Bargain of the Century

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As small shippers, we ship most of our larger boxes (one cubic feet +) to destinations Zone 5 and above via FedEx Home Delivery. It gives good service to the continental US and includes excellent tracking and $100 in free, hassle-free insurance.

For shipments to Zone 4 or less, the “bargain of the century” is Priority Mail. Why? Because USPS dos not charge dimensional weight on these packages because they can be run on their ground network and still meet the service standards. The packages do not see the inside of a plane.

My wife is sending a vintage piano stool from Tigard, Oregon, where we live, to Oakland California – a Zone 4 shipment. The weight of the total shipment is 19 pounds. FedEx would charge $24.66 for this 28” x 18” x 18” package. USPS Priority Mail service on the same package is — $11.82. That’s right, less than 50% of FedEx. Interestingly, USPS Parcel Select on this shipment — which offers slower delivery – is $29.97. Go figure.

The same package to Southern California (Zone 5) costs $57.77 on USPS Priority Mail and $29.92 on FedEx Home Delivery. The big box is charged a dimensional weight of 47 pounds on USPS, putting the rate through the roof. [You can get about the same price using USPS Parcel Select as FedEx Home Delivery on this shipment, but the delivery will take 2-5 days longer.]

Word to the wise – for shipments to Zones 2-4, look at the options carefully. You can save your customers and yourself a lot of money and possibly upgrade service at the same time.

Note:  Prices quoted are on-line pricing using ESTY USPS system or ETSY FedEx rates.

UPS Does It As Well

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As I predicted in my last Blog, UPS today has announced they are following FedEx Ground/Home Delivery and will start charging weight based on the larger of actual or dimensional weight. According to UPS, this change will affect the cost of about 2/3 of their packages. This will substantially improve margins for both UPS and FedEx and send shippers scrambling to reduce package sizes and/or find other shipping options.

My sources inside USPS say that they have no plans to change their size and weight factors. If so, that will give shippers the opportunity to switch to Priority Mail, Standard Mail, and Parcel Select and save money. USPS will have the opportunity to pick up a lot of new business from the other carriers and improve their bottom line. Hopefully they will take advantage and improve their financial situation.

UPS and FedEx will probably exempt their larger customers for a short transition period. The hardest hit will be small shippers who could see their costs rise by 25-50%, depending on what they currently ship. The world for them will be very different.

I’m putting together the numbers for switching to USPS from UPS and FedEx in 2015. I’ll be back soon to share some opportunities.

Big Shipping (and Price) Changes Planned for 2015

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FedEx has announced that they plan to charge dimensional weights on all ground packages starting in 2015. This will be the largest single cost increase by any of the ground carriers since UPS began charging for residential service a couple decades ago. It will not affect everyone, but enormous new revenues will be generated. The questions now are whether UPS will follow suit and will the increase stick. My best guess is yes.

Readers of this Blog will remember that dimensional weight is calculated by multiplying the length, width, and height (in inches rounded up or down to the nearest inch) and dividing the total by a factor. In this case the factor is 166.

As an example, a 12” X 12” X 12” box would have a dimensional weight of 11 pounds. The calculation is 12 times 12 times 12 = 1278 cubic inches. That total divided by 166 = 10.409 and this is rounded UP to 11. In this case, the weight of the package in 2015 will be charged at the greater of the actual weight or 11 pounds.

Today, UPS and FedEx Ground/Home Delivery exempt packages under three cubic feet (5148 cubic inches) from the dimensional weight charge. A huge percentage of the boxes the two carriers transport fall into that category. Under the rules recently announced by FedEx, all packages over 166 cubic inches will be subject to the new rules. For smaller shipments 166 cubic inches and less, there will be no change. The dimensional weight is one pound, and that is also the minimum chargeable weight. Starting at 167 cubic inches, the packages will be subject to a minimum weight charge of two pounds or more, regardless of the weight.

Consider the example of the 12” X 12” X 12” box shown above. In 2015, a one cubic foot box will be billed at the greater of actual weight or 11 pounds. In 2014, a one cubic foot, five pound box would be billed at five pounds. In 2015 the same box will cost $3.42 more to ship to Zone 8, using 2014 retail pricing.

It gets worse with a three cubic foot box. Again, in 2014 the box would ship at actual weight, since it is just under the dimensional weight limit. In 2015 the same box would be the greater of actual weight or 32 pounds. A 15 pound box (actual weight) in 2015 would be charged $16.10 more to Zone 8 than in 2014 (at 2014 retail pricing). Wow.

A wild card here is USPS. Will they change their dimensional rules on Priority Mail or oversize charges on Parcel Select and Standard Parcel? If they don’t (or make minimal changes), USPS will be much more cost competitive on all packages under three cubic feet.. The extra volume might generate enough new revenue to help them break even.

Regardless, it will make more sense than ever to plan packaging to reduce box size when possible and figure out which service is best for your customers.

Stay tuned for further updates.

Modify your Shipping Prices

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With FedEx Home Delivery 2014 rates and the newly announced USPS increases, you need to seriously examine your shipping prices for your shop. In some cases, the percentage increases are enough to kill some or all of you profits on an item if you don’t adjust them properly.

Generally, FedEx Ground and UPS rates were increased by 4.5-6.5%, depending on zone and weight. One to seven pounds received the highest increases.

USPS kept the Priority Mail pricing fairly stable, generally keeping your increases under 1% for non-flat rate-packaged boxes.

The big thing to watch is the huge increases on Parcel Select for shipments. Over seven pounds, increases are double digits in all zones and gets over 50% for some zones when the weight is more than 40. The reason this happens is that large discounts for shipping labels purchased online has been all but eliminated for this service. For instance, the difference between a Standard Mail (Parcel Post) shipment paid for at the Post Office and a Parcel Select shipment paid for on line for a Zone 8, 7 pound shipment was about $2.50 with 2013 rates. With 2014 rates, it is five cents. For a 20 pound shipment, Zone 8 the discount was about $7.00 and now, again five cents. This will bite you if you don’t pay attention.

Let’s turn to international – if you are shipping items four pounds or less, the cost effective way to ship is International First Class Package. For packages five ounces to four pounds, the increase is a little over 11% – more than enough to make changes to your international pricing as well.

When setting your shipment pricing on sites like Esty, you will want to protect profit on an item so you need to set shipment pricing for a worse-case (shipped the furthest) scenario. This means pricing for a Zone 8 shipment in the US. For those who haven’t done so, you will need to review your prices for shipping, particularly for shipments over three pounds and, if applicable, for all international shipments.

I have a quick reference pricing sheet (PDF) for 2014 US Domestic shipments for Zone 8 shipments that I will send to you if you’d like one. It shows pricing for 0-25 pounds for USPS and FedEx Home Delivery discounted for Etsy shippers. Just request one at:
gtc1963-shipping@yahoo.com.

Shipping Christmas Trees

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For the second year, I will be shipping Christmas trees direct to customers.  Yes, I said Christmas trees.  They are six foot noble firs which only grow in the Pacific Northwest.  They are shipped fresh, hours after they are harvested and arrive in 1-5 days depending on where the customer lives.  They are about as fresh a tree you can get unless you cut yours yourself.

The rules of shipping outlined in previous posts still apply –

  • Protect the contents
  • Limit the size and weight of the package
  • Use the right carrier

I will be using FedEx Home Delivery to ship trees baled with twine, encased in slightly-ventilated plastic and packaged in a custom box.   It will arrive with a stand, starter light set, wreath, or other optional accessories if they are ordered by the customer.

 If you have any interest, please visit oregonfreshchristmastrees.com  and check it out.  There are informative videos on the proper care of real Christmas trees that may be helpful as well.

Merry Christmas!

A Priority Mail Savings Opportunity

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Did you know you can still use Priority Mail Package service (PM), with free boxes, free insurance up to $100, and still save money over flat rate box rates for a lot of shipments? Keep reading.

USPS offers many sizes of free boxes for PM shipments that are not “Flat Rate” boxes.

The most popular size of a PM flat rate box is the “medium” which comes in two sizes: 11”x8.5”x5.5” and 11 7/8” x 13 5/8” x 3 3/8”. If you buy the label and postage on line the cost for shipping is $11.30. It allows you to ship anything that fits in either box anywhere in the US for that cost. A free box with a decent shipping cost. Not a bad deal.

What is not commonly known is that the USPS offers free PM boxes in addition to flat rate boxes. These are for general PM usage and are subject to standard weight and distance- based pricing. (In other words, they are not flat rate boxes). In many cases the price of a shipment is significantly less than if you used a flat rate box, especially for shipments in the 1-7 pound weight range and traveling to a nearby state

The additional free PM boxes come in these sizes:

11.5” x 13 1/8” x 2 3/8”
12”  x  12”  x  8”
7”  x  7”  x  6”
9.25” x 6.25” x  2”
15.25” x 12 3/8” x  3”
13 3/8” x 12 1/8” x 2.75”
14 3/8” x 7.5” x 5 1/8”
37 11/16” x 6 1/8” x 5 1/8”      (Medium Tube)
25” x  6”  x  5 7/8”                   (Small Tube)

This selection of box sizes makes the use of PM even more attractive and all these sizes can be ordered on the USPS website with free delivery to your door.

If you compare the $11.30 PM Medium Flat Rate charge against the standard PM charges, you’ll find that a standard PM shipment is less expensive for a number of weights and zones – sometimes a lot less. These savings range from $4.79 to $6.75 for a one pound shipment depending on the shipping distance and can be nearly a dollar less for a short-distance, 10 pound shipment.

To sum up, before you automatically reach for a flat rate box, weigh your shipment in one of the other PM boxes to see if there are savings available! Same service, free box, lower price. What a deal for you and your customer!

By the way, using these free boxes for non-Priority Mail shipments is a big no-no.”

Priority Mail Changes – Some Positives

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I wrote in earlier posts about the USPS plan to offer free insurance on Priority Mail shipments. That change, along with a few other others are now in place.

As I see it, here are the changes they have made to their “premium” services:

  • USPS Express service has been renamed USPS Priority Express and includes  up to $100 of insurance  in the price.  It is still a one-day service to most domestic locations with delivery guaranteed.
  • USPS Priority Mail offers up to $50 insurance included in the price and now has an “expected delivery time” map available on the USPS website for each origin zip code.  Transit time is 1-3 days depending on destination zip code.  Transit time is not guaranteed.
  • Both services have new box designs, but the older boxes can be used until the supply is depleted.
  • Both services have what the USPS calls “improved tracking”.  It is hard to determine what that enhancement includes, if anything.
  • The pricing for the services remains unchanged.

Analysis

This is a step forward for the USPS – the free insurance for the two Priority Mail (Regular and Express) services will help reduce the cost for some shippers who routinely have paid $1.95 for $1 to $50 and $2.45 for $51 to $100 of insurance in the past.

The service map for Priority Mail (regular service) is also a helpful aid for shippers to determine how long it will take for a package to reach their customer – although it is not guaranteed. In the past the service commitment was a non-specific “one to three days”.

For most internet shop shippers, the regular Priority Mail will remain a good option, especially on shipments under three pounds in boxes less than one cubic foot. Also, for higher weights to far-away destinations, the flat-rate boxes are an excellent choice, if your products can be safely packed in one of them.

FedEx Home Delivery and UPS remains a great option on weights over three pounds and boxes larger than one cubic feet.