The Offline Part of E-Retailing: Shipping

As you start selling more and more online, in light of the Christmas buying season, one cost that will increase is shipping. With costs going up, it is important that you re-evaluate your entire shipping operations, including incentive “free shipping” options.
Small Business Computing offers a few tips and writes The recent jumps in gasoline and fuel prices have placed a squeeze on Internet merchants. Since e-tailers rely so heavily on parcel shipping, when shipping costs go up, it threatens the bottom line.
Among carriers like FedEx and UPS, “We’re seeing tremendous hikes in fuel surcharges,” says Beth Enslow, an Aberdeen Group analyst who advises e-commerce companies on controlling shipping costs.
In September 2005, the average price of diesel fuel was $2.59 a gallon ó a whopping 72-cent increase from last year. Jet fuel costs have zoomed 60 percent in 2005. Consequently, fuel surcharges are changing “dynamically,” Enslow notes, “with many carriers’ calculations fluctuating monthly or weekly.”
“What that means for an e-commerce company is that, if you were offering free delivery for orders over $50, your transportation costs are going up. So you have to rethink: what am I charging these people?” Deliveries to rural areas can incur particularly high surcharges.
In short, e-tailers have to be cannier than ever when it comes to monitoring shipping costs, to ensure that sharply rising costs don’t eat into core profits.
Shipping charges have been a “secret” profit source for many e-commerce companies. Adding a little extra fee onto the shipping and handling charges fattens the bottom line for many e-tailers. But increasing shipping costs shaves this modest profit source.
“You have to be very smart about how you’re pricing your services to your end consumer, otherwise you’re not factoring in these additional charges,” Enslow says. “And you’re kind of blind-sided by these big charges.”