Shipping in Good Faith
Something went wrong for the estimate to have moved so substantially in barely 2 months.
I am not here to opine on whether the shipping is reasonable or why shipping is higher than CMON’s initial estimates. For a good overview, I recommend checking out Alex at Board Game Co’s excellent summary video.
Rather, I think the events raise some interesting ethical questions that we as creators need to think about and highlight how Kickstarter has evolved.
Remember When
A badge of Kickstarter pride used to be free shipping. Jamey Stegmaier even wrote an article on the economics behind, and how to plan for “free” global shipping (shipping was never actually free, it was just rolled into the price of games).
Changes in the interpretation of VAT laws made it more economical to charge for shipping regionally, and separately.
More recently, publishers were expected to plan for, bear the cost of, and absorb volatility in freight costs. 2021 changed all of that.
Freightios China/East Asia to North America East Coast Index
Creators were blindsided by freight costs that in some cases were more than 5x what they planned for – off of what had been a low volatility expense. Margins eroded, or in some cases were erased, and publishers had to go hat in hand to backers asking for their support and understanding.
Many projects were bailed out, and we are in a new era of backers accepting a burden of expense volatility that publishers have historically shouldered.
The Moral Hazard of a Shared Ecosystem
One of the surprising pieces of fallout from the CMON campaign is that many consumers are pointing to price volatility and disruptions in global freight to explain the change in shipping from CMON’s February estimates.
I don’t think CMON has implied that the increase in shipping is due to macro factors having changed since February – and indeed on the whole freight and shipping has been flat to down since February (at least the quotes I’ve received). Something else is going on beneath the surface, but that’s beside the point.
The point is that consumers are primed to blame the global macro environment for negative events that are not global macro driven.
Ethics
If pledges are fully refundable (including fees – which is not clear is the case with Marvel Zombicide), then in some sense charging essentially anything for shipping – regardless of initial estimates is ethical. Afterall, in this hypothetical, consumers can re-assess whether a product is worth it, and make an informed decision off of the new information.
That’s why it’s a shipping estimate.
And, I think that if estimates are made in good faith, then most people would be ok with the idea that sometimes estimates are wrong. And, if the magnitude of the error is small, or the change is well explained – even if they choose to drop their pledge, backers would be understanding.
This raises a couple of ethical issues, and room for bad actors to take advantage of broader trust. We’ll look at some of those potential problems, but first some context.
It All Goes to the Same Place
A not so dirty, not so secret of Kickstarter is that all of the money goes to the same place. The publisher collects it and then allocates it out to their cost centers and takes their profit. This means that that the clean $15, or $25 that you pay for shipping isn’t actually what your shipping costs.
It isn’t even clear what should be included in a shipping cost. Is it just shipping? Is it picking and packing? Does it include warehouse fees, freight?
The way publishers allocate costs in what we charge consumers (game vs shipping) is also our choice. There is a minor economic consideration in the fees we’re charged on different platforms, but that’s a small consideration, most of it is optics.
Let’s say that our economics for Nut Hunt make sense at about $45 all in, including US shipping (this is subject to change as we get more fulfillment quotes, update our freight and lock in manufacture, but it’s in the ballpark of what we plan to charge in the campaign).
One US fulfillment quote was $17.23 per game.
An option would be for us to charge $28 for the game and $17 for US shipping. If we did that, I guarantee that a lot of people would complain about shipping being 60% the cost of the base game.
Beyond that, the component skew of Nut Hunt can easily justify $50+ on a retail shelf. Putting a sticker on it of $28 – even if it’s the same $45 actual cost - unnecessarily cheapens our perceived value and makes the game harder for our retail partners to ultimately sell.
It is a lose, lose, lose.
So, we’re probably going to charge something like $35 + $10 US shipping, and scale global rates based on our actual relative costs. It’s a lot more palatable a price split.
The point of this tangent isn’t to focus on our pricing strategy for Nut Hunt, but to point out that it is really hard to separate out what is actually going into what you’re being charged for shipping, and we’re reliant on the ethics and transparency of publishers to not take advantage of our goodwill.
Intentionally Under-Estimating Shipping
Let’s imagine a hypothetical game that has a KS price of $50 and estimated shipping of $25. Many consumers will make their decision on whether to back based on that $75 all in cost.
Now, let’s imagine that the creator has always planned to increase shipping in the Pledge Manager to $35. This is now an $85 all in cost.
Some portion of consumers who would have declined to back the project at $85, will stomach the $10 increase in shipping because they are already in for $50.
This is a common sales approach. It’s why hidden fees show up at the end of a transaction, and why advertised prices don’t include add-ons that you’ll obviously use.
While we encounter this kind of corporate behavior everyday – it falls into a gray area that puts a bitter taste in my mouth and doesn’t fit with my personal ethics.
If a Kickstarter creator were to intentionally employ this kind of behavior I think it would be a step even farther over that ethical line – as there is some cost to backers who lock their money up with a campaign, and sometimes creators don’t reimburse dropped pledges for transaction fees (an understandable policy in most cases).
What makes this so hard, is that it is impossible to differentiate between a campaign that made shipping estimates in good faith, and one that always planned to increase shipping in the pledge manager.
It gets even more complicated as to whether creators should be accounting for inflation, and price volatility in their estimates, and whether they pass on only increases in shipping costs, increases in fulfillment costs, or increases in freight.
Are We Passing Savings onto Backers?
The fact that I and most consumers are ok with some difference in final shipping prices versus a good faith estimate raises the question as to whether creators are or should also be passing on cost savings. I imagine that most publishers would pass on the savings if they ended up having the volume to ship a full pallet to a local fulfillment center that was previously receiving air shipping from another domicile.
But what if per unit freight comes down by a dollar?
Is that getting passed on? Should it get passed on?
Before 2021 when consumers weren’t expected to and didn’t expect to pay more for higher freight, I think the answer would be an unambiguous no. But, now we are in a world where many creators might plan on passing on meaningful upward volatility in cost of freight.
What ethical issues do you see in board game crowdfunding, and how would you address them?
