One resource I use to keep up on new developments is Ina Steiner’s column on eCommerceBytes.com (I keep a permanent link in the list to your right). After I read this article today, my first impression was, “Hey, it’s about time!”. Unfortunately, it’s not yet an option for eBay sellers (it’s not listed as a shipping option). FedEx One Rate YouTube Video
I’m sure that in time, it will be. After dealing with UPS and FedEx reps for the past few years, I understand how scientific their finance people are when it comes to developing profitable shipping options. So, they’ll want to collect and analyze a lot more data before they roll this out to eBay. I won’t make any prediction about how long that will be.
But I do think it will happen, and I think it will be successful. Based on my own experience in the wireless industry, it reminds me of when AT&T Wireless rolled out their “Digital OneRate” calling plans many years ago. That was a smashing success, because people like simplicity. Neither buyers nor sellers want to figure out shipping charges that vary depending on distance, zones, weight, box size, fuel surcharges, and the alignment of the Sun, Moon, and Earth. If you’ve ever looked very closely at a FedEx or UPS shipping contract, it’s full of tables and options that only an accountant could love.
But, that reminds me of one of the most important things there is to talk about when it comes to running a profitable ecommerce business, whether it’s Amazon, eBay, or your own website. Shipping expenses can’t be ignored, and they can easily be misunderstood. The hidden costs can be insidious too (some of the charges on a UPS statement are hard to understand, but can really erode your profits). What’s the point? Well, a lot of people want to focus on the front end, the top line, and do a great job of generating sales. But you need someone to look at shipping. Especially so, because, IMHO, it’s inevitable that one day, in the not-so-distant future, shipping will need to be FREE for the vast majority of ecommerce transactions. Right now, there are a LOT of ecommerce retailers that profit on shipping, and that’s built into their business model. It’s a mistake. If you rely on shipping income to prop up your core business, you won’t be in business, eventually. That means, your pricing needs to be “right”, and it means that your product sourcing or costing needs to be low enough to generate margins that support free shipping. The USPS and FedEx flat rate/One Rate plans will help many (though not all) retailers simplify their profitability models. You do need to know that One Rate has a 50lb limit, and, if you have a FedEx account, those discounts do not apply to the program.
That being said, the following is on the FedEx One Rate page today:
FedEx One Rate makes it easy to:
- Know your price up front, instantly.
- Provide your customers with a dependable rate quote and deliver exceptional customer service.
- Manage and plan shipping costs efficiently with predictable rates that include most surcharges.
- Experience FedEx reliability with a money-back guarantee*, free packaging in more shapes and sizes and up to $100 in declared value for free.
If you’re an eBay or Amazon seller, and you’re charging for shipping, it’s hurting you, unless your selling products that are either very large or very heavy. I remember a speech that John Donaho, eBay’s CEO, gave a couple of years ago that basically said (in MY words): “Offer free shipping, or you won’t do well on eBay”. And of course, many of you know this already, from the commission fee changes and by seeing how your listings show up in search. Those listings have an advantage in search results. The same thing is true on Amazon.
And, it’s not just free shipping. It’s also free returns that are becoming inevitable. LL Bean, Zappos, and others have free returns, and they’re not charging restocking fees either, in many cases. It’s not free for the seller, so these logistics costs need to be build into your products’ “landed cost.”
What are your thoughts?