Sunday, September 14, 2003

Shipping costs can be tricky


Entrepreneurs

By Rhonda Abrams
Gannett News Service

As customers, we all like to get free shipping when we place an order. But as business owners, we know shipping costs can quickly eat up profits. So it's time to find ways to reduce shipping costs.

In my publishing business, we ship a lot of books, which are heavy. Shipping costs directly affect our profit margins - and our customers' satisfaction.

Some of these costs - such as shipping from the printer to the distributor - are figured into the price of the book itself. But how do you set the charge of shipping and handling when you're fulfilling a customer's order?

Here's the cardinal rule: Try to break even. Don't try to make money on your shipping and handling. It's not competitive, and it's not fair. Equally important, try not to lose (too much) money. That's not easy.

Hidden costs

Recognize the hidden costs of every package you send. Besides the actual freight costs levied by the shipping company, you have the cost of packing materials, the cost of pick-up or of getting the package to the shipper, and the cost of staff time packing and processing orders.

That's not even mentioning the time it takes to deal with shipping companies when there's a problem or when customers have special needs.

That's why you charge for shipping and handling.

Establishing shipping charges becomes even more problematic because rates vary depending on weight and distance. That means every order may have a different cost, yet you can't expect consumers to wade through complicated shipping charts.

Compare them

Before you choose a shipping company, do some comparison shopping. You may be surprised.

Here's what you can do to reduce shipping costs and hassles:

• Establish a primary relationship. You're going to use all the main shipping companies from time-to-time. But by choosing one primary company, you'll have more leverage in negotiating discounts and vastly reduce hassles.

• Use the shipping company's software and online processing. Both UPS (www.ups.com) and FedEx (www.fedex.com) have free, easy-to-use software and online processing.

• Ask to have a sales representative assigned to you and meet them in person. Talk to your rep at least once a year.

• If you make sales from an Internet site, devise a simple way to charge for shipping. Customers are not willing to wade through a complicated formula. Set one charge per item/order regardless of distance.

• Use discounted or free shipping as an incentive. .

• International shipping is a hassle. That doesn't mean you shouldn't do it, just recognize that it's going to take more time and money and charge accordingly. We've found the U.S. Postal Service to be much cheaper than other options, but that means we have to send a staff person to the post office and fill out lots of forms. So make certain international buyers understand costs before processing their orders and get pre-payment by credit card.

Rhonda Abrams is the author of "The Successful Business Plan: Secrets & Strategies."



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