Even Shipping Charges Below Our Cost Can't Satisfy Everyone...

It's no secret that shipping and freights cost have been rising way above the inflation rate for the past 5 or 6 years, and much of the big cost increases have been hidden in the way freight carriers break down their charges. For instance, where the postal service used to just charge one rate to move X lbs from point A to point B, a couple years ago they started 'zoning' the rate table so parcels to far away places became much more expensive the ship. Then they started 'DIMing' boxes, so now a shipment of 3 figures going to that far away place that actually weighs 3 lbs ends up shipping at the 14 lb rate due to the 'dimensional weight' calculation of the box.

The commercial carriers like FedEx and UPS do all this as well, plus they add a few more things, like a couple of bucks extra to deliver to a residential address, and a couple more bucks to deliver to a residential address that's outside of a metro area - which also allows them to quietly increase actual shipping rates each year without increasing their base rate table by just adding to the number of zip codes that qualify for that 'remote zone charge'.

I could go on and on, but basically domestic small package freight rates have pretty much doubled in the past 5 years, and overseas rates have tripled with the postal service having discontinued the cheaper surface mail services, and the commercial carriers tacking on all sorts of extra fees including variable fuel surcharges of up to 20% of the cost of a shipment. In spite of all of this, we have not increased our outgoing freight rates for nearly three years, so it's easy to see why I found an e-mail that came in from an Australian customer last month a little disconcerting:

On May 12th we shipped an order to Daniel M. in Whyalla Australia. That's in South Australia, and while it's not the Western Dessert, it's not Sydney either. The order was for 6 DVD's and shipped at the 2lb freight rate via FedEx International Express. It traveled half way around the world, cleared customs, and was delivered to Daniel on May 18th (the first delivery attempt was actually made on the 15th). His order total was around $130 US, and we charged him $36 for shipping, which he clearly saw when he checked out and also when he setup the paypal payment. So the order shipped complete in 1 business day, was delivered 1/2 way around the world in 4, and we thought everything was fine. Then on May 20th, the following e-mail came in from Daniel out of the blue:

On Wed, May 20, 2009 7:09 pm, Daniel M. wrote:
US$36 for postage & handling?! You've got to be kidding!?.. provide fedex receipt.
Daniel M., Whyalla Australia

So now we have to start proving our actual freight cost for parcels. Of course, in the spirit of good service, I answered the e-mail myself, so rather than a canned customer service style response he got one of my trademark personal e-mails:

Daniel,

$36 for FedEx International Express? That's a total bargain.

The retail cost for a 2lb FedEx International Express shipment from Virginia,USA to Whyalla Australia is $78.67 (US). We get a significant discount off of FedEx's commercial rates because we have a contract with them and do alot of volume, but $36 is still a steal for that service and destination. I'm showing that parcel shipping on the 12th, was in AU in 2 days, took an additional day for customs clearance, and the first delivery attempt was made on the 15th. That's pretty good service half way around the world. Airmail would have taken at least 2 weeks. I haven't seen the actual billing for your shipment yet, but I'm sure the shipping charge you paid was actually a little below our cost.

Hope this helps,
Bob

As it usually works out, 15 minutes of my life gone and that's the last we ever heard from Daniel as he didn't bother to reply to my e-mail (hopefully he's satisfied), but I messaged Jamie (here) to flag the bill when it came in just to see what the actual freight charge ended up being for that shipment. It came in today, and here is how it broke down:

Package ID: 953829495353
Shipped Via: FedEx International Express
Shipped: May 12
Delivered: May 18th
Delivered To: Whayalla Australia
Rated Shipping Weight: 2 lbs

Transportation Charge: $78.67
Remote Delivery Area Surcharge: $22.00
RACS Contract Discount: (-$58.22)

Total RACS Freight Cost: $42.45

Even with our huge contract discount our cost to ship the parcel was actually $6 more than we charged him (which is not unusual these days), though I'm sure Daniel probably would not have been happy no matter what we charged him. Sometimes we just get folks that we just can't satisfy no matter what we do - but we still try to give folks a good deal AND good service (even if they don't know it is), and I guess that's what counts. :-)