Shipping Rates for 2012 Will Impact Free Shipping Policies

Commenting on the recently announced 2012 UPS rate increases in a November 21 Multichannel Merchant article “Numbers Deceiving in UPS Rate Hikes”, Doug Caldwell of AFMS Logistics observes that while increases average 4.9%, the actual increases are considerably higher for lighter weight shipments.  Looking at 1 to 5-pound continental U.S ground rates, heavily used by B-to-C shippers, rates rose nearly 8%.  Surcharges for residential delivery are up 9%, while the delivery area surcharge is up 8.1% for commercial and 9.1% for residential, and in extended areas 8.3%.

Catalogers, especially in the apparel and accessories segments, need to revisit their free shipping policies and metrics in order to avoid margin deterioration in the face of continued demand by consumers.

USPS records $5.1 Billion Loss

Growth in Shipping Services; Continued Decline in First-Class Mail Volume

November 15, 2011

Release No. 11-124

WASHINGTON — The U.S. Postal Service ended its 2011 fiscal year (Oct. 1, 2010 – Sept. 30, 2011) with a net loss of $5.1 billion. The year-end loss would have been approximately $10.6 billion had it not been for passage of legislation that postponed a congressionally mandated payment of $5.5 billion to pre-fund retiree health benefits.

Total 2011 mail volume declined by 3 billion pieces, or 1.7 percent, from 2010. The Postal Service’s largest and most profitable product, First-Class Mail, continued its year-over-year decline, from $34.2 billion in 2010 to $32.2 billion in 2011 (5.8 percent), which dwarfed continued growth in its more competitive products, packages and Standard Mail.

USPS Shipping Services revenue, which includes Priority Mail and Express Mail, increased $530 million in 2011 (6.3 percent). The increase in Shipping Services revenue was driven by strong growth in the Parcel Select and Parcel Return Services, due to increased mailings of packages, as customers continued to use the Internet more often to purchase products. Revenue from Standard Mail increased by $495 million (2.9 percent) on a volume increase of 2 billion pieces (2.6 percent).

The Chronicler notes:  Will the USPS get smart and notice that the two areas of growth come from multichannel merchants and that responding to that demand might provide at least part of the solution?

An accidental pioneer

It was with some sadness that I discovered today the passing of Sheldon Lance, founder of Defender Industries, an independent boating supply cataloger and internet retailer.  I was with the firm during the period 1995 to 2001 when we repositioned the company from pure discounter to a real boating outfitter.  It remains that way 10 years later – way to go Stephen for keeping it that way.

It was usually (although not always) with some amusement that I watched Sheldon come into the office and rip into the purchasing department for not returning items he happened to find in the warehouse stuffed onto the back of some distant and hard to reach bin.  Imagine the look on John’s (a buyer) face when he was presented with some electronic contraption with vacuum tubes and transistors – mind you this was just a few years ago.  John’s reply?  “Sheldon, I don’t even know what that is or what it does!  And the manufacturer is long gone, outta business.”  Sheldon would say, “Return it for credit anyway.”

Defender was actually one of the very first – if not the first – boating catalogs (circa 1960) and internet retailers (1994). In their own way, a true pioneer in the industry.

Goodbye Sheldon.

QR Codes: Bonanza or Bust?

Tim Parry’s article ‘Are QR Codes on Catalogs Cutting It?”Aug 22, 2011, in MultiChannel Merchant hit at the crux of the matter. The printing of the codes on a catalog is easy enough- gosh, even I did it to get the 3% discount for Tuttle. But did I understand what I was doing and did it do anything to bring in business?

If you have a story to tell regarding QR codes, let The Chronicler know. I would like to hear it.

The Chronicler Returns

After a three year hiatus (actually in the trenches as COO for a specialty retailer) I have returned to The Catalog Chronicles.  My last predictions were that Free Shipping and shipper fuel surcharges would hammer the industry’s financials.  We can thank LL Bean, Nordstrom’s and other big box/multi-channel retailers for inserting “free” into our daily lexicon.  And diesel fuel, after a drop in 2009, is back near the $4.10 per gal. cost of 2008.  This week’s average price is $3.89 per gallon.

Now that “free” shipping and higher fuel prices have embedded themselves in the cost structure of the survivors, what will be the impact of the USPS’s dismal state in years to come?  Stay tuned.