The Arcane Art of Shipping

Last week was consumed with xmas, of course, and by my preliminary effort to tease some meaning out of the results. Since that's still in progress, and because something unexpected siphoned off my attention for a couple of days (I can’t write about that yet), today’s post is one that I’ve been chipping away at for a few weeks.

First, though, I’m pleased to mention that the last week of December was much stronger than expected. I have still not had a shutout since mid November.

I do 95% of my shipping through the post office. They do the best job of delivering packages in a timely manner and in good condition for a reasonable price. USPS is certainly more reliable than UPS or FedEx. But they do piss me off sometimes.

I buy my shipping labels at the USPS Click-n-Ship website so that I can just drop the paid-up packages at the post office and be on my way. Online purchases get free or reduced-cost delivery confirmation, and some services also earn a small discount off the walk-up postage rate. This is all well and good as long as you ship via priority mail or express mail.

Problem is, at least 75% of my customers choose the cheapest shipping method. That is usually first class mail (under 13 ounces) or parcel post – services that USPS doesn’t sell online. Why? Because they have sweetheart deals with Stamps.com, Endicia, and Pitney Bowes. If you want to access the full range of USPS services online, you have to pay one of those third parties for the privilege. That will set you back $16 per month for a convenience that the USPS could easily offer for free.

It offends my sense of fair play to bribe a third party for a service that ought to be free. I’m sure that the USPS gets a kickback from those third parties. So I usually upgrade my parcel-post orders to priority mail when that’s cost-effective, or I stand in line at the APC (automated postal center) when it isn’t. The APC offers most domestic services, but it soaks you 75 cents for delivery confirmation, and it can’t print customs paperwork for international sales.

The last resort is standing in line for a human clerk. There is nothing a postal clerk enjoys quite so much as telling you why you can’t do something, or that you have to fill out additional forms, or that your box is somehow below standards.

International shipping too often sends me to the counter. Packages under four pounds – most of mine – are cheapest via first class international, and guess what? You can’t buy first-class postage online. The price gap between first-class international and priority international is way too high to upgrade. And so I have to fill out the customs paperwork by hand, and wait in line for a surly clerk to scowl at my packages and look for reasons why I can’t ship them.

December’s frenzied pace made that $16 monthly fee at Endicia look so tempting that I finally overcame my inner cheapskate and signed up for their 30-day trial. From Dec. 4 thru Dec. 26, I shipped 78 first-class or parcel post boxes through Endicia. For each one, I paid 18 cents for delivery confirmation instead of 75 cents at the APC. That’s $44.46 that I saved, not to mention several hours of standing in line. Sixteen bucks for that looks like a bargain. Now I have until my trial ends on Jan. 4 to decide whether the time and money savings make sense during my slow months, too. Financially, probably not. For convenience and stealth, maybe so. I'm going to keep it through January and see how the numbers come out.

Stealth? Did I say "stealth"?

Endicia’s basic rate is only $6 per month. I'm paying an additional $10 to print labels that say “Postage & Fees Paid” instead of showing the actual amount. That’s called “stealth postage”.

I strive to keep my shipping charges neutral – to take in very slightly more than I pay out. Ideally, every single order would cost a few cents less than I collected. In practice, it’s very difficult to calculate shipping charges accurately. Consider the lighted cap.

One packaged cap weighs 10 oz. It’s simple enough to set the weight of one cap at 0.6 lb (9.6 oz) and charge those customers accurately. The problem is that packaging accounts for much of that initial 10 oz. The caps themselves actually weigh only 3-4 oz. If a customer orders two caps, the assessed weight of 1.2 lb takes them out of the first-class mail table and puts them on the 2-lb priority or parcel post rate. But the actual package weight is just 13-14 oz, which could go first class, or for the 1-lb priority rate. The more caps I put in a single box, the greater grows the disparity between the assessed weight and the actual weight, and the harder I soak my better customers.

My workaround is to add an invisible handling charge charge (currently 85 cents) to every order, and reduce the weight of each cap to 0.4 lb (6.4 oz), which is closer to reality. Now the single-cap orders remain pretty accurate, and multiple-cap buyers get a better deal. Careful analysis would let me optimize the handling charge and cap weight for my most common orders. This would be great if I only sold caps, but mixed merchandise makes it impossible to charge everybody accurately. So the best I can shoot for is overall balance. In December I collected $1408 in shipping fees and paid out $1353. I think you’ll agree that a $55 overcharge is reasonable and minor…unless you happen to be one of the unlucky customers who contributed to it (remember that some customers are undercharged, too, so there were actually more than $55 in overcharges).

Enter stealth postage. :)

While I’m complaining about carriers, here’s a new reason to hate UPS, too: A number of weeks ago a customer placed a telephone order just minutes before my 2 pm cutoff for same-day shipping. Literally minutes after the call, I had her box packed up and on its way. A couple of hours later, she tried to cancel the order. That's when I discovered that UPS has a package recall feature. You can intercept it prior to delivery and have it returned to sender. I told the customer that I was doing this, and that she’d have to pay return freight. She was displeased, but why should I take a loss because she changed her mind?

The return freight should be the same as the outgoing freight, which was $9.50. And it was -- plus a $10 intercept fee. Yes friends, it cost $19.50 to have that little box returned before it reached my customer. With the original shipping fee, it cost $29 to transport merchandise that she never even got.

Because that $10 surcharge was news to me, I ate it, and just charged her the $9.50 that she would’ve had to pay if she had returned the package herself. Everybody loses! Except UPS, that is.

Winding Down

I hope my legions of fans were not too disoriented by my failure to post yesterday. I just spaced on it. I hope it won’t bore you too much if I continue the day-to-day format that I used last week. Reviewing this will be helpful when next Christmas rolls around.

Last Friday ended up as the third-best day of the season, with 14 transactions from just 186 visitors. Saturday was better than expected despite another drop in traffic, to 153 visitors. It was not enough to save the year’s busiest week from ending 12% behind LY. Ouch! Well, what’s done is done. I’ll continue flogging what business I can for the next few days, but we’re definitely in the winding-down period now.

Sunday belied that last sentence; traffic recovered to over 200 and sales were unexpectedly strong. On Monday I awoke to three more orders in my intray; one is going to Belgium via Express Mail for $86 in shipping costs! (More on this one below). I thought I was going to have time today to balance my personal checkbook, pay the household bills, wash the dishes, take out the trash, and make dinner – all the normal-life stuff that keeps slipping. But it looks like Xmas is going to remain front and center for a little longer.

Tuesday – when I was sure things would start to die down – set a new record for the most transactions in one day (19). On Wednesday I had another stellar day, tying the 19-sale record that I set just yesterday. People are paying the big bucks for shipping now. Traffic declined steadily from 200 visitors on Sunday to just 153 on Wednesday, when my conversion rate set an all-time record of 11.76%. There aren’t as many shoppers, but they are serious about it.

Things slowed down enough on Thursday (138 visits and just four sales) that I actually had time to shovel the driveway and start my own Christmas shopping. The frenzy is gone. Friday's mere 117 unfestive visitors delivered just three more sales. There’s still plenty of work to do, some of it (like tamping down my PPC ad spending) pretty urgent. But I feel almost like I’m on vacation. On one hand, I obviously need the sales, and a fast pace makes the days fly by quickly; OTOH, I’m exhausted after working at full speed every day for the past three weeks (by one report, I shipped 469 boxes so far this month). It is a relief that I can shovel the driveway again today and finally pay the bills that were due five days ago. This brief interlude – too late for Christmas orders, and too early for complaints – is sweet.

Anyway, this week was so much better than LY that it not only erased the deficit from early December...it put me ahead of LY for the month! I sure didn’t see that coming.

*******

This week I had the always-weird experience of buying stuff from myself – something I do very seldom because Curio City pays me so little. Kraken Enterprises buys my merchandise from the vendors. Then I buy it again with my own money (earned from Kraken Enterprises) at slightly over cost. I’m tempted sometimes to just mark it down to zero and take it, since Kraken Enterprises is really just me, but that would be stealing from myself. When I buy it the company records a sale…which contributes a few bucks to my paycheck, but also obliges me to pay sales tax! What a bizarre circle. It gets even weirder when, during the depths of the summer slump, I start selling my personal property to Kraken for disposal on eBay. The difference between me and Kraken is only legal, but I observe the line pretty strictly.

What did I buy? you may wonder. I can’t tell you because my wife has been known to read my blog. She’s already using her new Lightning Sky Fusion PurseHook, though, so there’s no secret there.

Next week I’ll start a retrospective on the good and the bad aspects of 2007, and then start the tortuous examination of my prospects for 2008. January is all about fallout – paying taxes and dealing with complaints and returns. I’m pretty sure I’m going to turn a small profit this year. I didn’t expect to be profitable until next year at the earliest. As an S Corporation, Kraken Enterprises won’t owe any federal income tax; profits get distributed to the shareholders – that’s me – as Schedule K income. The Commonwealth of Taxachusetts, of course, has no such compunction against taxing corporations. I’m sure they will extract their pound of flesh.

*******

I mentioned earlier that a Belgian paid $86 to have a $80 globe sent to him via Global Express Guaranteed –- a premium service provided by FedEx and sold by the USPS. Knowing the futility of dealing with human clerks, I made a pre-visit to the post office to get the necessary paperwork (you can’t buy that service online). The traffic director there gave me two Customs forms to fill out. I came home, filled out their forms, boxed up my item, and stood in line for 30 minutes…only to learn that the traffic lady had gaven me the wrong forms. So I had to start over. Then the clerk couldn’t find a necessary item code, so we had to fudge it. Then it turned out that my site’s shipping routine had read the cost table for documents instead of packages; shipping a box would cost $30 more than the customer paid. That wiped out the markup on the item. Altogether I spent about 90 minutes shipping a parcel that netted $0 profit. You know I’m ambivalent about international orders anyway; the first thing I did when I got home was remove the Global Express Guaranteed shipping option.

The Home Stretch

Oops! I did it again: Another customer claimed that I short-shipped him two USB fans. Although I’m reasonably sure that I put them in a box, I can’t swear that they went into his box. My physical count inconclusively came up 1 over. Fortunately, the cost of this mixup is minor.

The setback that I wrote about last week had a happy ending. The customer whom I suspected of receiving my mis-sent parcel really did get it, and she contacted me as soon as she got back from a vacation. I must bear in mind that not everybody lives online and works 365 days a year, like I do. Normal people get days off…holidays…even vacations.

I was briefly tempted by her kind offer to return the caps, but I stuck with plan A and offered them to her without repercussions. She immediately placed a large second order that partially offset my loss. That reinforced my long-held belief that a satisfied customer matters more than a profitable sale. Although I must say that I do like profitable sales.

**********

I usually write or revise a bit of my weekly blog entry each weekday, then clean it up and post on Friday morning. This week I thought it might be interesting to preserve the day-to-day journal approach as I chronicle Curio City’s performance during this busiest week of the year in 2006, with its daunting sales targets for this year.

The first week of December (last week) never quite made up its poor start, and ended up about 14% behind LY, so I'm going into this intimidating week with a deficit already.

Sales were mediocre on Sunday, surged nicely on Monday, then turned strange on Tuesday. On Monday 293 customers visited my store, setting an all-time traffic record. (For comparison, normal non-holiday traffic is around 100 visits.) Just as the first of three huge backup orders of Panther Vision lighted caps arrived, this hottest item of the season stopped selling almost entirely. I had been selling at least a dozen caps a day for the past couple of weeks. I found another store undercutting my price by $3 per cap, so I promptly cut my price. While I was in a sacrificing frame of mind, I knocked my Pursehooks down a couple of bucks, too. What started out as a novelty in the fall seems to be ubiquitous now, and robust early sales sputtered out almost entirely.

So Tuesday looked like a bloodbath – one of those disturbing days when things get so quiet that I suspect technical problems. A rare, large jewelry order staved off disaster, but still left me substantially behind LY. Then, just 15 minutes before midnight, two more orders arrived to save the day. Traffic fell to 196 visitors, down a third from Monday’s peak.

Wednesday, which should have been the strongest day of the week and one of the best of the year, continued the slowing pattern. The smaller items that I’ve been selling in great quantities (and with which I’m very well stocked) are dead. I should be bouncing off the walls trying to keep up with them. Instead, I’m selling just enough large-ticket items to keep a pulse going. (Levitating globes FTW!) Each day I fall farther behind LY, and I don’t know what changed. It is as if Christmas shopping ended on Monday night, just as my major reorders started to hit. It makes me literally sick when something major and unexplained like this comes along. I feel an urgent need to do something, but I have no clue what, or if anything I do would make any difference. At times like this that I wish I had coworkers to talk to. Wednesday ended many hundreds of dollars behind LY. Traffic was basically flat at 203 visits.

Thursday opened with only one small sale waiting for me. I resolved during my morning walk that I am not going to stress out over it anymore. I’ve done everything I can do. This morning I added shipping advice right on my key product pages, and cap sales revived. Maybe that’s all I needed all along? If so, it’s a valuable lesson. I wish I’d learned it two days ago. This is the time of year when every day counts. Traffic is still around 200 visitors per day.

My ambitious plan to kick out one last newsletter plugging my new 4-LED Camo cap died in a major snowstorm. My delivery run to the post office and UPS Store – normally a 30-minute errand -- took more than two hours. I’ve been scrambling to update my product pages and get the newsletter ready, but it’s 7 PM, and tonight is the Kraken Enterprises Christmas party. I’m outta here.

This morning (Friday) I spent two hours shoveling. so I don’t have time to polish up this post. I need to crank out that newsletter and ship my orders. Yesterday ended up pretty strong and today is off to an encouraging start. With luck and hard work, I can probably keep sales up for about five more days, and maybe recover a bit of my sales deficit.

Setback

It’s been an exhausting rollercoaster week. After last month’s stellar end, I promptly fell more than $800 behind LY during the first two days of December. That’s not insurmountable, but it’s discouraging.

And then the phone rang.

A customer who ordered five lighted caps worth $100 received instead five clip-on cap lights worth $30. My inventory numbers are all correct, meaning that I shipped those five caps to somebody – and I think I know whom. I had another order on the same business day for five clip-ons. I probably switched the two orders – they looked very similar on paper (5 caps, 5 cap lights….) – and I did reverse two shipments once last year, too, so I know I'm prone to such things. The suspect customer didn’t reply to email; she no doubt intends to keep her windfall. I decided against phoning her for several reasons: First, the postage on the second shipment should’ve been inadequate for five caps, so there’s a slight doubt in my mind that she really got them, and I can't prove it anyway. Second, I think it’s bad form to harass a customer about an error that I made. Third (and most convincing), the cost of recovering those five caps and replacing them with clip-ons would leave me with a net gain of only $20 after all the postage. Is that worth the hassle and ill-will? The reasonable thing to do is let it go.

I refunded the first customer’s purchase, of course, and let her keep the clip-ons as an apology (and because they really aren’t worth the cost of return postage). So I lost a $100 sale and $100 worth of merchandise. That’s a pretty nasty hit.

The December 2006 numbers that I’m up against are extremely intimidating. Remember, I had a product in two gift guides LY, and I don’t have anything comparable going on this year. I need very strong sales both today and tomorrow just to match LY. And next week is even more challenging.

So I’d better stop writing about it and knuckle down, don’t you think?