Shipping Costs and Your Bottom Line

As a small business owner, hard-won experience has taught me that when sending out multiple packages to fulfill auction and e-commerce orders, the cost of shipping plays a crucial role in calculating profits.

This is not a shocking discovery, perhaps, but it's one that has motivated me to examine in detail the various available shipping options for domestic delivery. I've used a 2 lb. package as my example, bound from New York ZIP code 10019 to Los Angeles ZIP code 90071 and sent it via FedEx, UPS, DHL and the U.S. Postal Service.

Two pounds, by the way, is an optimum shipping weight. Anything greater and transportation costs mount quickly. Your business may not lend itself to small, light packages, but for any online seller just starting out, my suggestion is that product size and weight be seriously considered.

The United States Post Office

If convenience is your choice than the first option for shipping is the best, at least for a 2 lb. package. I'm an enthusiast of this absolutely reliable government operation. It's pretty much the easiest and the cheapest way to go. Also, in some instances the fastest.

It's also discovered the Internet. Click-N-Ship, USPS' online shipping software, is free and offers discounted shipping rates. You can also print your own postage online using endicia.com (the link will lead you to a 60 day free trial) and they have a variety of services.

Yes, it's the same U.S. Postal Service that shreds letters, but for whatever reason, its treatment of packages in many instances is swift and sturdy: through sleet and rain—O.K., water sprinklers anyway—they get them where they're going. Here are the main attractions:

Priority Mail: Priority Mail is still the most common form of shipping for person-to-person online auctions. The Postal Service promises delivery in two to three days. You can ship small packages reasonably, and best of all, they will send—that's right, deliver to your door—pre-addressed return labels, boxes, tubes and envelopes. Your 2 lb. package will cost $8.25 to deliver, plus an additional 65 cents for Delivery Confirmation. But if you print your shipping labels online, Delivery Confirmation is free and shipping is discounted to $7.96.

Keep in mind that a Delivery Confirmation number will only let you know if the package has arrived—there is no in-transit tracking of these packages by the Post office. So it's up to you—if you're insuring the package, you might pass on Delivery Confirmation. By the way, you can drop your Priority Mail packages with delivery confirmations directly into a mailbox, or give them to your mailman.

“The best strategy is simply to plan in advance, and wherever possible, offer items that don't run up your shipping tab”

Priority Mail Flat Rate is another common alternative, but unless your 2-lb. parcel can be crammed into a 12.5-inch x 9.5-inch envelope, this won't be among the cheaper modes of shipping. If you're lucky enough to meet this criteria, shipping will cost $4.80, or $4.75 with Delivery Confirmation when you print your labels online. Select the 11-inch x 8.5-inch x 5.5-inch "shirt box" or the 11-7/8-inch x 3-3/8-inch x 13-5/8-inch flat box and the flat rate will be $9.80, or $9.30 online. There's also a 12-inch x 12-inch x 5.5-inch flat rate box that ships for $12.95, or $12.50 online.

Incidentally, flat rate shipping is available for packages weighing up to 70 lbs.

Book Rate: In the past, I have taken some hits about not extolling the virtues of Special Standard Mail, neé the Book Rate. If you sell books, films, printed music, sound recordings, scripts, printed materials or software, you may qualify to mail under this reduced rate. A 2 lb. package with insurance would be $4.63: $2.58 for postage and $2.05 for the $100 insurance—if you want a delivery confirmation, the charge is 75¢. (Delivery confirmation for Special Standard Mail and Parcel Post are charged at a higher rate than for Priority Mail).

Parcel Post: Speaking of Parcel Post, the rate for sending our 2 lb. package Parcel Post would be $6.67, not including insurance. You can see the benefit of using Special Standard Mail—but the downside of these services is that your package may take eight days or more to arrive.

UPS

United Parcel Service's UPS familiar brown trucks pick up on a regular basis and rarely lose packages en route

UPS is reliable, but unless you ship hundreds of pounds a day and get a price break—or ship to a commercial address—the company's shipping rates aren't very competitive. For a 2 lb. package to arrive within two days, you have to ship it via UPS Second Day Air. UPS charges $30.40 for this service. The carrier's Three Day Select service will get it there in—how did you guess?—3 days for $23.81. If you prefer to ship via UPS Ground, it's only $11.55, but it will take four working days for your package to be delivered, not including weekends. If you send the package to a commercial address, you can knock a couple of dollars off these prices.

In the plus column, if you open an account (which will cost you nothing), UPS will provide shipping supplies free of charge. UPS also provides tracking for all packages—another plus—and all packages are insured up to $100 without an extra charge.

FedEx

FedEx now has a residential-only ground service designed to meet the needs of online sellers whose business is based mainly on home deliveries. The service, FedEx Home Delivery is backed by a money-back guarantee and offers online tracking. The company also insures each package up to a declared value of $100 with no additional charge. As with UPS, you need a FedEx account to get free shipping supplies.

The delivery time, like UPS Ground, is based on distance. A 2 lb. package from New York to L.A. will take four business days. The cost: $8.60—if you drop off the package at a self-service station. Take it to a FedEx-staffed location or an authorized drop-off site, and the price goes up to $10.14. It's not as cheap as Priority Mail or Parcel Post, but you have the FedEx guarantee. And if you use the ShipRush for eBay service to process shipments, you can save up to 20 percent on delivery fees.

If you live close to a FedEx pickup station or a FedExKinkos location, you might want to consider getting a FedEx account.

“Priority Mail is still the most common form of shipping for person-to-person online auctions”

DHL

Of the major parcel carriers, DHL is probably the most price-competitive with the U.S. Postal Service—if you can get DHL service in your area. But with DHL shipping counters now available at many OfficeMax and Walgreens stores, it's getting easier to ship through DHL.

To send that 2-lb. package using DHL Ground service will cost $4.27, but will take up to 6 days for delivery. Upgrade to 2nd Day service, and the cost goes up to $9.70.

If you're keeping score, there are no outright winners here, but no terribly clunky losers either. The best strategy is simply to plan in advance, and wherever possible, offer items that don't run up your shipping tab. When there are few options, get quotes from the various shippers, and let your customers know when they can expect delivery.