Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Thu Jan 14 2016 12:03:50

Low Margin Sellers: Every Ounce Counts

By: Ina Steiner

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Wednesday's Newsflash article "Postage Rate Hike to Hit Penny Book Sellers on Amazon" touched on the impact of new postage rates coming this Sunday particularly on penny-book sellers. We mentioned a media seller who said the USPS rate hike for First Class Package Service (FCPS) would hurt his sales of CDs and DVDs. His items have an average of 4 ounces and he sells them for a penny on Amazon, making money on the shipping.

The current cost to send a 4-ounce package via FCPS is $2.13; on Sunday, that will rise to $2.60.

Gordon Glazer of Shipware reached out and pointed out that not all booksellers would see a rise in postage. For example, a 12-ounce book he recently ordered for a penny on Amazon would only cost the seller a penny more to ship via First Class Package Service once the new rates take effect.

The percentage change for FCPS for all weights (Commercial Base pricing) highlights why online sellers need to familiarize themselves with the changes and why weight matters.

Rates for items with a weight of between 1 - 3 ounces are going up 27%.
4 ounce: 22%
5 ounce: 17%
6 ounce: 11%
7 ounce: 3%
8 ounce: a decrease of 4% - 11 cents cheaper
9 ounce: 14%
10 ounce: 9%
11 ounce: 5%
12 ounce: 0% (1 penny more)

And because the USPS is extending First Class beyond 13 ounces, sellers who ship items weighing between 13 - 15.999 ounces will see a decrease of between 10 - 12%, according to Glazer.

Stamps.com shows a nice clean chart on this blog post - it doesn't spell out the percentage change, but you can see the difference in pricing between current rates and the rates as of January 17th (it's the 6th chart down).
 
Sellers who list items with the same weight can easily assess the impact of new shipping rates on their margins, but it's more difficult for sellers with items of varying weight. Some sellers may have to organize their low-margin media listings by weight and make price adjustments accordingly.

An eBay seller commenting on the article on the AuctionBytes Facebook page said most of the ephemera items he sells weigh 3 ounces, and he expects the postage rate hike to hurt his business in a big way - raising prices results in lost sales, he said.

Making sure you get Commercial Base pricing (by using an online postage provider - with USPS Click N Ship now excluded) and cutting the weight and cost of packaging are some ideas for coping with low-margin media in weights where costs are going up.

On a recent book purchase, I received a 5 x 7 3/4 inch paperback (3/4 of an inch thick) in a very interesting type of envelope: an A194 kraft cardboard envelope from LilPackaging.com - you can read about its envelopes in this blog post on its website. It's a UK company and I don't know how the cost compares to other solutions - but the book had no packaging inside whatsoever and arrived in perfect shape. The easy-to-open, easy-to-recycle envelope left a good impression on me as a buyer. 

With every ounce making a difference, packaging and shipping envelopes/boxes sellers use to send their orders matters. And the USPS rates affect more than FCPS - the chart on this page shows that Priority Mail Commercial Base pricing is going up by an average of 9.4%, while Commercial Plus rates are going up by an average of 13.3% for Priority Mail. Parcel Select - Lightweight is going up by an average of 23.5%. And some international rates are impacted too.

Have you found ways to save money on packaging supplies to help your margin, or found ways to cut the weight of your packages to reduce postage?

We've run numerous stories about the January 17th USPS rate changes - our hope is that there are not a lot of shocked people next week when they go to print postage shipping labels and find their shipping costs have changed dramatically.




Comments (49) | Leave Comment | Permalink

Readers Comments

Perminate Link for Low Margin Sellers: Every Ounce Counts   Low Margin Sellers: Every Ounce Counts

by: mcposty This user has validated their user name.

Thu Jan 14 12:15:05 2016

Wonder how much china rates go up...oh yeah probably zero

Sickening

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by: sasikat9 This user has validated their user name.

Thu Jan 14 12:29:56 2016

Hey people someone has to pay the post office to support the chinese epackets and the special deal for Amazon... You didn't think Obama had a hand out for them did ya.

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This user has validated their user name. by: iheartjacksparrow

Thu Jan 14 12:30:40 2016

I really like the fact that they are extending the weight of a First Class Package to 16 ounces. I have numerous items that weigh 14 or 15 ounces and are beyond the current weight limits so I have to bump them up to a Priority Mail Flat Rate Envelope. I also like that ounces one to eight are the same price so there's less calculations to do.

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by: epuise This user has validated their user name.

Fri Jan 15 00:29:59 2016

How about a note to BUYERS that POSTAGE increases on the FREE TO BUYER shipping that sellers pay for ?

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This user has validated their user name. by: Bill

Fri Jan 15 01:04:02 2016

I can not find on line what they new pricing is going to be. The USPS notice 123.pdf has not been updated yet to show the new prices and I can not find the new pricing agreement on the web site.
I saw the blog by stamps.com but I need to know what the International rates will be.
Any help?

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by: tb This user has validated their user name.

Fri Jan 15 01:44:17 2016

Never really understood the penny sellers. Buyer pays $4.00 (.01 + 3.99), Amazon takes probably 15% or 60 cents, shipping was $2.13, you have packaging and time and you're lucky to make a dollar! I would look for a different line of work. Just saying.  

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by: tb This user has validated their user name.

Fri Jan 15 01:44:17 2016

Never really understood the penny sellers. Buyer pays $4.00 (.01 + 3.99), Amazon takes probably 15% or 60 cents, shipping was $2.13, you have packaging and time and you're lucky to make a dollar! I would look for a different line of work. Just saying.  

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by: bb6 This user has validated their user name.

Fri Jan 15 02:54:20 2016

The post office looks like ebay here throwing a one size fits all blanket over anything under 1lb. I have several businesses set up and sell on multiple platforms. One of my businesses sells low priced collectibles on ebay. When selling low priced you need to rely on volume. I have no problem producing volume for those items in that market. The issue is that 1-3 oz are jumping $.56, but with ebay taking 9% and paypal taking 3% of that shipping, the sellers are taking a $.63 hit. So for example if you sold 50,000 items in 2015 and made $1 each profit, then you made $50k. If they take $.63 of that $1 you are now down to $.37 profit so from $50K a yr to $37k a yr. They have killed the low price collectibles market overnight. Basically anything sold in USA that is light weight and cost a few bucks. Opens the door for China sellers who pay $.15 to ship lightweight epackets.

On the flip side if you sell things that weigh 14-16oz you are jumping for joy because a package that you shipped in 2015 for a little over $5.30 for priority in 2016 will cost you around $3.60 first class.

Sidenote: Why the hell are the prices so hush hush before Sunday for the Post office and Ebay? Who's running these companies? Do they not realize thousands and thousands of companies all across the USA need these numbers so they don't take hits on postage? I changed my shipping prices on all platforms on Wednesday so that come late Friday/Saturday I don't get slammed with orders and have to ship out on Monday with higher shipping prices. Stamps and Endicia have both posted their prices. This just cements the idea of why you don't rely on ebay for your shipping needs. They don't have a clue what they are doing and are always 3 steps behind the rest of the world. Anyone willing to bet Ebays shipping doesn't crash Monday morning when they finally decide to update their prices and everyone is printing labels?

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by: Paul W This user has validated their user name.

Fri Jan 15 03:07:30 2016

Those of us who use stamps on our 1st class packages are very happy with the new rates.  Everything over 3 ounces will cost less to mail.  I use stamps because I can buy postage at bigger discounts than eBay labels provide.

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This user has validated their user name. by: Marie

Fri Jan 15 03:22:57 2016

@paul W

You may want to look at those rates again.  You are misinformed.  There are only two weights that have no increase on them and that is 8 oz and 12 oz FCP.  So just about everything OVER 2 oz is an increase and some are pretty big.  The percentages are given in the above article.

I don't know where you are getting stamps for a cheaper price than you can do an electronic label, but you then would have to pay for tracking separately and to do that you have to go to the post office.  So I don't imagine you are saving as much as you might think you are.

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by: Tiffee Jasso This user has validated their user name.

Fri Jan 15 05:23:49 2016

It has always been my experience that when a government agency hides facts it is because they are doing something unethical, and possibly even illegal. In this case it is my opinion that the USPS
1. Does not want Americans complaining to Legislators that they are once again having to foot the postage bill for Chinese sellers and American special interest customers. Deals made in absolute secrecy and stated to be Classified.
2. Is deliberately keeping everyone in doubt and anxiety because by the time sellers find out the actual costs, they will be implemented and it will be too late for Congress to step in and stir the pot so-to-speak.

My answer is Elections are coming up November 2016. If sellers do not make the secret deals made by USPS an issue with those seeking election, then sellers obviously should not complain next year when they pay another 20% or more in postage hikes. And see their business decrease by the same amount as folks buy locally because it is cheaper or more Asian goods because there are no postage costs.  

One other suggestion I will make is we sellers control a great deal of the buyers. Start educating you friends and family where to buy and who to buy from. Tell them to go to the dollar or import stores for cheap Asian goods, and to watch sales at their local department stores to save money. When the big venues see a whopping loss in orders, they will put pressure on Congress to lower postage rates.

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by: davealex This user has validated their user name.

Fri Jan 15 08:46:23 2016

All my shipping is free for buyers (Amazon, Ebay, Bonanza, Etsy) First Class Package (fixed weights - 5 oz for one item, 9 oz for two items). My costs will go up maybe an average of 25 cents per shipment. My retail price was $24.95 and always on sale for $18.95. So what did I do? I raised my retail to $26.95 and the sale price from $18.95 to $19.95 per item across all sites. Sales have gone UP, not down, and I will actually make more. And the dollar amount listed as their ''sale'' discount is more, as is the percentage. Psychologically, people look at both ''$18.95 with Free Shipping'' and ''$19.95 with Free Shipping'' as --- twenty bucks. ''Look, it's twenty bucks. You want it or not?''

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

Fri Jan 15 09:12:29 2016

Don't forget that there is no mail on Monday so all orders coming in this weekend after you have mailed out any order on Saturday, will all go out at the new rate which means prices have to change TODAY for most of us.

I don't do the 'free' shipping nonsense since it is never free for anyone. The buyer is essentially paying for it. I prefer to charge it separately so when someone asks why so much I can blame the PO and send them to the PO website to see for themselves. This latest rate increase especially for international FCM packages will probably kill off the rest of my international business. In the last 4 years from right before the first huge rate increase to now, my sales have plummeted to 1/6 of what they were before. However if they are willing to pay, I'm willing to ship so I will keep that part of my business open. I'm always amazed at those that won't sale to international locations because of the expense as if it is coming out of their own pocket. If an international buyer want something bad enough, they will pay. I would rather get the 1/6 that no sales at all.

I too do not understand how the penny sellers can make money on those penny listings. $1 or less is a lot of work for not much in return.

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This user has validated their user name. by: Ric

Fri Jan 15 09:35:27 2016

The reality is that eBay has zero motivation to negotiate better rates for sellers.

Regardless of whether sellers charge for shipping or list their items with shipping included, the Postal Service rate increase amounts to higher profits for eBay in the form of Final Value Fees.

eBay simply went through the motions to negotiate discounts knowing full well that significant discounts would reduce their take rate on transactions.

eBay loves Postage rate increases as they effectively realize an increase in their take rate while being able to blame a third party for the higher fees they will collect.

If, in reality, eBay was unable to negotiate better discounts, they still have the ability to mitigate the impact the new rates would have on sellers.  

eBay could choose to reduce their Final Value fees to compensate sellers for the discount they were unable to obtain through negotiation.

I laugh as I write this because I know eBay is only pretending they are concerned for their sellers and that their only concern is the higher profits.

Bottom line, this rate increase is a big win for eBay, and the company is not about to take any actions that would reduce the windfall they will receive as a result of higher postage rates.

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This user has validated their user name. by: toolguy

Fri Jan 15 09:42:59 2016

How much does it cost to send an 12 oz. e-Packet from Beijing to Los Angeles?

I'll bet it cost less then the same package going across the street to my neighbor.

THIS IS WHERE I HAVE A PROBLEM!

I'm going to look into Fedex & UPS shipping options ~ BOYCOTT THE USPS!

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by: Linda This user has validated their user name.

Fri Jan 15 10:12:20 2016

One Question Only: Is eBay going to continue to collect fees on shipping labels???

IS EBAY GOING TO CONTINUE TO COLLECT FEES ON SHIPPING???

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

Fri Jan 15 10:13:29 2016

Time to quit buying labels through ebay.  I will get them through Pay Pal now as there is no incentive to do otherwise and I will save the ebay fee on them.  When ebay first starting "taking" part of the shipping their reasoning was they deserved it as they got us a discount from the USPS.  Now that they do not will they stop taking their unearned part?  I doubt it.  

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This user has validated their user name. by: toolguy

Fri Jan 15 10:27:42 2016

" I will get them through Pay Pal now as there is no incentive to do otherwise and I will save the ebay fee on them."

This will NOT stop eBay from charging you a fvf on shipping.

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This user has validated their user name. by: iheartjacksparrow

Fri Jan 15 11:34:53 2016

@Bill - There are some really good charts here:

http://www.fp-usa.com/ratechange/january-17-2016-rate-inc
rease/

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This user has validated their user name. by: Ric

Fri Jan 15 11:52:07 2016

One more thing.....

"eBay advocate Jim Griffith replied, "I know the people on the shipping team. I also know that they were involved in a three day, closed door negotiations meeting with USPS. And eBay doesn't keep a part of the negotiated shipping rates for themselves."

Uncle Grief's statement may be factually correct, however, the reality is that while eBay may not keep any part of the negotiated shipping rates, eBay likely receives a commission for shipping labels sold.

Given that eBay allegedly spent 3 days negotiating with USPS, I would bet that the majority of that time was spent negotiating how much that commission paid to eBay would increase, and the time spent negotiating lower rates for sellers was infinitesimal in comparison.  

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