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Thu Nov 24 2011 10:14:59

How Will Online Sellers Cope with Increased Costs of Shipping?

By: Ina Steiner

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Shipping costs go up each January at FedEx and UPS, and in 2 months, USPS will also be raising rates - Priority Mail rates are increasing an average of over 3%, effective January 22.

Meanwhile, retailers have trained consumers to expect free shipping. How are online sellers coping?

- Don't offer free shipping;

- Offer free shipping and eat the cost (make less profit);

- Offer free shipping and increase the price of your products;

- Make free shipping conditional (the most obvious being to make shipping free only after the customer spends a certain amount).

Marketplace sellers have their own special set of challenges - eBay is strong-arming sellers into offering free, fast shipping in order to get exposure in search and receive fee discounts during the holidays. And Amazon only gives sellers a portion of the shipping fees that buyers pay Amazon.

Wednesday's Newsflash article reviews the USPS changes most likely to affect small online sellers. In it, we mention a new Regional Rate box from USPS - a reader wrote in, "I have never looked into Regional box mail. Sounds like a pain." This article from February reviews USPS Regional Rate boxes, worth reviewing to see if you can save money.

I'll also be interviewing some shipping vendors to see what advice they have for merchants. If you have questions, please let me know and I'll try to get them answered.




Comments (17) | Permalink

Readers Comments

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

This user has validated their user name. by: Anonymous Annie

Thu Nov 24 13:07:34 2011

I'm fortunate in that my typical customer is smart enough to understand that ''free shipping'' isn't really free, and that merchants consider the cost of shipping (along with other expenses) when determining how items should be priced... and how much profit is needed.

My web site calculates ACTUAL SHIPPING COSTS based on the size and weight of the item/s... and that's ALL the customer pays.

One $25 item ships for $4.75 flat rate. TWO $25 items will fit in the same box together and will ship for the same $4.75.

Compared with ''free'' shipping that would make it necessary to ADD the cost of shipping to the item... making it $29.57. If the customer buys just one item (with ''free'' shipping) the cost is the same.

But if the customer buy TWO items with ''free'' shipping, they have paid for shipping TWICE. --- Sure, that's more profit for me, but smart customers realize it's not the BEST deal, and they'll move on to sites that offer better deals.

So... in response to Ina's query... I plan on doing nothing other than updating the shipping cost tables in my shopping cart software. (Perhaps I'll also add a little graphic on the checkout page that explains, and expresses regret, that our carrier has increased shipping costs.)

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: massachusetts howler

Thu Nov 24 14:08:38 2011

Well, especially with that other post that says we will get auto 5-stars on s/h on ''MOST'' transactions- TYPICAL JD SPIN -
We will now NEVER OFFER ''FREE'' SHIPPING and WE WILL RAISE OUR S/H rates to compensate.
EVERYBODY- STOP FREE SHIPPING if you are now offering it- it does not even give you a REAL ''boost'' so what's the benefit JD?- 5 stars ''MOST'' OF THE TIME??
We TRUST ABSOLUTELY NOTHING Ebay tells us and we haven't for 3 years. We see the GAME EVERYTIME FROM JD SO WE JUST IGNORE ALL ANNOUNCEMENTS and SERVE our buyers.
Nice job jd.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Et tu, Brute!

Thu Nov 24 15:43:35 2011

Research time and time again shows that buyers go for the ''free shipping'' over discounts that will reduce an item's price below what the ''free shipping'' would have been.  I wonder if that has to do with not having to bother with doing the arithmetic in their heads over a fast rounded additon for the items only.  And most multiple purchases DON'T actually ship for the same price as one original.

I plan to try the ''free shipping'' across the board at my place on Black Friday thru Cyber Monday.

Business has been briskly growing this November.  I have good expectations for this upcoming weekend.

Time will tell.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Patricia This user has validated their user name.

Thu Nov 24 16:53:36 2011

I'm such a small seller it doesn't matter much to me.  If people want my goods they'll pay the shipping whether I include it in the price or not.  However, the USPS is in grave trouble - trouble brought to them by congress and if they don't get it straightened out and soon they are destined to become another "privatized" company and then we'll really see hikes in postage!!!  People need to get aware of the USPS's plight and complain LOUDLY!

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

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

Thu Nov 24 17:18:48 2011

PAtricia is correct.

Eliminating another union and privatizing the postal service and making it another greedy, for profit corporation has been neo cons objective for years.

Call your congressperson and tell them to fix the pension overfunding requirement and vote no on HB2309.

USPS rates mitigate what FedX and UPS can charge. Let USPS become privatized and we'll soon be paying twice as much as we are now.

If corporations can force high shipping rates thorugh destroying USPS and government succeeds in imposing universal online sales taxes, then online sellers will be at an enormous disadvantage compared to b&n stores.

Think a few moves down the road.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: anyone out there

Thu Nov 24 18:39:11 2011

With increase shipping costs comes increased FVF's..

5% raise across the boards should cover it. If people don't want to pay that then they can go somewhere else. Doesn't matter much to us as we WILL NOT SELL AT A LOSS.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

This user has validated their user name. by: Ed Gadfly
Web Site

Thu Nov 24 18:45:02 2011

Has anyone noticed how many more mail thefts and misdirected mail now days?

Everything on eBay with FREE SHIPPING is priced so high it's not worth buying.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Rich

Sat Nov 26 10:31:09 2011

I sell in a category where Ebay has maximum shipping limits and they've had this max shipping for about 4 years now.  They've never raised the max shipping so each postal increase means I make less and less.  I've tried raising prices but there's so much competition that raising prices leads to less sales.  So my store of 5,000 from 3 years ago is down to 500 as I ended 90% of my listings over the years. How do I cope? I make less and less on ebay each year and do more of my regular job.  And of course I buy less and less on ebay since my Paypal account doesn't have much left due to less sales, higher fees and losses on shipping

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: NotHimAgain

Sat Nov 26 13:10:48 2011

Just to clear up the third option as listed by ECB.

To shift a cost (in this instance S&H) into the price of the item and then promote/advertise that said cost as being ''Free'' is breaking consumer protection laws.

There will be those who will argue that the consumer knows that ''free shipping'' is not free shipping but a hidden cost in price of the product. They do so to justify their illegal activity (like the guy who argues with an officer that he was doing 70 mph in a 50 mph zone because other drivers were doing the same and he was just going with the flow, so he should not get a speeding ticket)

In this case, ''S&H included'' would be the correct verbiage to use in promoting/advertising your wares.

The second and fourth options are correct ways to make use of the term. ''Free shipping (and handling)''.

Rick

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: pennyrub This user has validated their user name.

Mon Nov 28 02:11:11 2011

The dumb thing is if Ebay is trying to compete with all the other business's offering free shipping...these other business's only offer it for items OVER $50!!!!  There is always a MINIMUM purchase required.  Bad business to offer free shipping for a $10 item...

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

This user has validated their user name. by: Philip Cohen

Mon Nov 28 03:19:48 2011

While never forgetting “Ming’s Law”: The eBafia (and PreyPal) lies, always has, always will; always remember that when the eBafia is not practicing outright deception, they invariably demonstrate utter incompetence.

Enron / eBay / PayPal / Donahoe: Dead Men Walking.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

This user has validated their user name. by: Tula

Mon Nov 28 08:26:16 2011

I continue to offer Free Shipping and have seen corresponding increases in sales because of it. Most consumers are lazy and don't want to do math. All the studies I've seen point to the fact that customers want Free Shipping, so I give it to them. If it gets me a better deal on eBay, so much the better. It's less work for me and, yes, can result in better profits when people buy multiple items. I don't sell a lot of multiples, so it's not much of an issue for me.

I have the luxury of offering one-of-a-kind vintage items that don't have the same kind of competition as in other commodity areas. If my costs go up, so do my prices, simple as that. It's Business 101. No matter what you want to call it (hi Rick) -- and you can take it up with eBay and every other vendor out there that offers "Free Shipping" if you don't like it -- Free Shipping is what customers are demanding, so I give it to them. Simple as that.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Henry

Mon Nov 28 10:38:56 2011

As a buyer on eBay and other online sites I always compare prices on like items. I know that if I am buying multiples with shipping included that I am paying double the shipping costs.

Shipping included in price is important if that is the low price for a comparable item.

As a seller I offer shipping included when it is good for the buyer and I can still make a profit.  If it is not in the buyers best interest then it is price plus shipping.

Seems like everyone is getting worked up over a small increase by the USPS and overlooking the outrageous eBay FVF on shipping.  In the end this will drive up prices and shipping costs more than anything else.

My 2 cents...Henry

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: sparky

Mon Nov 28 12:03:02 2011

I tried an experiment on another site on which I sell.  I offered 10% discount for total orders including shipping if paid by Money Order or Check.  Only 1/15 customers used that promotion over 8 months.  I had to conclude math is the problem.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Ann

Mon Nov 28 18:36:34 2011

USPS INTERNATIONAL RATE INCREASES

Seems I'm writing about everything today but it’s no wonder the USPS is going broke, with the people running the place, who have no clue what they’re doing.  Can we all say DUMB at the same time?

I don’t know all the details yet but I’ve heard that the USPS  will be charging $40.00 flat rate on all International boxes up to 70 lbs., as of Jan. 1st, 2012.  60% of my business is international.  I sell makeup brushes and makeup,  so my items are small and orders usually weigh 5-11 lbs.  I pack carefully, to avoid going 1 ounce over the next pound, which increases the cost dramatically. My average shipping cost to the Ukraine, Russia, Canada, Australia, NZ etc. cost $45 to $80. I can’t remember the last time that any International order was less than $40, so what are these people thinking???

My customers will love the lower shipping but the USPS will go broke, even faster than they are now.
It’s much easier to ship USPS than UPS, Fed Ex etc. who have forms that take an hour to complete.

I know this is a dumb question but who asked the Postal Service to provide FREE boxes for us to use to ship??? How much do they spend on boxes?  I bet the companies who used to sell boxes are really angry that many customers, no longer need to order boxes and use only the Freebies from the Post Office.

I’d love to have one of those high paying jobs, with great benefits and a generous pension,  paid to the executives, who make the decisions that are destroying  our postal service.   Can we all say DUMB at the same time?

Of course sellers will pass on the extra shipping ,to their customers and anyone who believes they don’t, please contact me so I can sell you some land in the  Everglades.

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: There's No Free Lunch

Thu Dec 29 11:51:51 2011

The free shipping bubble will burst just like the housing and mortgage bubble burst.

There is no such thing as free shipping.  

How Will Online Sellers Cope with Increased Costs of Shipping?   How Will Online Sellers Cope with Increased Costs of Shipping?

by: Softtouch

Mon Jan 2 16:56:10 2012

My sales are a little different than Retail sellers, since the majority of my customers buy Wholesale. I've always told them,''When the USPS starts shipping Free of Charge, I will offer Free Shipping but not one day before''.

I can't believe so many buyers are dumb and really believe that anything is Free. If something is listed with Free Shipping, I don't trust the seller, because I know he/she is lying. They know they've padded the price, to cover shipping costs, so what else are they lying about?

WAKE UP PEOPLE
There is no such thing as a Free Lunch and there never will be. With Shipping Cost rising, I plan to write my customers and explain, ''We apologize but USPS is increasing their shipping rates, so we have no choice but to increase ours as well''.

JUST BE HONEST and up-front with customers and they will accept it.

TO SELLERS COUNTING STARS ON EBAY:
What will you do, when you violate one tiny rule (you didn't know existed) and find yourself suspended? What good will those Stars be then?



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