Here’s a product sold by a merchant via Amazon that costs about $2.50. Except that the shipping and handling are more than $8. And the item weighs about two ounces.
Shipping and handling charges have always been deceitful. Storefront merchants rarely charge "for the little hangtags" or add a "mannikin surcharge". When direct mail was new, sellers tried to persuade buyers that the prices were just as good as at the local store–and they segmented S&H as a way of comparing it to the hassle of driving over. When the shipping and handling for an order was $1 or 2, this wasn’t such a big deal.
Two things have changed. First, Amazon has taught millions that free shipping is the way the world should work. As a result, anything more than free just feels wrong. Second, other merchants have realized (like the squeeze bottle example above) that you can make 100% of your profit from shipping and handling and do quite well.
For a while.
How many people who get that product are going to buy from the store again?
Online, the economics are clear. Repeat business is what matters, and that happens when you surprise people (for the better). Not when you rip them off.