Part 16: Shipping and Handling
I’ve already talked about opening small, focused Internet Stores with a LEGITIMATE ECommerce provider. We try to stick with one wholesale distributor per store. (Remember, one good wholesale distributor can carry tens of thousands of products, from dozens of different Brand Names, so you're not limiting yourself to just a few products when you work with one distributor per site).
There are many valid reasons for this, and streamlining your Shipping and Handling are a biggie.
When you sell products to your Internet customers, they want to know the FINAL price before they buy. They’re going to go through your order process until they get to the price PLUS Shipping and Handling, and THEN they’ll make their final decision.
You need to make sure you can supply that final price. That means you have to know what the shipping and handling fees will be BEFORE the order is completed.
We use the Online UPS Shipping Calculator to determine how much shipping is going to cost per order. You can see it in action at www.UPS.com.
With some types of Internet Stores, the UPS calculator can be integrated with your store itself, and perform shipping calculations automatically. With other store solutions, it's more of a manual process.
However you calculate shipping, it's a whole lot easier if all your products come from the same Zip code!
If you have more than one distributor, they’re probably going to be in different Zip codes.
Say a customer comes into your store, and purchases a really nice Coleman Tent from you. Your Coleman distributor is in Iowa. While the customer is there, they decide that camping isn’t much fun without music, so they add a battery-powered Panasonic boom-box to the order. Your Panasonic distributor is in Miami.
On many Internet Store solutions, the shipping calculation is done automatically, but you can only enter ONE "Zip code of origin" for your entire site. That means that your store site thinks that EVERYTHING you ship comes from the same place, and calculates the shipping accordingly. Let's say that when you set up your Internet Store, you entered the Zip code of your Coleman distributor in Iowa.
Now, your customer lives in Oregon, which isn’t all that far from Iowa, relatively speaking. Your site is going to calculate what it will cost to ship BOTH items from Iowa to Oregon. The site doesn’t know any better, because it thinks that ALL your products come from the same zip code, in Iowa. That’s the shipping price the customer will pay, on top of your product price. The customer thinks the total price is pretty good, so he makes the purchase.
Who pays the EXTRA shipping cost to send the boom box to Oregon from MIAMI, instead of Iowa?
You do, when your Panasonic distributor in Miami charges you for the wholesale price plus shipping.
Normally, shipping gets passed on to your customer, but in a situation like this, you lose money.
If the situation was reversed, and your Zip of Origin was listed as Miami, the CUSTOMER loses, because he will pay too MUCH for sending that tent from Iowa to Oregon. Your site will think the tent is coming from Miami also, and charge accordingly.
As I said, that’s one very good reason, among many other good reasons, to open small, focused sites that deal with the products of one distributor each. Again, a single distributor can carry dozens of brand names, so you’re not limiting your ability to carry different products. You’re simply avoiding an ugly situation. Losing money to shipping costs is UGLY. Trust me, I’ve been there.
Another thing I suggest you avoid is Motor Freight. That’s the shipping method used for large, heavy packages. It means that the item is too heavy to be shipped by UPS or FedEx, and must be carried on a tractor-trailer.
Motor Freight is EXPENSIVE, and you’ll never be able to set your site to calculate the costs. The only way to do it is to get your distributor to agree on one set price to ship the item anywhere in the country, and that’s HARD to get a distributor to do. The only way they might do that is if you agree to pay the maximum possible shipping charge every time, no matter where the product goes. You’ll never make any sales that way…your customers will not want to pay it.
In other words, we don’t sell anything that weighs more than 70 pounds (the UPS max shipping weight) on our sites.
Now, what’s this about Handling Charges?
As I've already said, some drop ship distributors charge a “drop ship fee” per address delivered to. This is a normal part of the drop shipping business, and always has been. It can range from $1 to $4, but generally it is in the $2 to $3 range. There are many drop shippers who do NOT charge this fee at all, but it’s something you should be aware of. Those who charge this fee do so to offset the extra work they have to do to ship out single items for you.
This is NOT a “per product” fee. It’s “per address”. That means that a customer can order 10 products from you, and as long as they are from the same distributor, and going to the same address, you will only pay that Drop Ship fee ONCE per order.
One way you can cover this fee is to build it into your product price for each product when you figure out your pricing. When your customers DO order more than one product that will go to the same address, from the same distributor, that’s a good thing in more ways than one. It means that the extra drop ship fees you calculated into your price on EACH ADDITIONAL item are yours to keep. You make extra profit, since you only pay the fee ONCE, and you’ve sold more than one item that has that fee built into it’s price.
For example, if your Drop Ship Fee from your distributor is $1.50, you add $1.50 to the price of each product when figuring out your wholesale cost. You may actually raise your retail price to cover this. If you do, and your customer orders 10 products from you, and you only pay ONE fee of $1.50 because it's all the same order, you make an extra $13.50 (9 x $1.50)
Alternatively, you can simply add that $1.50 ONCE to each order as a handling fee. That way you can keep your retail price down, although your shipping and handling charge will be a bit higher.
Shipping and handling are not hard to deal with. You can handle the work easily enough if you remember two basic things:
Try to use only ONE distributor per web site that you build
Try not to sell anything that weighs more than 70 pounds
There, that wasn’t so bad! We’re on to Part 17: Placing Orders with Distributors