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Every Friday, I post a small insight into running Curio City and/or Blue Hills Editorial Services. My most recent posts are directly below. You can also start with the first post, or use the subject labels to the right to home in on particular topics. Feel free to comment on anything that interests you.
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Friday, June 20, 2008

Reasons to Hate Shipping

This post was originally entitled “The Airspeed Velocity of an Unladen Swallow” but I decided it was both too cute and too obscure for a post about the arcana of accurately calculating shipping charges, a topic that I first addressed last December. I shall avoid repeating that earlier post, so I suggest that you read it for background if this subject interests you.

Last week I subtracted $225 from my open-to-buy (or more accurately, I added $225 to my OTB deficit; see the end of this post for more about that) to allow for the cost of shipping a $176 order. Imagine my surprise when the bill came in at $249.12! That’s right; four cartons from the Left Coast cost $73.12 via UPS Ground – over 40% of net! Fifteen percent of net is considered reasonable and customary for freight; lately, 20-25% has become common in our energy-inflated economy. Forty percent, though, is pure bullshit – especially since this was bargain-priced merchandise that should have delivered my benchmark 50% markup at an appealing sale price. Instead I had to price the item higher than some competitors just to achieve a dismal 39% margin. If I were to price-match the competition, my markup would drop to a money-losing 15%.

There had to be a mistake. Sure enough, two 13-pound cartons bore labels showing that they weighed 27 pounds each. When I notified the vendor that they were overpaying for shipping, I learned that UPS was charging a dimensional weight. Because those two boxes exceeded some arbitrary cutoff size, UPS charged double their actual weight. I certainly won’t be reordering this “bargain” again. I can only sell it profitably if I inflate the shipping cost to my customers – a common dishonest tactic that I have always rejected as sleazy.

I try to take in exactly as much money as I actually spend on shipping, with a tiny surplus to cover the cost of boxes and packing materials. Ideally, every order is charged a few cents more than its real shipping cost. Alas, that is virtually impossible to achieve in the real world, as I explained in the earlier post linked above. Last week I actually dropped my handling fee by a nickel, to 70 cents from its high of 85 cents, because my shipping fee collections were running a wee bit ahead of expenses. In aggregate, I do a good job of balancing income and expense. Getting there has taken a lot of time and attention, and a few items are still out of whack.

Google Checkout’s rate calculation bugs have been an ongoing hassle – check the “Reasons to Hate Google” tag to find those posts. You would think that a shipping lookup module would just take a total weight, consult some tables, and return accurate prices. Nope.

Reasons to Hate UPS: UPS charges a base rate that varies across geographical zones. Then they add a fuel surcharge that (presumably) fluctuates with actual fuel costs, but in reality only ever goes up. Then they add a residential delivery surcharge if the package is going to somebody’s home. Then they generate fictitious weights to cover the bizarre dimensional pricing that I mentioned earlier. There’s an insurance surcharge for packages worth more than $100. Even after all that is factored in, the price that I pay when I create the shipping label often differs by a few cents from what UPS ultimately charges my credit card, necessitating fiddly little corrections every time I get a credit card statement. Overall UPS rates are higher than the USPS, their service is slower, they don’t deliver on Saturdays or to PO boxes, and they often damage packages. Package tracking is the only thing I actually like about UPS.

Reasons to Hate the USPS: The post office revises their rate structure every year, requiring customers to re-develop our shipping modules. The parcel post bug about which I’ve written so often recurs so dependably that I suspect it’s a deliberate effort to reduce parcel post sales. And that’s just the beginning. USPS uses separate rate tables for “machinable” (standard) and “non-machinable” (oversized, undersized, and oddly-shaped) packages. In May, USPS introduced UPS-style dimensional premiums for priority mail over one cubic foot. The cheaper services like first class parcels and parcel post are not available online via Click-n-Ship, but priority mail receives a discounted rate when purchased online. And then there’s flat-rate pricing when you use the proper boxes. For all of that complexity, USPS does not guarantee their delivery times, or offer parcel tracking, or provide loss coverage for uninsured parcels. Presumably that’s why it’s so much cheaper than UPS.

Given the level of complexity by both carriers, it’s no wonder that so many merchants prefer fixed-rate shipping tables. Who knows? Maybe some customers really would rather pay a fixed shipping price per dollar amount – at least it’s predictable. I suspect (for no objective reason) that my customers would rather pay the real cost of shipping than a one-size-fits-all rate based on purchase price. Merchants who use flat-rate shipping tables are just dodging the issue. So I gamely struggle with the lookups, constantly fine-tuning item weights and adjusting my handling charge to approach the ideal. Until the next rate reorganization comes along and screws everything up again.

And now, as long as we’re hating companies…

Reasons to Hate Microsoft: I feel like my hatred neglects MS. That’s not a deliberate slight; they just don’t have much to do with e-commerce. But here’s something: After a Windows update a few weeks ago, MS Outlook started freezing on the first load, on both of my machines. It loads OK on the second launch, but makes me wait for a 30-second repair routine each time. I allowed Windows to report the crash to Microsoft each time in the unlikely event that somebody is collecting those. Eventually I got a link Microsoft’s solution: Upgrade from Outlook 2002, because it’s no longer supported. Thanks, Microsoft! You just moved me one step closer to migrating to web mail.

Speaking of my open-to-buy…I don’t think it’s ever going to reach zero. As much as I really want this business to put money into my pocket rather than siphon it out, I am on the verge of loaning the company enough money to wipe out my deficit, satisfy pent-up demand for reorders, and bring in one expensive new product line. It would take $3,000-4,000 to do all that. I even have that much money sitting in an ING Direct account named “Kraken Startup”. Five things keep staying my hand: (1) The aforementioned aversion to putting more money into the company; (2) a real lack of warehouse space in the cellar; (3) the certainty of earning a nice, safe 3% return by leaving it right where it is, versus potentially losing it entirely if I invest it in my business; (4) my belief that future cash infusions should only be used for technology and marketing; and (5) my suspicion that bailing out the OTB – again – merely ameliorates a long-term structural problem in either the way that I calculate my OTB, or the way that I spend it. Yeah, I could pour $4,000 into overstuffing my cellar right now…but will I be right back to low stock levels and an empty budget again when it’s time to lay in Christmas orders in a few months?

Coming Attractions:

  • Running with the Big Dogs
  • Let Us Now Praise Famous Products
  • The Zombie Store
  • Legal Extortion

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