What is the cheapest way to ship a package? It all depends.
I received the following email from one of my readers. Thank you, you have raised some very good questions. Read my response below in blue:
I invite any of you with questions to email me at mark.taylor@myshippingcoach.com. I may not be able to get back to you for a few days, but I read all my emails and respond.
You have a 2-pound package that is shipping to a zone 2 (someplace close). If it fits into the Priority Mail Small Flat Rate Box, you can ship it for $4.95. BUT, if you put it in another box, it would only be $4.90. If you used the bigger Priority Mail Large Flat Rate Box, you could pay $14.50—way more money!
If you have a 5-pound box, the rating becomes more complex. For a Zone 5, you would pay $11.76. It would be cheaper not to use the Priority Mail Large Flat Rate Box. But the same package going to Zone 8 (cross country) would be $16.37, so it would be cheaper to the Priority Mail Large Flat Rate Box. Now, I could ship that same box with FedEx Home Delivery for $10.59 and save $5.78 with the rates I get from FedEx (email me and I will tell you how).
The bottom line is this: no carrier is the cheapest carrier for every kind of package. The USPS does a great job and is the cheapest for package shipping to residences that weigh less than 2 pounds. My advice is to compare carriers and services.
What happens if that item is not delivered and your customer complains?
If you are an Amazon seller, you are bound by Amazon.com’s A-to-Z Guarantee and the money is automatically refunded to the customer. Most likely, you will refund the customer or ship another item, but you lose your profit and bear the costs of your product and the shipping costs.
The US Post Office, UPS, FedEx, and DHL all offer various forms of insurance if your package is lost or damaged. With these carriers a shipment is automatically protected up to $100 for loss or damage, but if you require more protection than you need to declare a higher value for protection. FedEx and UPS call it “Declared Value”. DHL calls theirs “Shipment Value Protection. The US Post Office offers insurance as well.
The formula works pretty much the same even though the rates are different if you have a retail or commercial account.
For example, for customers with Retail Rates, UPS charges $0.90 for each $100.00 (or portion of $100.00) of the total value declared, with a minimum charge of $1.80. If you had a package that was worth $500, you would subtract the $100 that is included and have $400 or 4 units x $0.90 for a cost of $3.60.
If you shipped 10 packages a month of this value, you would be paying $36 just for insurance!
FedEx charges $.70 per $100 of value with a minimum charge of $2.10.
The USPS starts with the first dollar that you declare, has a minimum of $1.75. For $100 package, the cost is $2.25.
Now here is a secret that many eBay sellers and online merchants don’t know. There are third party insurance companies that will insure your packages for 50% less than the carriers charge.
Here are the rates from one third-party insurance provider: (Full Disclosure—I would receive a small referral fee if you use this service)
UPS/FedEx Ground $.30 per $100
USPS Priority Mail with Delivery Confirmation $.50 per $100
This is a HUGE savings. For a $200 package with FedEx, the cost would be $.60 instead of $2.10—a savings of 71%!
For USPS, that $100 package is only $.50 instead of $2.25, a savings of 78%!
I have been working in the mailing and parcel industry since 1976—34 years! I am still surprised at what I see and hear. If you don’t know what you are doing, you can waste a ton of money. The worst part is that the carriers don’t make it easy for you, the small parcel shipper, to do it right. In fact, it almost seems like they confuse you on purpose. Let me give you an example, let’s say that you want to ship a package on Monday and get it to your customer by Wednesday. Which service would you use? Many would choose a service like UPS 2nd Day Air or FedEx 2 Day service. Others might use US Post Office Priority Mail. What if you want to be sure that it gets there and choose the most economical service?
What is the best way to ship this package: UPS, FedEx, or US Post Office?
I went online to FedEx.com, USPS.com, and UPS.com and researched shipping a 5 pound package being shipped from Plymouth MI to a residence in Lawrence KS.
Here are the results of my analysis:
The most expensive choice was UPS 2nd Day Air for $27.91—guaranteed.
FedEx 2Day would get my package there for $27.58—guaranteed. (almost the same)
USPS Priority Mail was only $11.76. This would save me 57% but it is not guaranteed.
But wait, if you look at the display below, you would see that FedEx Home Delivery would get it there in “2 Business Days.”
Why do they have to make me figure out that 2 Business Days is Wednesday! Why do they make it so hard!
I could pay $11.85 and it would be guaranteed. Looks like the best deal, but why pay retail if I could get a discount?
I checked my discounted rates and saw that it was only $9.21, 22% less than retail. (email me and I will tell you how to get this discount)
Look at how much difference there is between rates. If I didn’t know what I was doing, I could have paid as much as $27.91!
Wow! It sure does cost a lot to ship a small package. Even though I advise people on shipping packages, the truth is that I don’t personally ship that much, maybe a couple of packages a month. So, when I do ship something, like I did over the weekend, I experienced firsthand the surprise and frustration of small parcel shippers. Here is what I saw and learned when I shipped several items.
My first observation was that the retail cost to ship an envelope across the country (from New York City to Beverly Hills, CA) was exactly the same for FedEx Priority Overnight and UPS Next Day Air. I knew that the prices for ground shipments were the same but I did not realize that it was also true for express shipments.
Of course I was shocked that the price was $32.05! I can’t believe that anyone pays that much.
Of course, I was glad that I only paid $14.11 with the discounted rate that I was able to obtain because of my industry knowledge. I saved 56%!
I wondered how people that don’t know where to get a discount feel about paying so much to send an overnight letter. If you email me at mark.taylor@myshippingcoach.com, I will be happy to share with you how I received that rate.
My second package was 2.2 pounds that I was sending to my son in Texas.
I went to USPS.com to get the rates. I was surprised that this small package was going to cost me $9.95 to send Priority Mail.
I saw that I can save $.60 by shipping it online and get Delivery Confirmation for free, saving another $.70 for a total savings of 13%.
I wished that it could fit into Priority Mail® Small Flat Rate Box for only $4.85 online.
While it could have fit into the Priority Mail® Medium Flat Rate Box, that would have cost $10.20 online or $.85 more.
I wondered if people sometimes made the mistake of thinking that the Flat Rate Boxes were always the cheapest way to ship something.
I then went to FedEx.com to compare prices. The retail rate for FedEx Home Delivery was $11.50.
But my discounted rate was only $8.57, 25% less than retail!
I thought about all the people I see standing in line at Kinko’s to ship a package and pay more; I wondered how they compete with bigger companies if they were businesspeople.
In today’s fast-paced world of e-commerce, instantaneous communications and unscrupulous deadlines, demands on the shipping industry have never been greater. At the same time, customer expectations, fueled by the promises of the major carriers, continue to grow. Bottom line: Packages have to get there; on time; every time.
In PARCEL magazine’s 2009 Best Practices Survey, service failures were one of the top five complaints that shippers had about their primary carrier.
UPS and FedEx dominate the industry to the tune of nearly $100 billion annually in combined net sales by promising to absolutely, positively deliver packages on time for their customers. But, are they holding true to their word? While the carriers guarantee every package will be delivered on time, in reality they are actually late 3% of the time for no verifiable reason at all; they don’t fall within the “beyond our control” exceptions such as bad weather or shut down airports. Moreover, the carriers make it both complicated and time-intensive to claim refunds, especially for companies shipping dozens of packages a day. As a result, a mind-boggling $2 billion of guaranteed refunds go unclaimed each year!
This money represents a failure to meet a performance bond; it is supposed to be returned to the customer, as recompense for the shipping customer¹s inability to meet a delivery promise to its own customer. But how many of you have ever seen a carrier “volunteer” a credit on your shipping invoice for any late-delivered packages?
The only means by which shippers can actually confirm on-time deliveries is to track their packages; and despite first impressions, that is the last thing the carriers want you doing.
Worse, in practice, the carriers are imposing an expensive, time consuming, intricate claims gauntlet in order to secure an allowable refund. Try it sometime. It isn’t easy. The drill goes something like this:
You must supply full shipping information, not just the tracking number, but the consignee’s name and address; city, state and zip; date package was shipped out; and package weight.
Next, you must determine the actual promised delivery for the class of service you purchased, then match it against actual delivery. This takes a search of disjointed sources and the ability to interpret color-coded ground maps, the carrier¹s service guide or information accessed through the Internet. You supply the time and money and staffing for this not as easy as it sounds exercise.
Now, you present your claim through the carrier¹s 1-800 number, which typically takes from 5 to 15 minutes per package.
Sit back, relax, you’ve earned it. If the refund shows up on your next weekly invoice.
What can you do about this?
Track your packages and call manually for late deliveries.
Invest in computerized shipping software that can track your packages for on-time delivery.
Hire a third party to get refunds on your behalf (they typically charge half).
Re-negotiate your contract and ask for a better discount based on your percentage of service failures.
Shippers should hold small parcel carriers to their word, namely, their guarantees that: “your packages will arrive on time or your money back.”
“Tis a week before Christmas and all through the house,
not a creature was stirring, not even a mouse.
The procrastinators know that there is plenty of time,
to get their gifts shipped and everything will be fine.
If they wait until Wednesday, two days before,
they can ship via USPS Express Mail and their gift will arrive at the door.
And for those who are willing to pay $12.50 more,
The USPS will take packages for Christmas, the day before.
But procrastinators be warned that not all destinations will be served,
and you need to drop off your package before noon or you might be nerved.”
In order to be certain, make sure you call, 1 800-ASK-USPS.
For UPS and FedEx the last day for shipping is Wednesday, December 23. Make sure that you use a service that provides delivery for the next day to the zip code you are shipping to. The last day for delivery is Thursday, December 24.
Many people have asked, what is the best carrier or the best value for shipping their presents. My answer is that it depends. It is variable based on how far away the recipient is, the weight of the item, and whether or not the delivery is to a home or a business (among other factors). If you don’t have a discount with a carrier, are shipping to a residence, and your gift if less than 10 pounds, the USPS is probably your best choice. Make sure that you check out their flat rate boxes. And if you ship online using Click-N-Ship or a PC Postage provider like www.stamps.com or www.endicia.com, you can get a discount on some services like Express mail and free Delivery Confirmation with USPS Priority Mail.
To give you a sense of the difference in price, let’s say that you have a 10 pound gift that you are sending to a residence from New York NY to Beverly Hills CA.
UPS Next Day Air by 10:30 will cost $97.32
UPS Next Day AirSaver by the end of the day will cost $87.78 (source www.ups.com retail rates)
USPS Express Mail $58.40 at the Post Office or $55.48 online.
USPS Priority Mail Large Flat-Rate Box is $13.95 at the Post Office or $13.50 online (source www.usps.com)
Attention UPS Shippers: the rates will be increasing on January 4, 2010. Most of you probably know this by now, but what you may not realize is how the rates will impact your budgets for 2010. My friend and colleague, Doug Kahl, wrote a useful analysis for PARCEL magazine which I would encourage you to read, called, UPS 2010 Rates: An In-depth Look.
In a nutshell, UPS Ground UPS Ground service will increase 4.9%. Doug provides an in-depth initial analysis of the 2010 Ground Rates UPS List Rate Increase that you can download. You will see that the lower weights and zones, less than five pounds, go up a little over 6%.
UPS Air and International Services will increase 6.9% in the base rate and will reduce the Air and International Services fuel surcharge by 2%. Doug also provides an analysis of the express services that you can download.
If you would like to see how UPS will compute the fuel surcharge next year, you can download the PDF, Fuel Surcharge Calculation Changes. You can download Doug’s analysis of fuel surcharges here.
Some of the highest increases occur with the 2010 Surcharges. You can download an excel spreadsheet.
The 2010 UPS Rate and Service Guide for Daily Rates is available here for download. You can also see the Retail Rates here.
The difference between retail and daily rates is significant. Retail is $7.05 for a zone 2 one-pound package compared to $4.84 for Daily Rates. You pay 31% more for retail! Nobody that ships regularly should pay for retail. Retail rates are for what is known in the industry as “gift shippers” or consumers. (see my blog on Consumer Parcel Shippers Pay More for Shipping). These are people that only ship once or twice a year and don’t have an account with a carrier.
Here is how to get up to a 31% Discount on UPS:
Discounts are available for shippers; in fact, eBay shippers can get an account with UPS and qualify for the lower daily rates and save 31%. You can find out more about the eBay discount here. So even if you ship a few packages a month, you could save a lot of money on shipping!
The new rates for 2010 go into effect January 4, 2010. The largest increases come from surcharges and accessorials (a fancy word for add-on charges).
The single largest increase is for address correction charges. The charge for ground packages increases from $8.00 to $10.00, a 25% increase! Air goes from $10.00 to $11.00. You could pay $5 to ship the package and get charged $15 because of an incorrect address! Here are a few suggestions:
Before you ship your package, validate your addresses. UPS provides a service, called “Detailed Address Validation” which is available if you are using www.ups.com or UPS CampusShip and shipping to a US address. This feature allows you to validate the street number range and the apartment number or suite number of your address. If it does not match, you will be offered some suggestions to choose from. It is not a 100% guarantee but it is a step in the right direction. This option is on the “create a shipment” page and requires the user to check the checkbox. You can also set a preference on the “shipping preferences” page so that it always performs the address validation. By the way, FedEx offers a similar tool.
UPS also offers an online tool for Address Validation for free. This is an XML tool that will require some help from your IT department to help you but can be used on your website for customers when they place their orders.
If you are not using the www.ups.com or CampusShip, you can use third-party software for validating addresses. I Googled “address validation” and received 131,000 English pages. I would suggest software with CASS certification, which stands for “Coding Accuracy Support System”. This is a US Post Office certification that the address conforms to USPS standards. In fact, here is the list of CASS certified software vendors.
Some shipping software providers also have options for address validation available, so you can also check with your supplier.
Finally, check every invoice you get from UPS for address correction charges. Research the address and do one of two things, correct the address if it is wrong in your database or call UPS and fight the charges. Either way, you should prevent this charge from occurring again.
It is hard to believe but true, the US Post Office has announced that effective January 4, 2010 that it will reduce the price of a domestic Priority Mail Flat Rate Envelope from $4.95 to $4.90! Now a nickel is not a lot of money but it is better than an increase. Sure, some prices are going up—an average of 3.3% for Priority Mail; however, let me highlight some areas that you can save on shipping that are unique bargains in this upcoming change.
The USPS has three pricing levels: retail, commercial, and commercial plus. The first thing that everyone should know about the shipping industry is this: never pay retail. Retail pricing is for people that don’t know how to qualify for a discount. My objective of this blog is to educate so that you can save. With the USPS, you can get the first level of discount by simply using your computer to ship a package. You can do this for free at www.usps.com by simply signing up for Click-N-Ship. The savings are significant. Instead of $4.95, you pay only $4.75 for a Flat-Rate Envelope AND you get Delivery Confirmation for FREE, saving you $.70 compared to buying it at the Post Office. That is a savings of 16%. Online prices, on average, are 5 percent less than retail for Express Mail and 5.7 percent less for Priority Mail. Online savings for international shipping is 10 percent less than retail for Global Express Guaranteed, 8 percent less for Express Mail International and 5 percent less for Priority Mail International.
If you ship higher volumes, you can qualify as a commercial shipper by using PC Postage with through any other qualified PC Postage provider such as stamps.com or endicia.com for a monthly fee. Many other third-party providers embed PC Postage in their solutions.
If you are a high volume shipper, shipping over 100,000 pieces a year or 420 a day, the rates are even better and there are a couple of new bargains: a Priority Mail half-pound price, starting at $4.22 for a Zone 2 delivery and a new Priority Mail Flat Rate padded envelope for $4.95, measuring 9.5 x 12.5 inches will be available exclusively for Commercial Plus shippers.
In this video you will see a real life example of a package that I received where the cost of shipping was at least 10 times more! As a customer that was charged $7.95 for shipping something that could have been shipped with via USPS First Class Mail for $.61, I was unhappy. Not only did it cost more, it took twice as long to get to me from California–4 days instead of 2. And, on top of that, it was more costly to the environment. It cost more to ship, cost more packaging, and contained plastic filler.
I don’t work for the Post Office or get a commission. I just hate it when I see waste.
Posted by mtaylortec 
