Almost everything purchased online is placed in a box and sent via the three major carriers. Thank God that the package distribution network in the U.S. is well refined and efficient. Shipping charges are a major source of cash inflow…approximately 8% of revenue. Shipping costs are also a major expense.
Nobody Likes to Pay Shipping Charges
The truth is most customers hate paying shipping. They perceive it as a surcharge or additional tax of sorts. So, you are faced with the choice of shipping ”at cost” or of ”making a little” on shipping. Should you cover the cost of your shipping supplies? Should you mark up shipping to cover your time spent in packing?
In light of how customers feel about it, your best bet is to make it a wash. It’s probably best to keep all your shipping charges at cost or even below cost. Not doing so will cost you dearly in lost sales. Unbelievable as it may seem, if your competition is $.25 cheaper on shipping, you will lose the sale. Companies that deliberately operate at a loss on shipping have found that this gives them an advantage over competitors and has resulted in larger market share. Keep your shipping charges as low as possible!
Three Ways to Charge for Shipping
There are three main types of shipping cost calculations that you can configure your web store to use: Carrier Based, Product Based, and Value Based.
- Value Based Shipping: this method will calculate shipping costs based on the total cost of the items in the order.
- Product Based Shipping: this method will charge a flat fee for each item in the order.
- Carrier or Weight Based Shipping: this method will calculate shipping costs based on the weight of the shipment, its origin and its destination.
Which method should you use? It depends on what you are selling and how you are going to sell it. For example, carrier based shipping is great for an online store because you can enter all the items’ weights into the product database and the website can calculate the shipping based on the zip code provided by the customer. However, if you try to use this method for your catalog, it can frustrate your customers as they add up the weight of each of their products and plug that information into a chart based on their location. In that case, product based or value based shipping may be the better choice. Your rule of thumb, remember, is that customer’s dislike shipping charges, so you want to always be as competitive as possible.
Other Shipping Considerations
Here are some other shipping considerations when deciding on what to charge and offer your customers:
- Premium Shipping Options: allows your customers to choose a premium shipping option and receive priority shipping for an additional fee.
- Multiple Ship To Addresses: gives your customers the option to ship a part of their order to more than one address.
- Handling Charge: an additional charge can be applied to orders to cover the cost of packing supplies.Minimum Shipping Charge: you can configure your store to charge a minimum fee for shipping on all orders.
Which Carrier Should You Use?
The three largest U.S. carriers for shipping are United Parcel Service (UPS), Federal Express (FedEx), and US Postal Service (USPS).
- great distribution network – 200 countries worldwide
- competitively priced
- easy to use shipping software
- inexpensive rates for daily pick-up
- great tech support
- free shipping supplies
- has 30% of the online purchases market share
- guaranteed delivery times
- easy package tracking
- payment terms (usually net 7)
- does not deliver to all locations in U.S.
- more expensive than USPS on lighter packages (under 1 pound)
- cannot ship to APO, FPO military overseas addresses
- more costly to most international destinations including U.S. territories
- #1 in overnight service
- daily pick-up
- guaranteed delivery times
- good tech support
- has 16% of online purchases market share
- collaborates with USPS for international deliveries to give better rates
- easy package tracking
- offers payment terms
- similar to UPS in delivery locations
- more expensive on average than UPS on overnight and ground shipments
- broadest mail distribution network in the world
- competitively priced
- free shipping supplies (Priority Mail and Express only)
- more drop off locations
- pick-up is free for any number of packages up to 70 lbs.
- offers package tracking
- the only carrier for packages going APO & FPO
- lowest cost on light packages (under 1 lb.)
- delivery times are not guaranteed (except for Express Mail)
- filing claims for lost packages is complicated and difficult
- no payment terms are available
Which carrier should you use? The pros and cons of the major carriers are highlighted below. For free and fast quote comparisons, you can go to www.redroller.com/shipping/home and enter your origin, destination, and package size to receive quotes from all the carriers for next day, and 2- and 3-day delivery. You can join Red Roller and have them handle your shipping, if you desire, but just being able to compare quotes easily is very convenient.
Packaging Your Products
When sending a package, there are several easy steps that make your package more secure and easier to ship.
Most items you ship are sent in a box. You need to choose one large enough to accommodate the item surrounded by cushioning material, such as bubble wrap or Styrofoam peanuts. Include about two inches to additional space around the item itself. The box does not have to be new, but all the shippers require that you remove or cover all previous labels or obliterate them with a heavy black marker.
Something to bear in mind is that a well-used box may have lost much of its rigidity, so much so that it is no longer a good bet for protecting the item from the rigors of shipping. Boxes that are torn or punctured, or that have lost their flaps along the way should be recycled, not re-mailed. Paperboard boxes such as shoeboxes are not rigid enough to begin with and should not be used. Check over a used box carefully to make sure that you have covered any tracking barcodes from previous uses, since you would not want those to be mistakenly read instead of the current one. If you have never noticed, many boxes have a maximum gross weight indicated on the bottom flap, so check this out to make sure the box will carry the load you are putting in.
The Packing Material
If you’ve ever watched those contests where budding engineers drop an egg from the top of a building specially packaged so that it doesn’t break, you can appreciate the power of good packing. There are several materials you can use to pack around your item(s), which are highlighted below. Whatever you use, a good rule of thumb is to have at least two inches of packing between the item and the top, bottom, and sides of the box, and between multiple items that may be sharing the same box. You want to pack the items into the box tightly enough so they don’t shake or move around, since they will have to withstand impacts and jostling along their journey. Some items, such as glassware or artwork, may even require double-boxing. Here are some of your packing material choices:
- Bubble Wrap
- plastic sheets with air-filled bubbles that can be bought in rolls and cut to length
- meant especially for light-weight items
- may be wrapped around the item several times until desired padding is achieved
- Air Bags
- plastic inflated with air
- can be purchased as a preform for particular products
- may be affected by extremes in temperature (expand or contract)
- used mostly as a space-filler
- watch using with sharp edged items
- Styrofoam Peanuts
- they can be crushed by heavy items, or shifted out of the way
- use with light-weight items
- coat the bottom to about 3 inches, place in the item and shake more around it
- overfill and let them settle
- Foam Enclosures
- made from Styrofoam, polypropylene, or copolymers
- usually made-to-order for specific items
- Foam Spray
- sprayed from a can and expands around the item
- make sure it is evenly distributed around all sides
- Corrugated Board
- trays, partitions, and liners that are made from corrugated board
- place around items
- useful for heavy items
- Paper Padding
- multilayered paper
- crumpled and placed around larger items
- can help control moisture absorption
- Kraft Paper
- crumpled paper for placing around light to medium weight items
- use at least 4 inches around top, sides, and bottom
For securing your boxes, tape is the best choice. Use 2” wide clear or brown packing tape on the box opening and all seams for best results. Use 2 or 3 strips of tape, overlapping for strength. You can use pressure-sensitive tape on almost any surface. Water-activated reinforced tape can stand up to the toughest challenge without splitting or tearing. A water-activated tape dispenser machine is a highly recommended tool. Avoid masking tape, cellophane tape, and duct tape.
It goes without saying that the box must display the correct address. Check to make sure it is right, and use the zip code + 4 if possible. For international shipments, include name, street address, postal code, and a phone number if at all possible. If you have only a PO Box, you must have a phone number. Even then, there may be delays and the normal next day delivery or two-day delivery services are not guaranteed. If there is a suite or apartment number, include it. You may face additional charges for Address Correction services. Remember that APO and FPO addresses are not accepted by UPS.
Assembling Your Package
To assemble your package, follow the steps below:
- Choosing a box slightly larger then your contents.
- Secure the bottom of the box with packing tape and add a small amount of packing material to the bottom of the box if you are sending fragile items.
- Place your items into the box and fill any spaces around the item with packing material.
- Place an invoice, sales receipt or packing slip on the top of the contents of the box.
- Do not forget to include a catalog and any other promotional material before sealing your box with packing tape.
- Place the box on a shipping scale to determine the package’s weight.
- Seal the contents of the box with packing tape.
- Create a shipping label and attach it to the top of the box avoiding seams, edges, and the sealing tape if possible.
- Your full return address must be included, along with a contact name and phone number, on top of the box.
Packages may be picked up at your location or taken to a drop-off location. If you prefer pickup service, please contact the carrier and ask to be added to their pickup schedule.
All the carriers have mandatory packaging requirements. Unless these rules are followed carefully, they will not honor claims for damage that occurs in transit. To read further on each carrier’s proper packaging procedures visit www.ups.com , www.fedex.com or www.usps.com. Type in “Your Packaging” as a search term and you will be redirected to the appropriate page. The packaging instructions given are easy to understand and follow.
Packaging supplies can be purchased from a local corrugated box company or from an online distributor like Uline www.uline.com. Both sources have pros and cons as a source of packing supplies. Purchasing supplies online can save you money on the actual product; however, it costs you money to have your packaging supplies shipped to you! You must also factor in shipping time when ordering your products; do not wait until the last minute. Local companies save you shipping costs and can deliver the same day, but they may not have as large a selection of supplies as a large distributor like Uline.
Buy a Dedicated Shipping Scale & Label Printer
Having the right equipment will make your business run more efficiently, which means higher profits. Having a dedicated printer and shipping scale that integrates with your accounting software and/or shipping software is a definite plus.
The Fairbanks Ultegra scale www.itinscales.com is somewhat pricey but is a rugged scale that works trouble-free for years. With regards to the printer, UPS has a great program that lets you lease a label printer for only $2.00 per week, and they supply the labels for free. If you do not want to use a label printer, just print your shipping label on a sheet of paper and tape to the outside of the box.
Don’t Manually Enter Names & Addresses
To eliminate errors and save bunches of time, don’t manually enter customer information into the shipping screen. In this day and age it’s easy to upload this information into most shipping software programs directly from your website or accounting program via Extensible Markup Language (XML) file import. Some accounting programs, like QuickBooks www.quickbooks.com have integrated shipping modules that access customer information and create a shipping label. E-commerce software, like NetSuite http://www.netsuite.com/, manages customers’ orders from your website and ships your products directly from an integrated shipping module without having to import the customer information. One great advantage of this feature is the ability it gives your customer to go to your website and receive tracking information, which, incidentally, gets your customer back to your site for another exposure to your products.
Send Out All Orders Promptly
It’s important to send all orders as quickly as possible. Once a customer has paid, they want their merchandise as soon as possible. The number one complaint companies receive is from customers who are dissatisfied with the delivery time of their purchase. Most of your shipping delays are due to manufacturer hick-ups and back order issues. If you receive back order merchandise before 2:00 p.m., make it a priority to send it that day.
It is important to know your carrier pickup deadlines to make sure you have your packages ready. If you are using more then one carrier to ship your products, schedule your packing time to meet the deadlines. For example, USPS usually picks up packages before UPS and FedEx, so you would pack your products shipping by USPS first, and then pack the products shipping by UPS or FedEx. Also, pack any express shipping orders first so you are sure to have them ready.
Should You Insist That a Package is Signed For?
All packages sent with signature required force a customer to be at home in order to sign and receive the package. The reality is that requiring a customer to sign for a delivery is a waste of money because the carriers will charge extra for this service. Requiring a signature at delivery also results in a lot of packages being returned to your warehouse. About 50% of the time, nobody is at home during the day. UPS and FedEx will make 3 delivery attempts and will then return the package to you. USPS will leave the package at the post office and notify the receiver to pick it up.
So how do you protect yourself in the unlikely event that a customer claims not to have received their package? As mentioned previously, lost packages are very rare (in the U.S. that is… overseas it’s a weekly occurrence), and are easily traceable online. With tracking information, you can verify if the package sent has arrived or not. Although this tracking information is very reliable, it is a not a 100% guarantee.
Most of the time, UPS and FedEx require the receiver to sign for a delivery regardless of whether a “signature required” service has been requested or not. USPS, however, will leave a package in the mailbox or at the front door and not require a signature unless that service has been specifically requested. If UPS or FedEx leaves a package without a signature and it comes up missing, they are liable for the declared value of the contents and will pay a claim promptly. USPS does not pay a claim unless insurance has been requested. A recommendation is to always pay the extra signature required fee if you are shipping high-value products and want 100% assurance that the item was delivered to the customer.
Shipping Oversized Packages
Watch out for oversized items that require extra shipping charges! This additional shipping fee can dramatically change your shipping costs. Consider the following example:
UPS Oversize 1 (OS 1) has package measurements of length and girth greater than 84 in. (213 cm) and not more than 108 in. (270 cm) and actual weight of less than 30 lbs. A package of this size is billed at a 30 lb. rate. UPS Oversize 2 (OS 2) has package measurements of length and girth greater than 108 in. (270 cm) and not more than 130 in. (330 cm) and actual weight of less than 70 lbs. A package of this size is billed at a 60 lb. rate. Oversize 3 (OS 3) has package measurements of length and girth greater than 130 in. (330 cm) and not more than 165 in. (419 cm) and actual weight of less than 90 lbs. A package of this size is billed at a 90 lb. rate. A Large Package Surcharge of $40 is applied to all UPS Ground packages when the size of the package exceeds 130 in. (330 cm) in length and girth combined.
For more information on oversize package criteria, go to UPS http://www.ups.com/content/us/en/resources/prepare/oversize.html#Oversize+Package+Criteria and Fedex http://www.fedex.com/us/service-guide/our-services/package-shipment/index.html.
Benefits of USPS Priority Mail Service
Shipping light-weight products using USPS Priority Mail has its benefits. If getting your package there fast is your top priority, Priority Mail offers the best value. Packages take 2-3 days to reach their destination, even across the country. The service is fairly reliable, but it is not guaranteed. Priority Mail postage includes forwarding and return service. You can enhance the service, security, and convenience of Priority Mail by adding extra services such as Delivery Confirmation and Registered Mail. These services are available for a small fee. A major advantage to this service option is free boxes and tyvek envelops. You can order FREE shipping supplies online at the USPS Postal Store https://store.usps.com/store/. The supplies are delivered to your door through the USPS postal service.
Once the sale is made, customers expect to receive their purchases as quickly and smoothly as possible – the source of the #1 customer complaint. All major shippers offer good service, so shop around to select what works best for you and the types of products you are shipping. Use good packing materials and methods to ensure safe delivery. Make sure addresses are complete and include your return address. And give the customer a break when it comes to cost – they don’t like to pay shipping charges!
IMPress Action Checklist
Below is a list of steps to prepare for shipping your products to your customers. Be sure to check off each task as you complete it to stay focused.
- Decide what type of shipping schedule you will use to charge your customers
- Compare shippers and decide the best one for your business
- Research mandatory packaging requirements of your chosen carriers
- Purchase adequate packing supplies
- Buy a shipping scale and label printer
- Interface shipping label software with shopping cart or accounting software for downloading addresses
- Shop around for shipping costs on oversized packages
- Send out orders promptly, packing in the order of carrier pick-up schedules