Update on USPS Free Insurance

Standard

As reported in an earlier post, the USPS has requested authority to provide free insurance on Priority Mail shipments.  It is unknown at this time when it might start,  Here is the announcement:

U.S. POSTAL SERVICE

Sales Communications – News You Can Use

May 16, 2013

PRC Filing Priority Mail Insurance Enhancement

On May 10, USPS Legal submitted the PRC filing for Priority Mail Insurance Enhancement.

The Docket No. is R2013-7 and can be accessed at http://www.prc.gov/Docs/86/86954/Notice%20(PM%20Insurance).pdf.

Please share this information with any of your customers that may be interested in this filing.

Shipping Cost Curve Balls

Standard

DSCF9238

I saw an article on the internet the other night with helpful tips for internet shippers.  Number one on the list was to budget for costly shipping mistakes.  The implication was that costly shipping mistakes are inevitable and you need to have a contingency fund to cover them.

By following the process detailed in my last few posts, you should not have costly problems, period.  You might not get every dollar back for every shipment, but the losses will be minimal and you may get opportunities to make some of it back with some creative packaging (to lower weight one pound).  You also can get a leg up by initially using the process I described in my “Strategies for Using Shipping Carriers – Pricing Shipping” post.  Finally, use the correct carrier as described in my two previous posts.

So you have followed the process for pricing and selecting carriers; are there other possible pitfalls to consider? Yes.  Here is a list of exceptions:

  1. If you plan to use the Priority Mail service with your own packaging, make sure the box is one cubic foot or less.  Why?  A box 12” x 12” x 14″, for instance, will be billed at 11 pounds, regardless of actual weight.  This is called “dimensional weight” and it could be a profit killer.

What to do?  Plan to use either UPS or FedEx Home delivery for a box this size.  There will be no extra weight charge unless the box is three cubic feet or larger.  You also can price to ship a slower USPS service like Standard Mail Parcel or Parcel Select which have less stringent dimensional weight rules.

  1. You have a large item to ship but no shipping box in the necessary size.  Anticipate this scenario when you price the item.  Assume a worst case of having to buy a single box and include that cost and the resulting dimensions in your pricing.  If a free, “right size” box turns up by the time your item sells, you have the extra charges to defray packaging expense or to refund to the purchaser.
  1. You screw up badly and don’t anticipate weight, size, and/or service level required.  If the sum is significant, consider contacting your buyer to explain your situation.  Many people will understand an honest mistake and may pay a bit more for fast service or might accept a slower service for the same price.  If the buyer isn’t of the frame of mind to negotiate, consider it a shipping lesson learned the hard way….and one that you won’t be repeating!
  1. The item you intended to ship USPS is too oversized for any USPS service and must be shipped by UPS/FedEx to Alaska.  Oops!

For ANY shipment with even a chance of being too big for USPS, add a line to your listing stating shipping fee is for shipments within the continental US to a street address.  For shipments other than that, the buyer should contact you for shipment pricing.

Free Insurance for Priority Mail?

Standard

Good news for shippers if true.  It still needs to be approved, so it may be a while away.

U.S. POSTAL SERVICE
Sales Communications – News You Can Use

May 8, 2013

USPS New Proposed Priority Mail
Enhanced Insurance Coverage
The Postal Service will soon file a request with the Postal Regulatory Commission (PRC) to provide enhanced insurance coverage with Priority Mail. The goal of this change is to improve the competitiveness of our Priority Mail product.
If the enhanced insurance proposal is approved, insurance coverage will be provided free of charge at a level of either $100 or $50 (depending on the method of payment used). Additional insurance coverage may still be purchased above these amounts. This change will not impact our other package offerings, including Express Mail or our International services.
Since the Postal Service will be decreasing the price of insurance for most Priority Mail items, this change will have minor price cap implications for the Special Services class of mail which will be set forth in our filing
Additional information will follow in the coming weeks. Please feel free to share this message with other interested stakeholders.
                                                                    — Consumer & Industry Affairs

Strategies – Choosing the Carrier to Use

Standard

Three shipments

You just received three new orders.  Someone in California bought the 1950’s radio, someone in Georgia bought a set of silver plate forks, and someone in Honolulu bought the cut glass pitcher.  You used the strategy described in the previous post to price the shipments so the amount should cover the shipping cost.  Now, which carrier should you actually use and what will it actually cost?

Here are the specifics:

Item                             Price          Ship Charged         TTL Weight        Zip Code

  • 1950’s Radio                 $95                 $15.00                 6 LBS                92549
  • Silver plate Forks          $30                 $  4.00                10 OZ                 30303
  • Cut Glass Pitcher         $65                 $17.50                  9 LBS               96706

Radio

You used the FedEx/UPS rates to price the shipping and rounded up to the nearest $. For a Zone 8, six pound shipment it was $14.25, rounded up to $15.  The shipment from Oregon is a Zone 5 and the zip code is a rural one, adding $3.50 to the shipment for UPS/FedEx.  OK, so the actual cost for those carriers is $16.46.  That would include insurance for the whole value of the shipment.  If you use the UPS/FedEx option, you would lose $1.46 on shipping.  There is an option that will cost less.  You can use Standard Mail and insure it using the USPS insurance.  That cost would be $15.57 and the package would deliver two days later than UPS/FedEx.  There is almost a $1.00 savings to do it with USPS, but we would opt to eat the extra dollar and use the UPS/FedEx option.  Would you?

By the way, if the radio shipment was not to a rural area, but still to Zone 5 the cost on UPS/FedEx would actually be $12.70.  In that case, you would have $2.30 to rebate or use for shipping supplies.

Forks

This is much simpler.  You figured that you would be able to package and ship the forks anywhere in the US for $4.00.  The actual cost using USPS 1st Class Package is $3.60.  We would not insure it and you have covered the cost and helped pay for the packaging.

Cut Glass Pitcher

This gets a little more complicated.  You have charged $17.50 for shipping, which will cover shipping and insurance anywhere in the Continental US (48 States).  The customer is in Hawaii.

If you included in your listing a request for buyers outside the continental US to message you for their shipping costs you are in good shape.  Just quote what shipping and insurance will cost to Hawaii, and you are covered.

If not, take a look at the USPS options.  You can use Standard Mail Parcel service and insure the item for a total of $19.45.  Yes, you will eat almost $2.00 on shipping, but your customer will receive the item for quoted cost.  Two dollars spent on goodwill may yield a repeat customer.  And consider adding to your listings the request to buyers beyond the continental US to message you for additional shipping cost.

Next up – Curve balls in Pricing

Strategies for Using Shipping Carriers – Pricing Shipping

Standard

price sheet cropped

The United States Postal Service may be the only carrier you need to use if you have light items to ship, they are heavy and fit in Flat Rate Boxes, and/or they tend to be inexpensive.  In this post, I want to address shop owners who have more expensive, heavier, or a range of shipments.  That’s the shipping dilemma my wife faces.

In the six months she has been in business, we have shipped items worth up to $350 in weights ranging from a few ounces to over 50 pounds.   Her shop sells vintage items of all kinds as well as handcrafted items.  In this and the next post, I will discuss the two processes – first as she sets prices for the shipping on her site and second, how she chooses the carrier once she has the order in hand.

Pricing the Shipping Charges

 When setting the shipping charge in the listing, she weighs the item she plans to sell on a quality digital scale that I described in an earlier post.

  1. She determines if a Priority Flat Rate Box makes sense.
  2. Even if a Priority Flat Rate Box could work, she also estimates packaging in a box she would supply and adds that to the weight of the merchandise. At that point she does not know the destination of an eventual order but she wants to cover her shipping and packaging costs.
  3. I have created a handy rate sheet that shows rates for all USPS service options, UPS/FedEx rates and Flat Rate Boxes.  The sheet is for weights from 1 ounce to 25 pounds. This sheet assumes a US shipment to the furthest distance zone (8).  This will cover shipments to non-rural addresses within the Continental US (48 States) for FedEx/UPS and all US addresses (50 states) for USPS.
  4. Taking into account the value of the product and the service level desired for the shipments, she looks at the sheet and chooses an appropriate shipping cost for the shipment.
  5. Generally if the shipment is higher value (more than $50) and four pounds or more (round up to the nearest pound), she chooses the FedEx/UPS option.  The only exception is if the item fits in a Flat Rate Box and its cost is a couple dollars lower than the commercial option.
  6. If the weight (rounded up to the nearest pound) is three pounds or less, typically she picks the best USPS option, consistent with the service she wants to supply.

I already hear you asking, “What about orders that need to be shipped to Alaska or Hawaii or to PO Boxes?  You said earlier UPS/FedEx is not competitive to those locations for shipments of any weight and can’t deliver to PO Boxes”.  There are two strategies:

Assume that you will use USPS options to Alaska and Hawaii, rural areas, and to PO Boxes.  Generally the Parcel Select or Standard Mail rates are close enough so you won’t lose too much on shipping.

  1. State in your listing that your shipping charge is good for the Continental US. (48 States) and to message you for rates to other locations.  That way you can change your charges. If necessary, to cover expenses.
  2.  Using this process you will cover your shipping charges.  If the shipment ends up shipping to a closer destination or at a slightly lower weight you will have enough to help pay for shipping supplies and/or rebate some of the extra charges back to your customer.

Next up:  With the order in hand, process for picking the actual carrier.

USPS versus UPS and FedEx Home Delivery – An Overview

Standard

which carrier

Many  people  (a majority?) with internet shops use only USPS and are satisfied with the service.  For certain applications, that is really the only prudent choice to be made.  However, there are instances where other options should be explored in the interest of customer service and/or cost.  Let’s look at the strengths and weaknesses of the two types of carriers.

USPS Pros

  •  Simple to use and access
  • Range of services and pricing
  • Delivers to all addresses and PO Boxes
  • No surcharges
  • Free pickup and Priority Flat Rate boxes

I believe generally the best use for the USPS services are for light, lower-value items, certain heavier shipments that fit into Flat Rate Boxes, and shipments to PO, APO*, FPO*  Boxes, Alaska, and Hawaii.

UPS – FedEx Ground Pros

  • 24 hour, toll free customer service help
  • Published, guaranteed delivery dates
  • Superior tracking and tracing
  • Free insurance
  • More likely to meet delivery commitments during peak seasons
  • Easier claims process

I believe the best use for the commercial carriers’ ground service is for heavier shipments (3+ pounds) that are delicate and/or valuable.  These shipments should be to the continental 48 states.  Shipments of any weight over a cubic foot in dimension, and more than five zones  (more than about 900 miles) away are also candidates for this service.

Interestingly enough, even with the myriad of surcharges, the commercial carriers’ prices even without discounts are often close or can beat USPS pricing.  With available discounts, the pricing is even more competitive.  Couple pricing with the distinct service advantages and UPS and FedEx are enticing choices.

In my “Free Shipping Boxes” post earlier I talked about a strategy where not using a Priority Flat Rate Box would actually save money even though you use your own box and the same Priority Mail service.  Well, what about an example where a commercial carrier might be a better option than one of the USPS options?

Let’s say your have a five pound residential shipment worth $100 going cross country (Zone 8) to a non-rural address.  The item(s) are too large to fit in even the largest Flat Rate Box.  Your alternatives are:

  •  USPS Standard Mail               $14.20             Delivers in 5-7 Days, Insurance Extra
  • USPS Parcel Select                $13.81             Delivers in 5-7 Days, Insurance Extra
  • USPS Priority Mail                   $18.70             Delivers in 2-3 Days, Insurance Extra
  • UPS/FedEx Home Delivery     $14.10             Delivers in 5 Days Guaranteed and Free insurance

You’d have to look carefully at the commercial option.  If the item is worth close to $100 or more, the choice might be easier.

Next up, strategies for using USPS and the commercial carriers.

*  Definitions:  APO = Army/Air Force Post Office.  FPO = Fleet or Field Post Office.

The Commercial Carrier Alternatives – UPS® and FedEx®

Standard

ImageImage

Since 1970 the USPS has operated as semi-independent Federal agency charged with operating as a non-profit organization.  While the USPS is “semi independent”, it can hardly be called a private enterprise entity.  The Federal Government mandates services, locations, and have successfully slowed or eliminated plans to make the operation more efficient.  They can do this because they have infused taxpayer money into the system to make up for huge losses in recent years.  In my opinion, it is a wonder that the USPS has as good a package delivery system as they do.

With that in mind, let’s discuss the true commercial alternatives – UPS® and FedEx® (FX).  For this discussion, I will detail the carriers’ residential ground delivery services.

The two carriers are very similar and have almost identical rates, rules and fees so I will discuss their attributes and pricing together.

Basics:

  •  Consistent, dependable service to all US addresses other than PO, APO, and FPO Boxes
  • Guaranteed transit times – you can request a refund for late shipments *
  • 24 hour toll free numbers (with live, trained agents) for delivery, damage, pricing, and other assistance
  • Automatic, free loss and damage insurance for the value of the shipment (up to $100)
  • Free online tracking and tracing on every shipment
  • Systems flexible enough to have minimal slowdowns even during peak periods
  • It can be less expensive when you create labels and ship online using websites or free software
  • Offer package intercept, redirect, return capabilities if needed

Total pricing is similar to Priority Mail, but can actually beat all USPS service pricing on selected  weight and distance shipments to the 48 States.  Both UPS and FX have a ground service to Alaska and Hawaii, but it is not competitive to the Standard Mail and Mail Select USPS package options on those routes.

Pricing:

  •  Standard ground pricing – weight and zone based
  • Surcharge for residential shipments – currently $2.80
  • Surcharge for extra fuel cost – currently 6.5%
  • Surcharge for rural delivery – currently $2.75 or $3.50 depending on how rural
  • Ships at actual weight under three cubic feet. — dim weight above that
  • Surcharges for packages with a longest length 60” to 108” or 130”+  – length + girth **

With all the surcharges, it is amazing that these two could ever beat USPS on price.  USPS does not have of these type of surcharges.  I’ll show you how it all works in the next couple of posts.

Next up – Pro and Cons – USPS versus UPS, and FedEx

*  The guarantees have exceptions for weather, disasters, and civil unrest, etc

**  “Girth” is the total inches around the smallest two dimensions of a box. Example:  If a box is 28” x 16” x 14” the total length + girth is 28+16+16+14+14=88.