prices. All the prices were the same as in-store. Great!

After filling my ‘cart’, and going to the checkout process, I see a price of $3.99 tied into choosing a delivery time. I assume that is the delivery fee, as every possible day/time selection is $3.99.

As I get to the end of the checkout, I see the tip added, as well as a ‘Service Fee’ of $4.13, which is 5% of the basket total. So now in my mind, the delivery fee is actually $8.12 ($3.99 + $4.13).

Like with the take-out delivery apps, I really hate not knowing what the delivery fees will be until the end.

At least the prices of the items are the same as in-store in this example though.

I did a similar check of Inabuggy. It was clear from the onset that the delivery fee was $19.98. They call it a ‘Picking, Packing & Delivery Fee’. It’s a lot higher than the total delivery fees for Instacart, but at least it was clear up front and not a surprise at the end.

Where it gets interesting is the price check vs in-store using those same Walmart items. In most cases, prices were 21-23% HIGHER than in-store, with one being 65% higher!

I really hope that 65% one was just a mistake!

So again, we’ve got hidden costs, with these ones being less likely to be noticed unless you really know your prices.

It is convenient to buy on-line, whether it’s a take-out delivery app, a Retailer’s website, a grocery delivery app or anything else.

Please just make sure you are aware of how much extra you’re paying for that convenience, and if you can find a less expensive alternative, use it.

Uncovering and hopefully avoiding the hidden costs of on-line shopping will make sure we are all Doing More with Our Money.

Thanks for reading.

Mike

1 https://www.cbc.ca/news/business/ticketmaster-misleading-price-investigation-1.5192724

2 https://globalnews.ca/news/6249936/food-delivery-apps-menu-price-premium/

https://www.blogto.com/eat_drink/2020/04/food-delivery-app-commission-toronto-restaurants/

12 Replies to “The Hidden Cost of On-line Shopping”

  1. Great post Mike, I enjoyed the read!

    I actually do a fair bit of on-line shopping (shhhh don’t tell the hubby!), typically The Bay. With 3 kids, it would have been a suicide mission to do BTS shopping for clothing every year, so instead I bought everything on-line and only in stores with a bricks and mortar location nearby. Stores do not always have ALL size options in-stock, but on-line typically will.

    Know the retailer – what is the minimum purchase to avoid shipping fee!
    Know the return policy – something was likely not to fit, so a trip to do a return was likely but still less time in store and sanity saved.
    Rarely buy full price – everything will have a “sale/feature” price at some point or work the point system where possible. I like to mark things as a favorite and then just keep watch for sales.

    AND BTW, for any Bay shoppers out there, if you prefer in-store shopping, check the on-line price before cashing out – it is often cheaper in their case!! The cashier will price match.

    1. very good points, Annie! I’m especially aware of not only what the return policy is, but also how painless (or painful) it is to actually do the return. Some retailers are great at this, and others not so much!

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