Talk about your needle in a haystack.
When you ship one package through the Fedex system it becomes one of more than six million that the company formerly known as Federal Express moves about the globe every day. If you shipped it on UPS it would be one of 14 million handled by the company now known mostly as “Brown.” Over at the U.S. Post Office, now marketed as USPS, it would be one of about 6.5 million priority and parcel post packages handled daily. Of course, there are other shippers, who handle smaller numbers, people like the newly aggressive DHL, which recently acquired Airborne Express, as well as Purolator and BAX.
All of these shippers are doing quite well, thank you, due in part to the $170-plus billion dollar Internet ecommerce industry that has emerged like a Phoenix from the ashes of the Dot-Com crash in the late 1990s. And while your single package may be the proverbial needle in a haystack, it is nonetheless quite findable and it is a formidable force. A fact of daily life for these shippers is that they are all competing for your business, and that competition is a good thing when it comes to you picking and using a shipping option for your ecommerce business.
Your shipping options include simply picking a carrier or carriers to haul the stuff away for you, having a wholesaler or manufacturer drop-ship for you, or having a fulfillment house warehouse and ship your products.
While, on the surface, all of the major carriers seem to be the same thing, upon closer examination they each have areas in which they excel and in which they may be more cost effective or offer a higher level of customer service. For many small ecommerce shippers, the biggest factor in choosing a carrier is typically price. Here, each shipper seems to have a niche into which they fit.
For example, shipping a one-pound parcel from Los Angeles to St. Louis, you can’t beat USPS for shear low cost shipping. Their 1-3 day (three days to the most distant zone from the shipping point) rate (in your packaging or theirs) is $3.85 for one pound to any zone. This is a Priority Mail shipment, a brand and classification that has gained in popularity over the past four years. The same guaranteed 3-day shipment on UPS would cost $11.25. On Fedex the one-pound package on their 3-day FedEx Express Saver would run $9.25. DHL would cost you $13.48 for two-day delivery.
But let’s look at the rate for a 15-pound package (in your packaging) going the same distance in three days. Fedex will charge $32.50 for a weekday delivery. USPS will charge you $22.50 and UPS will get $36.98 for second day (end of day). DHL only has Second Day at $47.81.
Sending the same 15-pound package on slower ground service, of course, saves money but points out other differences in the carriers. Here FedEx gets $10.03, DHL costs $10.37, UPS is $15.74 and the Post Office comes in last at $17.49 and may take up to six days to get the package to its destination.
However, the Post Office has added a service called Priority Flat Rate Box in which you can ship up to 70 pounds anywhere in the U.S. for $7.70. There is a catch—the contents must fit into one of two USPS Priority Flat Rate Boxes. The inside dimensions for the two boxes available are 11″ x 8.5″ x 5.5″ and 13.625″ x 11.875″ x 3.375″. As a side note, it is hard to imagine something about the size of a large shoebox ever weighing 70 pounds. But if you’re shipping lead or rocks, you get a deal.
When it comes to guaranteed overnight shipping, FedEx and UPS still reign. DHL has made serious gains but they still don’t have the intense pick up and delivery map that the two bigger carriers have. The USPS says it will ship one-pound overnight for $13.75, but they don’t guarantee it until sometime between 12 to 3 PM. FedEx offers “first overnight” (by 8 a.m. in any time zone) and their old standby “by 10:30” as does UPS and DHL.
You can easily calculate any of the rates for any shipment by going to the websites of each of the carriers. They all have easy-to-use menus. And even though the USPS invented the zip code, they all rely on it for rate calculation and routing.
One of the major differences in shippers shows up in the way they count workdays. USPS works on a six-day week, while DHL, UPS and FedEx go on a five-day week and charge for Saturday delivery and pickup. If you have items, such as perishables, that must be delivered in two days or your customer gets a box of mush, you will want have to be very careful. The basic rules are:
- Avoid Saturday deliveries.
- Never ship a two-day item any later in the week than Thursday (ship Wednesday to avoid Saturday problems).
If, for example, you shipped a cheesecake from Los Angeles to St. Louis on Thursday, you could not use USPS Priority because their guarantee is 1-3 days. That means that your cake most likely will not make it to St. Louis before Monday. UPS two-day and FedEx threeday wouldn’t make it until Monday either. The only way is either overnight or to go for a two-day with Saturday delivery. The guaranteed two-day delivery, plus Saturday surcharge, will basically double your shipping cost and your might even see the shipping cost double the total expense to the customer. FedEx and UPS both charge $12.50 extra for Saturday delivery.
Of course, for non-perishable items where the customer is willing to wait to save money, you have a little more leeway. Here, the choice is often one of convenience and personal preference. We spoke with one ecommerce business owner in Florida who uses only USPS and charges all customers a flat shipping rate. She has a few items that cost her a little more to ship but the lighter bookkeeping and predictable shipping costs work for her.
Shipping Options Depend on Your Business
If you are a small shipper who sends out less than a few dozen items a week, your shipping costs and options are not as flexible as perhaps someone with great volume. Also your location, that is, the point from which you ship may have an impact on your shipping costs and your ability to have certain services. Online retailing has been a boon to people who would rather live in rural areas. There are, as such, plenty of small ecommerce businesses in small towns and villages all over the country. While the service level from companies like FedEx and UPS has tended to follow the trend it can still be a tricky business to expedite rapid fulfillment from a rural location. Ecommerce entrepreneurs in rural areas need to test some options. In these regions USPS is often the best bet, but may not be able to meet your time frames.
The Drop-Ship Method
One strategy is to consider having the manufacturer or wholesaler of your product drop-ship for you. This takes you out of the shipping loop because you simply pass the order on to the drop shipper, which saves the expense of having the inventory shipped to you and you having to warehouse it until you sell it. For some insightful information on drop-shipping and the companies who offer it there is the Drop-Ship Directory compiled by Brad Beiermann, president of Heinote, a drop-shipping consulting firm in Illinois. Beiermann has complied a lengthy directory (updated each year) of companies which drop-ship. The book is available from his website.
Another strategy for rural shippers is to find out if carriers serving your region are sending empty trucks back to the dock after dropping parcels in the area. If they are, they may well be more competitive with their shipping rates if they can haul something back from your area. This strategy, called backfill, worked well for a rural shipper in the Northwest. Using backfill, TheFruitCompany.com (see TheFruitCompany.com: From Farmers to eCommerce Entrepreneurs, Practical eCommerce, November 2005) has been able to beat competitors on shipping, while adding more value to their product. The best way to find out about the backfill opportunities in your case is to talk to the driver who comes to your business. He or she will know if they’re a going back empty.
Shipping Software and Services
One of the tools that businesses can use to expedite product movement is shipping software. There are several off-the-shelf packages, which you can use to manage your shipping issues. The software can be set up to automatically determine the best and most cost effective way to ship a particular parcel. The system can be integrated with barcode scanners and printers, the web services of the various shippers, a scale system and label printer.
Harvey Software Inc. has something called the Computerized Parcel System (CPS) which runs on Windows. The basic CPS Platinum System sells for about $1900 and is a stand-alone software application that can be installed and configured by the end user. According to Steve Stevenson in the sales division at Harvey, the program has proven cost effective for shippers moving as few as ten packages per day. The user may use multiple shippers from one system. The system does your rate shopping for you and even figures in the fuel surcharges, which everyone except USPS charges. There is talk, however, the even USPS will start charging for fuel cost escalation in the near future.
The basics are that the user inputs parameters such as destination, weight, dimensions, values, time requirements and other items and the software shops the rates and routes and sets up the best shipping method. Then it prints the shipping labels, handles the billing and can even interface with an accounting program. The selling point is that, while you can accomplish the same thing with each of the shipper’s websites, the time and accuracy factors shift in your favor when using the software.
The Fulfillment Option
Ecommerce shippers have another option available. They can make an arrangement with a fulfillment house to handle their warehousing and shipping matters. If the fulfillment entity is a large one, chances are they will have created relationships with carriers, which will have generated lower rates. Even though you will pay the fulfiller for expediting each shipment, it may be that in the long run you will save money in labor, preparation, and transportation. If you are a one or two-person shop having a fulfillment house handle your shipping, that could free you up to do more marketing and create more product. Fulfillment services also, as we said, can be very beneficial to rural shippers.
Check your local yellow pages or do a Google search using the terms “fulfillment services.”