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Sun Jan 16 2011 13:48:22

Increased Shipping Costs Are Coming - How Will You Adjust?

By: Ina Steiner

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Online sellers are being squeezed between the consumer demand for free shipping and the ever-increasing costs of shipping. This month, the cost of sending UPS, FedEx, and USPS Priority Mail and Express Mail packages rose, and last week, the USPS filed plans to raise rates for First Class and Standard Mail rates in April.

Merchants are paying 25 cents more for a USPS Priority Mail Small Flat Rate Box, and will pay up to 15 cents more per package for USPS Media Mail beginning April 17, 2011.

Sellers must pass along higher shipping costs by raising S&H fees or by raising the price of product, or else absorb the higher cost of shipping. Either way, they face higher payment processing fees and in some cases, higher fees to online marketplaces and inventory management services that take a percentage of the transaction.

How will you deal with higher shipping costs in your business? Are you increasing your S&H, rolling costs into the price of the item, or taking the loss on margins? Share your thoughts (and any tips you may have) here!




Comments (60) | Permalink

Readers Comments

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Carl G.

Sun Jan 16 14:05:41 2011

It goes with the territory ... fuel and postal union wages are going up so it stands to reason, however; it raises several questions...especially for ebay sellers who have to deal with the non-level (where oh where has Bill Cobb gone) playing field called search.

On the one hand, sellers have to offer free shipping in order to enjoy favorable (???) search standing but on the other hand, if they include it in the base p[rice of items will they be thrown out of the comparison ball park?

The small seller will once again be squeezed as they have to compete with the big box seller with deeper pockets.

The real winner here once again will be paypal/ebay in that they grab a ''cut'' of all gross monies transferred through their system and this includes shipping/handling/processing/insurance fees whether it is visible or not...

the end result is more sellers dropping out due to decreased profit margin and a feeling that the deck is really stacked against them...

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Jim S. This user has validated their user name.

Sun Jan 16 14:15:25 2011

I am increased my S&H accordingly.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Digby
Web Site

Sun Jan 16 14:31:26 2011

I will be increasing my S&H charges.
I can't afford the drop my margin.

But I image it will have an effect on my sales and on all online sales.


Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: John

Sun Jan 16 14:51:31 2011

It will not effect mega sellers at all.

It will effect the small sellers big time

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Harriet This user has validated their user name.

Sun Jan 16 17:34:51 2011

I am going to be increasing my shipping prices. As with other shipping increases, there will be some resistance at first, and when buyers realize that that's the way it is, they will adjust.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Cindy B.

Sun Jan 16 21:07:23 2011

Because my "free" shipping is actually added-in to the selling cost of the item, I'll increase the price of my items.

Someone once wrote on this blog that it was illegal to include shipping costs in the price of the item and then call it "free shipping".

But then there was some question on whether or not this was true. WAS THAT EVER RESOLVED?

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: pete

Sun Jan 16 22:34:02 2011

In the UK this is classed as misleading the consumer under trading standards law, just like the low cost airlines that say fares are $1 ++++++ = $200

You are not giving free postage if it is in fact razing the purchase price & eBay are putting sellers into a very gray area of law with their free postage push

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: pete

Sun Jan 16 22:38:44 2011

Sorry meant to add the term many sellers should in fact use and eBay SHOULD differentiate the difference is postage INCLUDED or FREE post a very big legal difference

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

This user has validated their user name. by: Ming the Merciless

Mon Jan 17 00:20:43 2011

Advantages long enjoyed by ebay sellers over b&m businesses are evaporating with each shipping fee increase and the the threat of sales tax collection looming.

For many, the ever decreasing margins will cease to be worth it.

And, just in case anyone wondered, it was the recent former President Bush who signed the law compelling USPS to raise their Priority Mail rates each January which means the other services will raise them as well necessary or not because they have an excuse.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Alexx

Mon Jan 17 00:28:06 2011

I agree with Harriet; people eventually has to accept that rise by "common sense" obviously its going to be quite harder to small resellers, however, in times of crisis (always?), imagination is more important than intellect :)

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Rich

Mon Jan 17 00:57:02 2011

For media ebay already has max shipping and did not raise max with the last USPS increase.  I lose 20 cents on every order and that's without delivery confirmation; with DC I lose closer to $1 per order.  If Ebay does not raise the max shipping; then I'll do less and less Ebay as has been the 3 year trend for me.  The only other solution is not to use extra cardboard on inside of package--this saves money by lowering the wieght of package and the cost of the shipping materials,  but it means a chance of occasional damage.  It's best to pack securely but pointless to sell on Ebay if there is no profit to be made  

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Rick1313

Mon Jan 17 01:51:15 2011

To Pete's first post...

For Americans (and I imagine for many more countries) it is illegal to use the word ''Free'' in advertising an item for the sake of making a sale, and the ''free'' part is hidden elsewhere in the invoice total.

Says it right there on the FTC website.

I have been a broken record on AB's site in stating this fraudulent business practice.

The last time an AB thread went up and talked about ''free'' shipping, there were posters who talked about adding the shipping cost to the price of the item and using ''free'' to help sell their items.

When I posted how they were violating FTC regulations, one poster questioned my post and then the thread went dead.

For some reasons, no one else wanted to state that they were using the fraudulent ''free'' shipping or that the FTC site did not say what I said it was saying.

Wonder why?

With the push to ''free shipping'', especially by third parties like eBay,inc. who DO NOT actually do any shipping, they are setting the sellers up when regulatory bodies start looking into this fraudulent business practice. And it will come in time if enough consumers (buyers and sellers) complain.

If one will look on eBay's sight literature, one will notice that nowhere does eBay,inc. tell sellers they should include the shipping price in the price of the item and then use ''free shipping''.

They do say it for insurance, but not for ''free shipping''.

Matter of fact, for those of you who have doubts, why not call or email eBay and ask them if it is allowed to hide the shipping cost in an invoice line item and then use their promotional ''free shipping'' program.

Say you want the response in an email.

See what answer (most likely none will come) they will supply.

I should add that this applies to all venues that promote ''free shipping'' as a seller listing incentive.

It is a simple yes or no question.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

This user has validated their user name. by: Stockmiser

Mon Jan 17 08:29:14 2011

There are no FTC regulations against free shipping - in fact, there are no FTC regulations against the use of the word "free". Period.

The FTC enforces laws against "deceptive advertising" for purposes of consumer protection. Most of the time, it's not a black and white, yes or no, legal area. So they issue "guidelines". There are guidelines concerning the use of the word "free". But the only question that is relevant - legally - is whether or not the use of the term is deceptive and harmful to consumers.

The guidelines themselves are full of examples - and "free shipping", though far more prevalent than any of the examples given, is NOT mentioned at all. If the FTC believed that "free shipping" was deceptive, and given that 80% of online retailers offer some form of free shipping, don't you think the FTC would at least mention it? In fact, I would think they would have an entire guideline written up just for it.

But what do the guidelines say?

All of the examples mention free products or services offered directly by the seller. Unless you are hand delivering your items, these are all third party services. It's funny that you should mention insurance - because it's exactly the same thing - a third party service. So the guidelines might not apply at all.

The only time I can see this guideline applied for free shipping is if you had - on the same site - the exact same item listed with free and charged shipping, and you were clearly embedding the shipping charge in the free shipping offer.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Rick1313

Mon Jan 17 12:30:17 2011

To Stockmiser's post...

Okay lets take your post by the order in which you presented it.

1. You state, ''In fact, there are no FTC regulations against the use of the word ''free''. Period.''

Reply: Then what do you call section 251.1 (from 1971, quite old but the general gist of it stills stands) on the FTC site, ''FTC Guide Concerning Use Of The Word ''Free'' And Similar Representation''? A figment of my (or my pc's) imagination.

2. ''The FTC enforces laws against ''deceptive advertising'' for purposes of consumer protection.''

Reply: Yes. As a matter of fact, if one goes to the section titled, ''Advertising And Marketing On The Internet: Rules Of The Road'' (from 2000), one can see this right near the top (high caps mine)...

''The FTC Act prohibits UNFAIR or DECEPTIVE advertising in ANY MEDIUM. That is, advertising MUST TELL THE TRUTH and not MISLEAD consumers. A claim can BE MISLEADING if RELEVANT INFORMATION IS LEFT OUT or the claim IMPLIES SOMETHING THAT IS NOT TRUE.''

Matter of fact, it then goes on to say how third parties services are responsible to make sure that the claims are valid. If not, then the third party (a company like eBay,inc.) can also be held responsible for misleading the consumer.

3. You third paragraph goes on about how the FTC site makes no exact example of the use of the term ''free shipping''.

Reply: The FTC cannot give every single possible combination that exists that may lead to a claim being labeled as deceptive to consumers. A guideline is exactly that, a guideline that covers in generalities and at times may be updated to reflect general tendencies.

''Free shipping'' is pretty much a recent ''phenomena''. FTC may eventually make a change and handle this issue specifically, but they need not to as it is covered in the generalities of the Act.

And what is your source for the 80% figure? Is this strictly for sellers using a third party service or does it include website's of private enterprises.

4. You next talk about third party services.

Reply: Again, section 251.1 talks about products and SERVICES and, as the consumer is paying for it, still comes under the general umbrella of acting in good faith with your potential buyer/consumer.

5. Finally, you are entitled to interpret the guideline as you like (I am doing the same). However...

Reply: Even without any regulatory bodies guidelines, how can anyone truly say they are not deceiving/misleading their consumer by saying ''free shipping'' when they hide the cost in price of the item.

We all talk about (and it is mostly about eBay,inc.) deceptive and manipulative business practices by third party services, yet turn a blind eye when we do it ourselves and try to vaguely explain it away (just like how corporations work).

I dare any seller who uses ''free shipping'' and hides the cost in the price of the item, to state so in their listings. Tell your buyer that while you advertising free shipping, the actual shipping cost is in the price of the item.

The correct terminology is shipping (and handling if applicable) is included in price of item and seller would not click on the ''free shipping'' option that selling venues provide. Just list your item and send your invoice with $0.00 in the S&H field or, (and state in your listing) what the handling charge will be.

It would be the honest (and legal) thing to do for your consumer base.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: RicRoe

Mon Jan 17 15:32:19 2011

We will employ a couple different strategies.

Most of our listings have calculated shipping so the increase will simply be passed along with little effort on our part. We will however cut back on some listings for a few weeks until buyers adjust to the new higher shipping cost.

Some items where we face competition with sellers using the ''free'' listing strategy will be treated differently. We will delist those items just before the increase hits.

Those sellers offering ''free'' shipping will find margins squeezed if they do not make price adjustments, so they will make a move and might even increase prices even more because they will blame the higher prices on the new shipping costs.

A couple of weeks after the increase, we will relist those items at retail plus calculated shipping. Our prices should come in under the ''free'' shipping sellers items and leave ours positioned at a better price point.



Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

This user has validated their user name. by: Tula

Mon Jan 17 17:17:12 2011

I usually offer free shipping on my lightweight items. In my humble opinion, the term "free shipping" has come to be defined as having no separate shipping charge in addition to the stated price of the item. Whether that's the official or legal definition is up for debate. I haven't seen explicitly spelled out anywhere, so I'm going to interpret it the same way as the likes of Amazon and other big retailers.

In my business, I decide what kind of profit margin I want. If I decide to offer free shipping, then I may increase my item prices in order to maintain that profit margin. Common sense should tell anyone that a company must be making enough profit on an item to pay for the "free shipping" being offered. Unless a company is offering something as a loss-leader, then one can assume the shipping cost is coming out of the profit margin, whatever that may be, since companies are under no obligation to reveal their item costs.

I don't see that offering free shipping is deceptive to anyone but the truly ignorant or those morons who expect that companies should give products away at or below cost. I think most people know that companies are in business to make money and that free shipping isn't truly free. I don't see it as being in any way illegal. If it were, I doubt so many online retailers would be employing this strategy.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: visa DeCline

Mon Jan 17 18:50:30 2011

I usually factor my shipping costs every other year to factor in rises in postage so I really only have to do it once every couple of years.

It's just a part of doing business. We just need to deal with it.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

This user has validated their user name. by: elpereles
Web Site

Tue Jan 18 00:15:37 2011

The problem with postal fees increase is when you sell in different Alternatives sites that don't have a global edit tool to make the changes.

For eBay is easy because offline I can update any number in the eBay Turbo Lister. I already updated all the items with the January 2011 fees.

For eCrater, they added a Global Edit Online Tool that works, but you don't see it in the instant. It takes several minutes even hours to make the changes. Sometimes very difficult to review a lot of items.

For Blujay is a problem. I believe I still have some items not updated since 2008. In these days I will try to edit or remove some of them.

For Bonz and Atomic is Global Tool that works fine in the instant.

For Wensy is manual update. As far I know.

For the free sites I will update after April.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Rick1313

Tue Jan 18 00:58:24 2011

To Tula's post...

I see you believe in the doctrine, ''the ends justify the means''.

You give your spin on what ''free shipping'' means nowadays as that is what you want to believe in, in justifying why you are are deceptively misleading your buyers.

To say that others are getting away with it justifies you getting away with it proves the point I have been saying.

Regulators will have to eventually come in and clean up this new ''industry standard''.

Also, since you mention Amazon and big retailers, can you provide some exact samples of where these retailers say in their site literature that ''free shipping'' means that the ''free'' part is hidden in cost or any other part of the invoice.

Awaiting your reply with the info to back up your point.

Increased Shipping Costs Are Coming - How Will You Adjust?   Increased Shipping Costs Are Coming - How Will You Adjust?

by: Rick1313

Tue Jan 18 01:13:30 2011

As to (finally) address the opening topic.

I adjust the S&H charge as it needs be adjusted.

On eBay.com, the eBay site I sell from, the only problem is with stating S&H for USA destinations with larger packages, as their bad faith policy says that a S&H charge must be stated, even if you do not know what the S&H cost will be until you know the exact location.

I have to post the maximum it may cost if an order comes from, say, Alaska or Hawaii.

But that's another whole can of worms that I will not get into on this thread (unless prodded).

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