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EcommerceBytes-Update, Number 73 - June 30, 2002 - ISSN 1528-6703     6 of 6

USPS Rate Increase Affects Online-Auction Buyers & Sellers

By Toby Aulman

June 30, 2002

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First, let me start by correcting myself. As was pointed out by the friendly and helpful staff at my local Postal Office, it is a rate CHANGE not a rate increase that goes into effect today for domestic postage in the U.S. Okay, I'll grant that there are some rates that have actually decreased slightly, but few of them are for shipping methods that online auction buyers and sellers use on a regular basis.

The area with the greatest rate "change" is Priority Mail. Not only have nearly all of the Priority Mail rates increased, but the way those rates are computed has changed. Until now, the rates for packages up to five pounds were the same regardless of where within the U.S. you were shipping the package. Now, only the one pound rate is fixed, all other rates are based on the shipping zone of the destination (distance-based).

USPS shipping zones can be confusing. The zone chart is different depending on where you live. On your zone chart, you are always Zone 1, and the zone numbers increase as they radiate away from your location. The first three digits of the zip codes are used to compute shipping zones. You can get a zone chart for your location on the USPS Web site http://postcalc.usps.gov/Zonecharts/default.asp. Rate charts are also available on the site and are a handy backup when the online rate calculator is unavailable http://postcalc.usps.gov. I've also created a Priority Mail rate chart on my Site that you're welcome to use and bookmark. http://www.abzoid.com/priorityrates.asp

The majority of goods that most of us buy and sell online are between 1-5 pounds, so the new Priority Mail rates will have a substantial effect on nearly all buyers and sellers. The USPS summary of the rate change states that the overall average increase in Priority Mail rates is 13.5%, but that will vary greatly depending on your location and shipping habits. I live in Oregon's central Willamette Valley, and in my case, the increase is more than double the 13.5%. Bear with me for a bit, I have some numbers to share. (I have to justify all those hours I spent in college taking statistics courses.)

I went through my closed auctions for the last few months, 63 auctions in all, and charted the shipping rates for those items against what those same items would cost to ship under the new rates. The average shipping charge per package (Priority Mail and insurance only, no handling charges) was $8.59 per package. Those same packages shipped today would average $11.22 per package, an increase of 30.7%. Insurance rates have also increased, but those rates are not zone dependant.

I'm primarily a seller, but I also do some buying. As a buyer, I'm going to be even more apprehensive about shipping charges than I am already. Until now, I could make an educated guess on what the shipping charges would be on many items when a seller didn't list specific charges. Now, that can vary by as much as $6.30 on a five-pound package, depending on the location of the seller! The end result is that I'm going to be even more reluctant to bid on auctions where the seller doesn't either list a specific shipping charge, or at least include the shipping weight and zip code so I can compute the charges myself. The rate increase is also going to effect how much I'm willing to bid. If shipping will be $3 more than before, then my maximum bid will probably be $3 less than before.

As a seller, I have to take both of these factors into account. If the shipping increase is going to take a bite out of my ending bid price, then I must take that into account when deciding how much I'm willing to pay for an item that I'm looking to buy for resale. But more important, I need to do whatever I can to reduce bidder concern about shipping charges. There are essentially three options.

I can list my auction without specific shipping cost information, then sort it out with the winning bidder after the auction ends and I have their address. This requires the least homework prior to listing the item for auction, but also will likely lead to a higher number of email questions during the auction, requiring that I do the homework anyway, and has the potential for some unhappy buyers if they've drastically underestimated the shipping charges.

Another option is the look at the rate chart, and, based on shipping trends, pick a median flat rate price for shipping. The theory behind this option is that I'll be over on some auctions and under on others, and in the long run, they will even out. This is a huge improvement over the prior option, as the bidders will know before they place their bid exactly what the shipping will be. It also simplifies the process at the end of the auction, since I don't need the winning bidder's address to quote them the final total. If you are located in the Midwest and ship relatively little to zones 7 or 8, this is probably a very viable option. If you live on either coast, then it becomes more difficult to find that median shipping price. You can easily short-change yourself on the shipping in far too many transactions, or even worse, overcharge by enough to seriously aggravate a customer.

That leads me to the final option, which is to include the shipping weight, my zip code, and a link to the USPS rate calculator in my auction listing http://postcalc.usps.gov. This option requires the most work on my part. I have to compute the shipping weight in advance, and include the weight, zip code and link in the auction listing. When the auction is over, I must get the winning bidder's mailing address before I can confirm the total. While it may require a bit more work, it also does the best job at trying to reduce buyer apprehension over shipping charges when those shipping charges can vary widely.

All of the other options that I've seen are just variations on these three, and none of them are more "right or wrong" than others. It's just a matter of what you, as a seller, are most comfortable with and capable of implementing.

What does all this mean in more general terms? If history holds true, there will be a slow down in buying while both buyers and sellers learn and adjust to the changes. How severe that slow down will be is difficult to predict. If you think you've escaped unscathed because you use UPS, Fedex Ground or some other shipper, history has also shown that those shippers tend to follow USPS rate increases with rate increases of their own within a month or two.

We'll keep you posted!

About the author:

Toby Aulman is a "student of glass", who enjoys researching glass as much as he does hunting for and finding glass treasures. He collects late Victorian Era blue opalescent glass. His primary area of study is American pressed patterns from the last 100 years, with an emphasis on poorly documented patterns from the 1940's to 1970's http://www.PixClix.com/glassproject/. When not buying, selling, or studying glass he works from home as a Web Developer http://www.abzoid.com. Toby also moderates the AuctionBytes Glass Forum.

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