On the other hand, when I know the shipping costs are included in the price, it makes me feel like I'm being gouged on larger orders where the shipping cost per item should be lower.
Jet.com isn't perfect but they're trying some interesting stuff with pricing (e.g. pay more for included returns, or pay less but have to pay shipping if you return, buy items in bulk and get a discount, etc).
Full disclosure: I work at Jet on the pricing team.
That re-aligns the incentives of both parties.
So, back to the point, regardless of whether the price is broken out or bundled, there's really no way to tell how badly you're being gouged. Unless you can find it cheaper someplace else, the only question is whether it is worth it to you at that price.
On the flip side, as an eBay seller it's kind of painful to know that if I sell something for $X, shipping is eating $3+ of that - on top of the 10% cut for eBay and the 2% for PayPal. It makes it not worthwhile to me to list anything below $10.
So a retailer with a bulk discount can probably get away with that rate, much higher than around $8 though and people would know it isn't a real rate.
I'd wager this is true of 85% of companies when it comes to cost savings.
Still as a psychological thing I think customers just prefer to see free and don't think too much about how it could be costing them more. Most of our shipping is free because it seems to give better results, even if the customer ends up paying more in some cases.
Rather than the negative incentive of stacking on fees at the end, stack on discounts. Repeat customers may find this attractive.
Apparently a thing: https://news.ycombinator.com/item?id=12859942