Auction Shipping for Profit
How shipping auction items can actually help you boost profits!
Courtesy of BidBoosters.com The science of online auction selling is full of strategies designed to drive the maximum number of bidders to each auction and raise the final value of each item listed. There are numerous theories surrounding the best opening and closing times for auctions, most effective way to calculate your opening bid amounts, and methods for writing effective titles and descriptions.
In the quest for success and profitability, a critical element is often overlooked that can spell success or failure entirely on its own in many instances. Quite simply, shipping is the backbone of the auction industry; no international Internet marketplace would exist without the ability to deliver merchandise safely and affordably. To my great surprise, though, many auctioneers view shipping as a nuisance, as an afterthought in the auction process that requires time and physical effort. These sellers are neglecting what could be one of the most profitable parts of their Internet auction businesses.
To illustrate my point, I will use one of my own items that I sell regularly. It is a two disc audio book that I produced myself, and sell on popular auction sites regularly for a modest $4.49. Customers who purchase my CD pay me $3.50 for shipping and handling, which makes the grand total only $7.99 shipped. Not bad for two CD’s, right? I’ve never had one complaint, and I smile all the way to the bank every time someone pays me that $3.50 for shipping.
Here is a breakdown of my costs and profits for selling one of these 2 CD sets: My Costs per sold item:
CD Sleeve: 19.8 cents
2 Compact Discs: 59.9 cents
Auction Site Fees (listing + final value): 58.6 cents
Paypal (or other competitor) processing fees: .53 cents
Total Cost: $1.91
I profit: $4.49 (sale price) - $1.91 (costs) = $2.58 total
Once I add in my shipping, though, the table turns in my favor substantially more. The small CD boxes I use to ship the finished product cost me about .32 cents each through uline.com when I buy them in bulk. I ship the CD’s via First Class Mail, which runs around .89 cents. That leaves an extra $2.29 in profit from shipping that I can put straight into my pocket, which is only about 12% less than my profit I from the actual product. Only 57.5% of the $4.49 final auction value for the CD’s is my actual profit, whereas I keep roughly 65% of shipping and handling for each item sold after mailing the item.
What does it all mean?
Quite simply, I am making more money shipping the item than I am selling it. For items that you sell regularly, this means it is time to put your shipping fees and expenses to the litmus test and interpret the results carefully.
Some people feel an unexplainable obligation to simply pass through actual shipping expenses to the high bidder. Popular Internet and mail order catalog houses don’t put you on hold to weigh the item and give you an exact shipping total without markup, and they aren’t out of business for making a few dollars off of postage. Shipping is a service that requires a great deal of careful packaging, waiting in post office lines, delivering to drop locations, and more. If you prefer to work for free, that is your decision. The rest of us will stuff our pockets with the shipping profits you are missing out on.
Let’s say for the purpose of this article that I sell just one of my CD sets per week for one year. At $3.50 (shipping collected) X 52 (# of sales), my customers will pay me a total of $182.00 in shipping and handling fees in one year, of which nearly $120.00 is pure profit I would have missed out on by charging actual shipping fees.
If you actually assess a dollar value to your time, which most professionals do, you would actually be losing money on shipping after you took the time to pack the item and drop it off with the postal carrier. If the numbers seem inconsequential to you, look at them again from a full-time auction seller standpoint. Assume that I have 10 separate CD sets that I sell regularly. If each of the 10 sets sells 2 copies a week, I collect $2381.60 extra in shipping profits alone this year. Assuming you would like an extra $2400 lining your pockets, how do you get started? Fortunately, I’ve done a lot of your homework for you. You know your auctions best, though, so you will have to apply my strategies to your items and work out the optimal shipping solution for each one.
Don’t use just ANY box!
Research packaging, and don’t spend a penny more than you have to. I regularly make trips to grocery stores and liquor shops and ask if they have any boxes they plan to throw out. If I am selling an item that fits well into a FREE box, then my shipping expenses are decreased and my profits increase substantially.
Use this tip with caution, though; a free box that is three times the size of your item is no longer a free box; you will make up for the savings by stuffing it with costly packaging material. Shipping is also often billed by dimensional weight, which takes the size of the box into account. The leaner the box, the leaner the bill! The most common mistake made in the shipping game is buying boxes and packing supplies from public storage facilities, moving truck rental companies, office supply shops, and other retail establishments. The markups at these stores are often in the hundreds or thousands of percentages. Consequently, you make nothing (and sometimes lose money) on shipping. Jump online or scour through your local yellow pages and try to find a company that sells recycled boxes or manufactures corrugated boxes.
For comparisons sake, I shopped for a box a few months back at one of these pack and mail storefront shops that are in every strip mall in the nation. The box I needed was for a small coffee table that I had disassembled and was planning to ship out the next day. The store did not have a box that fit my item, but they were willing to custom pack the table for me for between $20.00 and $30.00. So I headed to my local recycled box store, where I found a perfect fitting box for only $5.99, saving between $12 and $22 off of the “custom” packing job rate that the retail shop wanted to charge me for. Other valuable packaging resources: Shops on the Internet such as uline.com offer bulk rates on thousands of boxes and shipping supplies. This is a great approach if you sell large quantities of similar items; be sure to look at the price they will charge to ship the box to you, though, and then call a few box suppliers within your town and see what price they will offer you. Never disclose the best price you have found up front, though; that’s like giving them more of your money!
Be creative with your packaging if it means saving money; is it cheaper to send a CD in a padded envelope than in a CD box? How much will the box and packing material add to the weight of my shipment? Would neighbors allow you to pick up their old newspapers once a week so you can use them as packaging material, rather than buying expensive peanuts and other filler material?
Research Rates and Put them to Work for You
We live in a brand specific society. Most consumers are brand loyal, and will purchase their favored labels over other comparable and often less expensive products. The same level of devotion is often found between auctioneers and shipping carriers. Many have selected one company, established an account, familiarized themselves with their rates and policies, and grown comfortable with the easy life. Investing all of your money in one company is not a wise investment strategy in the stock market, and it is equally discouraged in the shipping game as well.
For example, the United States Postal Service offers free envelopes and boxes with their Priority Mail services. Many shippers swear by this service because of the convenience; what a lot of them don’t realize is that they are losing money when they ship really lightweight packages using Priority Mail instead of purchasing a padded or flat envelope (depending on contents) and shipping First Class.
UPS and FedEx can also be very cost effective ways to send shipments. Make sure you have actually opened an account with them (you can signup online for accounts companies at www.ups.com and www.fedex.com, respectively). Billing all of your shipments to your account rather than making one-time shipments to a credit card will save you a ton of money in the long run, and also provide you with convenient consolidated payments that save quite a bit of time.
If you are a high volume seller, there is an excellent tool located at www.intershipper.com that will save you countless hours of time and a great deal of money. You simply enter your package information (including weight, ship from and ship to addresses, etc.) and they display rates for all major shipping carriers. It takes less than a minute to access a detailed rate comparison, whereas visiting each site separately could take you closer to half an hour! They offer a free 30-day trial, and prices for each lookup after the trial expires are as low as .10 cents. You will definitely save more than 10 cents each time you use this tool!
Take a look at the items you frequently ship and compare shipping rates with all of the major carriers. How much can you save by pursuing alternate packaging and shipping methods?
Flat Rate Shipping Fees – Simple, Convenient, and Profitable
If you’re not charging flat-rate shipping for all of your listings, abandon your current system right now. Waiting until the end of the auction to receive your customer’s address, then obtaining quotes and emailing out revised totals is a waste of time. Get paid the moment the auction ends, and still make money on shipping.
Here’s how:
1.) Get out your map of the United States and locate your city.
2.) Locate the point on the map that is furthest from where you live / do business.
3.) Before you list your items, package them, weight them, and get a quote on shipping them to the zip code for the point you picked on the map in Step 2. Take this quote, add in the cost of your packaging materials, and mark it up accordingly (I always mark up my shipping by a MINIMUM of 15%). And that’s it. The number you come up with in step 3 is your flat rate for shipping your item to any customer in the Continental United States, regardless of their location. If they happen to live across the country, you still profit by the amount you marked the shipment up. If they live two towns over, your profits are significantly greater.
Buyers will actually appreciate the flat-rate shipping fee because they know before they bid the total amount the item will cost them if they win. You will benefit from quicker payments, since your winners can send payment off immediately upon notification of their win. Use these tips to increase your bottom line, and begin profiting from shipping instead of resenting it. Your bank account will thank you!
Printed with permission of BidBoosters.com :: BidBoosters.com helps power sellers and auction newbies save money, increase sales, and boost online auction selling success with professional templates, free embedded item photos, and insightful auction selling information. ........end of article.........
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