Junk fees. It really seems like companies have become addicted to
junk fees. And it's making companies billions of dollars richer. Tipping culture has gotten out of control. There are people who argue 20% is kind of a cheap tip. People like free shipping because the word 'free' is
very powerful. It's not really free because someone is paying for it. You're being guilted into tipping on something that is
not technically a service. It's someone simply doing their job. When was the last time you purchased something and you
weren't asked for a tip? Yeah, I can't remember either. Tipping culture has gotten out of control. I get up to the pay window and she's like, 'How much
you want to tip?' What am I going to tip you for? I'm in the drive-thru. Oh, my God. Tips have been on the rise for decades. During the 1950s, people commonly tipped 10% of the
bill. By the 1970s and 1980s, that jumped to 15%. Today, people tip anywhere from 15% to 25%. According to one 2022 survey, consumers said they
tipped more than 21% on Average. Nowadays, there are people who argue 20% is kind of a
cheap tip. While the percentage that consumers are tipping at
full-service restaurants in the past couple of years Has remained about the same, in the fourth quarter of
2022, the number of tips provided at full-service Restaurants grew 17%. Meanwhile, the tip frequency at quick-service
restaurants such as coffee shops and fast food chains Rose 16% during the same time period. What we're seeing now, nationwide, is something that is
known as Tipflation. At every opportunity, we're being
presented with a Tablet that's asking us how much we'd like to tip. In many cases, not only replacing the old fashioned tip
jars that you could feel good about throwing some spare Change into, but actually suggesting tip amounts,
often right in front of the employee Receiving that tip, not to mention also your dinner
date and the dozen or so people standing behind you In line. And it's gone beyond just the tablets.
The other day I was using the Hopper app to book a
hotel, and it wasn't until I confirmed my payment that I realized my hotel was $10 more expensive. It turns out Hopper assumed I wanted to add a tip and
I had to go back to a prior page in order to opt Out. Tipflation refers to not just that we're tipping
more, but we're tipping Everyone for everything. You're being guilted into tipping on something that is
not technically a service. It's someone simply doing their job. In those situations, consumers are feeling resentful. Where do you draw the line? Tip stands for 'to insure promptness.' Tipping may go
back as far as the Roman era, but according to Most experts, the practice likely has its origins in
medieval Europe. Noblemen taking passage on roads would throw coins to
the rubble to Ensure safe passage. One theory is that it evolved in eating and drinking
establishments as a way to forestall envy, that When you're eating and drinking, you're having fun and
the people who are serving you are not. Fast forward to the 19th century. When waiters who received a full wage went on strike
demanding higher wages, they were replaced with women Who employers could pay less. A decade later, there was the population of newly
freed slaves. The idea from these restaurant owners was that they
were giving the luxury or privilege of a white person's Tips, that was without a full wage. Ironically, as tipping exploded in the United States,
it became less common in Europe And was replaced with service charges. While the first federal minimum wage law was passed in
1938, it wasn't until almost three decades Later when the tip minimum wage was established. In 1991, the federal minimum wage for tipped employees
was set at $2.13, which Is what it remains at as of March 2023. As far as I know, the United States is the only country
that exempts tipped Workers from having to receive the full minimum wage. In 43 states, it is legal to pay tipped workers less
than the standard minimum wage because tips Presumably make up that difference. In recent years, you might have found yourself asking,
'Do I tip this barista for pouring that hot coffee? What about when I'm going to a restaurant and picking
up takeout? And how much do I tip that doorman, driver or dog
walker?' When those in the service industry were
Feeling the brunt during the coronavirus pandemic,
consumers started tipping for things they never had Before, and the percentage of remote transactions when
tipping was an option in which the consumer tipped Soared from about 46% before the pandemic to around
86% in January 2022. If people were willing to tip the person delivering
food to their home 30%, why not ask if they'd like to Tip when they come pick up? During the pandemic, businesses who lost a lot of
traditional Customers and transactions were looking for
alternative ways to make up that Income. And if asking for tips was one way to do it,
they were willing to try It. And since then, that ask hasn't dissipated. Another reason consumers say they feel pressured to
tip more, they're being asked to tip prior to service Completion. Asking for a tip beforehand is almost like a bribe,
right? It's 'I'm afraid not to tip because, well, you do less
good work.' Customers might not be concerned about the barista's
perception of their tip before getting their latte, but What about the mechanic repairing your car? I don't know about you, but I'm certainly going to
make sure to tip them well to ensure my safety. Another reason consumers are tipping more, newer
technologies. Kiosks and tablets with three large tipping
suggestions that pop up on the screen in front of you, Three options chosen by the business. I have not yet been to the restaurant where they
recommend 5%, 10% or 15% for quick takeout. It normally always starts at 15% as a bare minimum,
sometimes even starting at 20%, 25% and up to 30%. According to a 2022 Creditcards.com survey, 22% of
respondents said when they're presented with Various suggested tip amounts, they feel pressured to
tip more than they normally would. They use those options as an indication of kind of what
the normative range is and feel Compelled to tip within that range. So the more you ask, the more you get. The three prominent companies with that trendy, sleek
look are Square, Toast and Clover. They launched a bit more than a decade ago to help
businesses run smarter, faster and easier, all in one Point of sale or POS systems. In some cases, fewer fees so it's less of a burden to
accept multiple credit cards, no long-term
Contracts and multiple other useful tools, including
inventory and employee management. They got credit card processing into the hands of
individuals and very small merchants. Square did a great job and it's been a tremendous
growth story. That's half of the business today. Do you think these companies are responsible for this
turn of events that we've seen with tipping? I would say they could take some of the credit for
helping restaurants gather more tips. Robert Sanchez manages Eli's Essentials in New York
City. One of the business's locations uses Toast while the
other uses this. He says the storefront that uses Toast sees more and
higher tips. The Clover, Square and Toast terminals to a consumer
are very easy to use. Big buttons, big areas to sign the tip, an easy way to
tip a different amount. If you don't like the starting at 20% option. There are others that do it, they're just not as cool
looking. We've come a long way from being able to just throw
your spare change into the jar by the cash register. The new tablets have turned what used to be a sin of
omission, I simply Didn't put money into the tip jar, into a sin of
commission. I have to hit a button and say no tip. I have to actively choose not to tip. Whereas before, not tipping was kind of a passive
thing. Glancing at the tip jar could have also been a way to
get a sense of how many others are tipping on that Service and maybe even how much money. Meanwhile, not only can the tipping options be
customized, but the tipping feature can be disabled as Well. So it's the merchant's choice to ask or not to
ask for tips. From the business side, it makes employees want to
perform better and do a better job. It's seriously significant. It really pays for the software. You'd be a foolish business owner not to install it
based on what the numbers display. Even a mammoth company as large as Starbucks has
decided that they need to sink or swim. And the best way for them to do that is to offer the
tip straight. Starbucks rolled out the tipping feature in stores in
September 2022. It's one thing to have a happy staff, it's another
thing to have customers that are feeling Resentful. I think it's a calculus that all business
owners really need to make. Do you think that they're somewhat going to start
seeing that they're getting lower tips because people Are paying tips to so many services or they're
resentful of the act of tipping in general?
I think that's a very real danger. Servers in a sit-down restaurant, they were greatly
affected during and immediately post-pandemic By restaurants doing all sorts of fees. Their tips were actually going down because consumers
were saying, 'Well, if I'm paying for the health Insurance and I'm paying for inflation and I'm paying
for this and I'm paying for that, enough is enough.' The more you levy these line items onto consumers,
guess who's being penalized? It's the one area that's still quasi discretionary,
which is the tip. I went door to door talking with waitresses, bartenders
and baristas, and while they wanted to remain Anonymous, they told me it's happening already. With inflation, and being prompted for tips left and
right, they say customers have already started to tip Less and sometimes not at all. A 2022 study found that 17% of Americans are tipping
less because of inflation. However, 10% report tipping more. At the same time, more than half of Americans or 60%,
want to do away with tipping entirely. The extent of pandemic-influenced generosity has also
gone down. 43% of consumers typically tip servers 20% or more in
2022, compared to 56% of consumers in 2021. Meanwhile, the average tip for full-service
restaurants has gone down only slightly during the same Time period. According to Toast, 19.6% in the fourth
quarter of 2022, compared to 19.8% in 2021. However, according to surveys conducted in those same
years, respondents said they're tipping higher Percentages, 21.2% and 18.9%, respectively. It can genuinely hurt the people who truly, truly rely
on gratuities For their livelihood. I firmly believe that the tipping invasion we are
experiencing right now, I think It's a net negative for society. And with that tablet at just about every counter, no
matter where you go, the question is, where is the Tipping point? I'm wondering how long before I'm
tipping my doctor after an annual physical? If you want to seem especially generous after an
exceptional meal, you might decide to go big and tip 30%. But it's a cycle. As more people seeking to make a good impression, then
up their tips to 30%, maybe even 35%. What becomes a generous tip? I have to believe tips are going to go up from where
they are today. But I also think there's got to be a logical ceiling
somewhere.
I just don't know where it is. Nearly $65 billion. That's how much money is lost to this deceptive
American practice. Junk fees. We're tired of being played for suckers. It really seems like companies have become addicted to
junk fees. And it's making companies billions of dollars richer,
across industries, spanning banking and Telecom to entertainment and hospitality. I stayed at a hotel. I asked, 'Are there any extra fees?' They said, 'No.'
The bill on the last night, we were charged a $40 a night amenity fee, but even crazier, a $1
mandatory charity Donation. I looked up the charity. It's a charity that goes back to the hotel. These fees are more than just annoying. The White House says they weaken market competition,
raise costs and ultimately drain The wallets of Americans. The very entity that's creating these fees are the ones
telling you, 'Well, we have to charge them.' Their investors and shareholders really like it. It's another way to pull in more revenue without
really Competing. Unless we do something about it, it's just
a race to the bottom. Some changes are happening, but the question remains
whether any of the new policies and Regulatory oversight will actually be enough to squash
junk fees once and for all. Junk fees are basically an additional cost that has
little to no added value. It's a junk fee, you know? Junk fees are fees that sometimes provide no service
whatsoever and are not Subject to the normal forces of competition. There are so many different kinds of these hidden fees. So let's categorize some of the biggest offenders into
three different buckets. Bucket number one, banking fees like overdraft
charges, late fees or fees to pay a Bill or even account maintenance fees that you might
get hit with after easily signing up for a new bank Account. A charge for using that service every year. We could even count student loans in this bucket. Just before the pandemic, we found that banks charged
about $15.5 billion in overdraft fees
In just one year. And many of those fees were ones that actually could
not have been avoided. It isn't just unfair. In many cases, it's illegal. And banks are cashing in. Fees worth nearly $24 billion were charged by card
issuers in 2019, and most of that $14 billion came from late fees
alone. We estimate that the credit card industry levies about
$120 Billion in fees and interest each year, and that
number might Be even going up, given the rise in interest rates. Bucket number two, fun fees, or the fees that you might
incur when you're hopefully doing something fun Like buying a concert ticket, booking a flight or a
hotel. For example, resort fees might be added for your use
of amenities during your stay, even if you're not using The gym or the pool. And even if it's not a resort. Junk hotel fees and these ancillary fees at hotels
bring in about $3 billion a Year for the hotel industry. Waikiki has them. In Detroit, which is crazy. Lauren Wolfe founded Kill Resort Fees in 2016 after a
vacation in Florida. Even though my receipt said paid in full, I couldn't
get the key to the room unless I paid an extra $20 in the name of a resort fee. And so I started the website. Hotel and resort fees can be anywhere from $20 to $70
per night. Many sites don't display these extra costs in the
advertised price, so people Can't comparison shop. The same thing happens when you buy a plane ticket. A lot of times people don't realize they're booking the
lowest economy fare that doesn't allow them to bring a Suitcase. The same goes for entertainment fees. It's when you try to buy a ticket to go see Taylor
Swift. No price gouging. Off the record, my wife calls me a Gen X Swiftie. Are you sure you want that off the record?
I do not mind. I'm at a very comfortable place in my life. I love Taylor Swift. For your band to make six bucks out of a $42 ticket
price. Yeah, that doesn't feel great. The Government Accountability Office found that on
average, ticketing companies charged fees worth about 27% of the ticket's face value. And then bucket number three, home fees, from buying a
house to having a car and getting internet at Home. This includes closing costs and other fees that
come up when you're trying to buy a home, like extra Fees for document preparation or title insurance. Then there's your cable and internet junk fees. A multi-billion dollars in revenue for the cable
companies to keep breaking out these fees. And they're mandatory. Including CNBC's own parent company, Comcast. The cable, internet and cellphone companies can charge
you $200 or more if you decide to Switch to another provider. Give me a break. It can also be a violation of marketing. So if you look at the fine print, they are like, 'to
maintain our high speed fiber network,' and you're Like, 'Okay, so you have to charge me an extra seven
bucks for the internet Infrastructure fee. But what about the $75 I've already paid you? What's that paying?' Today's actions are going to save consumers more than
$1 billion each year, and that's a lot of money. President Biden has been asking agencies to tackle this
problem. Regulators have the ability to address junk fees today
using existing authorities. It's really an all of government effort. The FTC has a law prohibiting unfair or deceptive
practices. And so we already have the ability to bring lawsuits
against junk fees. We can make it even clearer for companies, and we can
also strengthen our ability to impose civil penalties On companies that are imposing junk fees and also get
back money for consumers. The CFPB is targeting overdraft and bounced check fees
and issued further guidance for banning Surprise overdraft charges. The White House estimates these moves alone will
reduce fees by more than $1 billion each year.
We anticipate that the amount of annual overdraft fees
has declined by billions of Dollars per year. We have done major enforcement actions when it comes
to junk fees against Wells Fargo, Regions Bank and others. The agency also wants to change credit card late fees
to $8. It could save Americans as much as $9 billion a year
in late fees. Now, we don't think credit card companies should build
their business model based on these Fees. And the Department of Transportation wants to require
companies to show the full price of a plane ticket at Booking baggage fees and all. I know how unfair it feels when a company overcharges
you and gets away with it. Not anymore. We've written a bill to stop it all. President Biden still wants Congress to pass the Junk
Fee Prevention Act in hopes of tackling four More hidden charges. One, to ban airline fees for families to sit with
small children. Baggage fees are bad enough. Airlines can't treat your child like a piece of
baggage. Two, excessive concert event and entertainment fees. Three, crack down on early termination fees for
canceling telecom services. And four, getting rid of the surprise vacation charges
like resort and destination fees. We've met with the FTC and we've seen these fees get a
bit more Transparent, though I hesitate to say that
transparency here Is going to solve anything. Part of the problem is drawing the line between what is
truly junk and what charges are warranted. One dissenting FTC commissioner, Christine Wilson,
called junk fees "flawed assumptions" and "vague Definitions." The Peterson Institute for International
Economics argues that the projected savings is Speculative arithmetic, that at best, spotlights $27
billion in junk Fees. And those figures may not accurately represent
how those junk fees, if they're eliminated, How they can be rolled into that upfront cost. They also estimate that the real savings of junk fees
could work out to be $100 average annually For each 131 million American households, which would
be much less than President Biden's Estimate of hundreds of dollars per month per
American. They add up to hundreds of dollars a month.
Dissenting FTC Commissioner Wilson poses the question
of whether government mandated all-in-pricing will Actually result in less price competition or whether
it could make consumers pay for goods and services They may not want or need. What would your response be to someone who thinks that
the junk fee is something that is Beneficial? I think the first thing is you should give consumers a
choice. Oftentimes, these types of junk fees are tacked on in
a way where it's all or nothing. And so there's no way for the consumer to actually buy
the product or service without being subject to the Junk fee in the first place. I think if these fees are being included, you really
have to make the case to the consumer or to the member Of the public about what they're really buying through
paying this fee in the first place. Some House Republicans point to how late fees are used
to offset costs for credit and financial products, Arguing that the CFPB's proposal to crack down on
credit card late fees would result in negative Consequences because credit providers like banks would
be forced to increase interest rates for all Borrowers in order to offset that loss income. That could lead banks to restrict credit to
lower-income customers who are more likely to overdraw Their accounts in the first place. However, PIIE believes that the Junk Fee Prevention
Act is likely not to pass through the House Of Representatives' Republican majority. So we're now considering whether to introduce a rule
that would apply across the economy and put companies On notice that these types of junk fees can be
illegal. We also more generally are inviting comment right now
on whether the FTC should do a rule that Addresses junk fees more broadly. So this would not just be focused on a particular
sector, but really zooming out and looking across the Board. Some practices are shifting. A lot of banks are already starting to eliminate these
fees. 15 of the 20 largest banks agreed to stop charging
bounced check fees, and The Department of Transportation dashboard resulted in
more guarantees of hotels and meals for Passengers that experienced delays or cancellations at
the fault of the airlines, none of which was guaranteed Before. I think President Biden has recognized that this is an
issue that impacts everyday Americans, that this isn't just a travel issue of
people going to the fanciest hotels, that this Impacts hotels that are charging $40 a night.
It impacts hotel workers. It impacts how taxes are collected. Just these sorts of junk fees, just hotel junk fees
are really impacting our economy at a Time when we need more travel and tourism. Telecom is also prepping for new regulations. The Federal Communications Commission will have new
rules for grocery store like nutrition labels starting In 2024. Broadband providers must relay details about prices,
speeds, data allowances and any and all added Fees. But it's likely that more solutions will be
needed. There's currently a 50 attorneys general investigation
into hotel resort fees. The Nebraska attorney general has sued Hilton. The D.C. attorney general has sued Marriott. Pennsylvania just came to an agreement with Marriott
also about hotel resort fees. The fight against these fees is likely far from over as
more congressional hearings are down the Road. There's broad agreement that this fee creep across the
economy has to stop. So if the FTC did end up finalizing a rule that either
prohibited junk fees or Added new obligations on companies when they're adding
fees, it would really mean that if companies Violate the rule, the FTC will be able to charge them
civil penalties, which are fees that can really pile up On these companies. It would also mean that the FTC
would be able to actually get money back for consumers. So the junk fees that consumers were paying would be
able to get that money back in their pockets. Free shipping isn't free. This idea of free shipping has become a pervasive,
right? And there's a cost for that. It's just a psychological thing that people see that
word 'free' and it takes away one barrier to having Them purchase. That's all. There were over 131 billion parcels shipped worldwide
in 2020, and Parcel shipments are expected to double again in the
next five years, possibly reaching 266 billion by 2026. The big carriers like FedEx, UPS and even Amazon are
making a lot of deliveries and None of those packages are being shipped for free. When consumers click that buy box, they often don't see
what labor Leads to a box on their doorstep. And those shipping costs are ever increasing.
Anyone can offer an Amazon Prime two-day shipping. It's just the cost that you as a brand might incur in
providing that service. Very rough numbers, might cost you anywhere from $25
to $35 for a typical transaction. That's a two-day, right? That seems very expensive. People like free shipping because the word free is very
powerful. Even if people know that it's not really free because
someone is paying for it. Here's why free shipping is a myth. Answer to who's paying for it, it definitely depends
and it depends on a plethora of factors Around how expensive is the particular item? As a brand or an e-commerce entrepreneur, what are my
margins on that particular order? And third is, how much actually for me is the cost of
shipping? The seller is paying for the shipping. It just comes right down to whoever is selling. So if the customer is charged the shipping fee, the
seller still pays for that label and the customer Basically pays for the label through that fee. But if it says free shipping on the listing, the
seller is still having to buy the label, the seller is Subsidizing part of it. Or maybe the whole thing. I have free shipping on certain items that are
lighter, like things that I can basically Control and estimate how much it's going to cost. Cara has been selling her products on Etsy since 2011,
and now she takes to YouTube to help other Online sellers maximize their profits. I just figure out how much is it going to cost based on
the size and the weight. And I either decide, well, I can eat that cost or I'll
have to add some of it into the price of the Item. Etsy's free shipping initiative launched in 2019 and
includes tools and support for sellers to help Guarantee free shipping on orders of $35 or more for
U.S. Buyers. As of December 31st, 2021, 67% of sellers'
items on the Etsy Marketplace offered free shipping to U.S. Buyers. Etsy isn't the only company helping sellers
calculate shipping costs. I'm Dhruv. I'm one of the founders and the CEO of
ShipBob. We started the business almost seven years ago now
with the idea to help Bring best-in-class logistics for small- to mid-sized
e-commerce businesses. ShipBob helps these businesses coordinate their
products, inventory, orders and shipments
Efficiently, helping them keep up with big business
like Amazon. We did a survey of merchants and close to 50% to 75% of
the respondents Said that they offer some sort of free shipping. Either it's blanket free shipping across the entire
website or it's free shipping to the consumers After their cart hits a certain threshold of either
$50 to $75. What has happened in the last couple of years is that
the actual cost of shipping that UPS and the FedEx and the DHL and the USPS charge to brands has
gone up because their labor wage Rates have gone up because there's so much volume,
they are paying a lot of overtime excess, et cetera. So their cost of operating has gone up significantly,
which then they are passing on to companies Like us, which are then forced to pass on to brands
that we work with. Delivery giants like FedEx and UPS both said rates
would go up an average of 5.9% next year across most services. Companies like Amazon, Walmart and Target, even Etsy,
benefit from economies of Scale. These big players are generating so many online
sales, putting them at an advantage to Achieve bulk discount rates. Most of the time these companies will negotiate a price
with the Postal Service. So they go to the post office and they say, we are
shipping, you know, X number of packages. We're going to be buying this number of labels. And because they have so many people buying labels
from Etsy, shipping labels, they can negotiate the Lower rates. These rates are not publicly disclosed. And Amazon, FedEx, UPS and USPS either declined to be
interviewed or did not respond for Comment. However, Kara helped us break down how some
of these costs may compare. Here's an example of a lightweight four ounce package
going cross country. The retail rate, what you might pay at the post
office, is $5.50. Kara says Etsy charges a commercial rate of $4.15 to
sellers. In another example, a heavier one pound package
shipping priority cross country, shipping would Cost Kara $11.60 at that retail rate. But buying the shipping label through Etsy brings that
shipping rate down to $9.68. Etsy told CNBC that without access to item
level And logistics information that it couldn't confirm
these numbers. ShipBob negotiates bulk discounts from UPS, USPS,
FedEx and DHL for both Domestic and international rates across different
service levels for any customers using their platform. Amazon is a unique player in the e-commerce game for
so many reasons, but one is that it's heavily
Invested in its own transportation and logistics
business so that it could rely less on UPS and USPS. And same for Walmart and Target. Recently they all have announced some ways that they
are also getting into transportation simply because They have enough volume. In 2019, Amazon was delivering 47% of its own packages. In 2021, that number soared to 72%. Amazon's other strategy to lower shipping costs is to
place warehouses of inventory to Lessen the distance a package has to ultimately
travel. By placing inventory strategically across maybe six to
seven different locations, you can cover 90% To 95% of the U.S. Population within two days. According to ShipBob, its clients have seen that
distributing inventory across several fulfillment Centers can reduce shipping costs by 25% and bring a
13% cost savings to their bottom Line. Not only do they get delivered faster, but UPS and
FedEx charge you less for it because it doesn't have to Go through the entire infrastructure. And so that's really how Amazon and the Walmarts of
the world have made it Possible to offer free shipping to their consumers. Despite all this, shipping is super expensive for every
player in the game. Even Amazon, which still primarily outsources costly
rural deliveries to USPS And outsources that expensive last mile portion to
small delivery contractors. What does this mean for small business? Well, it's harder to keep up. Even in the U.S., if shipped from the East Coast to the
West Coast, it costs maybe 50% more, Depending on the size of the package than if I'm just
shipping from the East Coast to the East Coast. So you can't really plan 100% for how much things are
going to cost when you ship them. And that makes it difficult to 100% offer free
shipping because a lot of times you end up with no Profit if you're not really careful. The cost of shipping goes beyond what is easily
quantified. Hidden costs include exploitation of workers, lack of
unions, small business closures, And the impact on the environment. Some of that labor that goes into delivering goods to
your doorstep happens Within warehouses and distribution facilities and blue
collar warehouse
Workers do a lot of backbreaking labor. Research has shown that Amazon has very high injury
rate, even higher than the Industry on average, which is saying a lot because
it's a rather dangerous industry in terms of Workplace injuries and accidents. The interviews that we collected with warehouse
workers in the Riverside and San Bernardino counties Were reporting all sorts of back injuries, muscle
sprains. One other group of workers who make next day shipping
possible are the delivery drivers. Right? For example, part of Amazon's strategy was to invest in
the most expensive part of the shipping process, Getting a package that last mile. Part of this is completed by Amazon Flex drivers,
which are individual gig workers who make between $18 and $25 an hour driving routes on demand. Then there's the drivers working for Amazon's delivery
service partners, aka the DSPs, which are smaller Independent companies that contract with Amazon. What I think a lot of Amazon Prime members and
consumers don't realize is that these workers who are Delivering the goods to your doorstep on the next day
or the same day do not work for Amazon. Their employers are small trucking companies that
Amazon, instead, puts all the liability on These small firms that have, let's say, 40 vans. So instead of hiring drivers, Amazon hired small
companies. And this was a key aspect in preventing unions and
preventing responsibility Of those workers. The DSP program started in 2018 with Amazon offering
$10,000 to incentivize Current Amazon employees, veterans, Black, Latinx and
Native American entrepreneurs to Launch a DSP. There's now more than 2,000 DSPs in the U.S. So these workers, we can compare them to similar job,
whether it's United States Postal Service workers Or UPS workers. Those are both union jobs. And Amazon has now built this massive infrastructure
based on these contingent Workers who have far less rights, far less coverage,
and if you include benefits, Make less than half of what your average teamster does
per hour. The disparate impacts of warehousing, and those impacts
affects small businesses, As we mentioned, many of those have been under
pressure closing because they can't compete. In a 2019 survey, three quarters of independent
retailers said Amazon's dominance is a
Major threat to their survival. And then on top of that, there are environmental
concerns as well, right? Warehouses often are clustered together, concentrated
in certain regions like The Inland Empire, as well as neighborhoods that tend
to be low income communities of color. One study shows transport will be the biggest source of
new greenhouse gas emissions in the decades Until 2050. In absolute terms, Amazon is the largest emitter of
greenhouse gases, with total emissions Measuring over 60 million metric tons of CO2
equivalents in 2020. And the impact is that it pollutes the air, right? All those deliveries going out to deliver goods means
a lot of air pollution. There's been a normalization of instant consumer
gratification. And what comes with that is then free shipping. Free shipping has become synonymous with that instant
gratification. Offering free shipping ultimately impacts the bottom
line for all retailers, not just because of the cost To ship something, but because consumers are more
likely to complete a purchase if offered that free Shipping. According to ShipBob, offering free shipping
has proven to be the most effective website banner From a conversion standpoint. It also is a psychological thing where people see free,
and even if you know that someone's paying for the Label and you know that you're probably paying for the
label within the cost of the item, it still is one less Thing that you have to plan for. On the one hand, it is good for the customer
psychologically without not having to plan for it. But on the other hand, it really puts pressure on
people who can't afford to ship for free, and then it Takes all of our profits. Offering free two-day shipping on domestic orders
showed that brands have been able to increase average Amount spent per transaction by 97% and even reduce
cart abandonment by 18%. Many people today have low to moderate incomes, right? And even middle-class families are often struggling to
pay all the bills. I think many consumers are trying to cut costs in
different ways. I think also people don't really stop to consider what
the costs are. We wanted more and more people to really sort of pause
and think about what is it that we're doing in our Society, to each other as we consume.
