In the last issue, I discussed “free shipping” and its growing importance as a means for e-retailers to attract customers. But as noted, “free shipping” comes at a cost, particularly as shippers either absorb the cost or slightly increase prices to cover it. However, this is getting difficult to do particularly as carrier rates continue to rise and additional accessorial charges are applied to the final shipping bill.

For the small business, shipping costs can be difficult to budget. One solution is flat rate shipping, which is now more readily available. Flat rate shipping is simple to understand. Basically, obtain a box from a shipping company such as the USPS and FedEx here in the US or DHL in Europe, fill up the box as much as you like and pay the one set fee as noted by the shipping company. No measuring or weighing required.

Flat rate shipping has been around for some time. In 2007, while DHL was still trying to make a go of it in the US domestic market, it introduced an all-inclusive flat-rate box for US shipping customers. DHL’s ShipReady Box provided 2nd day delivery service, without any weight restrictions, for one inclusive fee to and from all points within the 48 contiguous states.

According to DHL’s Senior Vice President of Corporate Marketing and Communications at the time of introduction, “The ShipReady Box brings added convenience and shipping flexibility to the small business and occasional shipping customer. These customers need quick, easy and reliable shipping support so they can focus their time and energies on building successful businesses.”

Today, DHL offers a flat rate shipping option in such countries as the United Kingdom in which it provides up to seven box sizes from envelope to boxes that can hold 25 kg.

Meanwhile, back in the US, the leading flat rate shipping providers are the USPS and FedEx. The USPS offers flat rate shipping for both domestic and international shipments. For domestic shipments two service levels are offered. Priority Mail Express Flat Rate provides five service options and Priority Mail Flat Rate provides 13 service options. For international, Priority Mail Express International Flat Rate and Priority Mail International Flat Rate service levels are available with varying service options for each. Domestic option ships 1-2 business days whereas the international option ships 6-10 business days to almost 200 countries.
In late 2013, FedEx Express introduced its flat rate shipping option, FedEx One Rate and is marketing it to small businesses including eBay sellers. According to its website, to ship using FedEx One Rate, customers select their free FedEx Express packaging, an eligible FedEx Express domestic shipping service and the destination. The FedEx One Rate price is then calculated based on the packaging type, service selected and distance. FedEx One Rate shipping is available with one-, two- or three-day U.S. domestic FedEx Express time-definite shipping commitments.

According to FedEx, “For consumers and small businesses alike, FedEx One Rate pricing allows customers to plan and control their express shipping costs more easily. They can add to the box without adding to the cost.”

While flat rate shipping is indeed convenient and easy to budget, is it a cost saver? It depends. For the small business customer who can fill these boxes up with heavy items, then perhaps it is a cost saver.

An analysis between USPS and FedEx One Rate from Stamps.com, an online provider of USPS postage services, suggests that, at least in some categories, the USPS services offer a significant savings. A review of comparably sized packages and shipping routes suggests that shippers would save between 28.0% and 54.0% using Priority Mail over FedEx One Rate Express Saver (three-day delivery), depending on the route.

"I think that Priority Mail will be a better fit for ecommerce sellers over the new FedEx One Rate product based on the pricing being offered," said Eric Nash, Stamps.com's director of online marketing. "Keep in mind that 91.0% of Priority Mail packages are delivered within one to two days in the US, so most customers will be getting the items faster using the USPS Priority Mail."

Regardless, flat rate shipping does provide a convenient means of shipping. However, much of this flat rate shipping falls under the FedEx Express umbrella. What about a similar solution for ground shipping? Come January 2015, FedEx Ground will implement dimensional weight pricing across all of the packages shipping via its FedEx Ground service. According to FedEx, this will set the transportation price based on package volume - the amount of space a package occupies in relation to its actual weight.

Previously, neither UPS nor FedEx have applied dimensional weight pricing on ground shipments less than 3 cubic feet.
For e-retailers, “free shipping” attracts more customers. However, with FedEx and possibly UPS making ground shipping more expensive, e-retailers will be forced to make a hard decision regarding how they manage the higher cost versus the sales from their free or flat-rate shipping promotions.
{bottom_comments_ads}

Follow