Penny Wise, Pound Foolish
Devalued dollars and shoppers with shrinking budgets have produced an interesting shipping trend: Direct-to-consumer retailers are rethinking how they fulfill small orders, specifically those weighing less than 1 lb.
Online book merchant Alibris, based in Sparks, Nev., has worked to make shipping costs more palatable.
“Our biggest challenge is the cost of shipping small parcels relative to the cost of the goods being purchased,” said Mark Nason, VP operations, Alibris.
“Our product has a relatively low price point. In e-commerce, shipping options can be more robust when the product has a higher commercial value. In our business it is not uncommon to be selling a book at a great value, but the cost of shipping one book causes the customer to have second thoughts.”
Alibris has responded with a two-pronged strategy. On the customer side, it encourages shoppers to purchase more than one item by linking subject categories and automatically promoting complementary materials. The reduced per-item shipping cost when two or three items are purchased makes the overall cost of shipping more acceptable.
Secondly, Alibris partnered with UPS Mail Innovations, a partnership between United Parcel Services and the U.S. Postal Service, to obtain discounted rates on packages under 1 lb.
John Walsh, VP business development, UPS Mail Innovations, described how the service is an economical alternative: “Discounts range from 5% to 25% off the first-class postal rates, and on average, our service only takes one more day. For shipments going across the country, USPS first-class generally takes two to five days, and the UPS service averages five days to deliver across the country.”
UPS Mail Innovations optimizes the induction process through USPS hubs, which improves service, meaning time-in-transit, or improves economics.
However, the trends Walsh sees suggest that encouraging shoppers to justify shipping costs by adding items to the order is not a realistic approach in this economy.
“We’ve seen a marked decrease in the size of orders, from average orders of $217 a year ago to average orders of $108,” Walsh stated. “People are spending less, with smaller orders and more packages under 1 lb. Consumers and retailers are looking for best-cost options on under-1-lb. packages.”
The under-1-lb. package market includes books, CDs, DVDs, games and software and information packets. According to Walsh, one of the fastest-growing niche markets is health supplements and vitamins.