Ouch! The Postal Rates Went Up! Don't let the new postal rates steal money from your pocket. Our expert tells you how.
Opinions expressed by Entrepreneur contributors are their own.
On January 9, 2006, the U.S. Postal Service raised their rates across the board. The first-class stamp has gone from 37 cents to 39 cents. That's certainly a far, far cry from the 2-cents-per-ounce first-class postage rate established in July, 1885.
Other than that first-class increase, there has been an across-the-board increase in Priority Mail--the de facto standard for mailing eBay packages. (Check out this handy grid sheet showing the new Priority Mail rates by zone for packages that weigh up to 20 pounds.)
Since their inception, eBay sellers quickly jumped aboard the convenient USPS flat-rate envelopes and boxes. This is the ideal way to get your packages to the customer in a very timely manner, for a very reasonable rate. Sadly, aside from the general Priority Mail increase, we were also hit by the following heartbreakers:
Priority Mail Flat Rate Envelope--from $3.85 to $4.05 Priority Flat Rate Boxes--from $7.70 to $8.10 Express Mail Flat Rate Envelope--from $13.65 to $14.40 Delivery Confirmation--from 45¢ to 50¢
There are several reasons for the rate increases, the main one being the extra revenue is needed to fulfill a federal law that requires the USPS to place $1.3 billion in an escrow account to cover civil service retirement benefits.
The rate increase, along with the many other increases eBay e-tailers have encountered this year, is digging directly into our pockets and cutting into the bottom line. The average of 50 cents more per package may not seem like much, but it can turn into hundreds of dollars a for a medium-volume eBay business--and that's significant.
Working With the New Rates
Since the USPS has the best rates for small packages, you have a few choices as to how to deal with the increase. The first thing you might consider doing is to increase your shipping charges to cover the cost. The problem with this is that it may discourage new customers with the higher rates.
You also might consider doing what I plan on doing--use more of the lower-category services such as Parcel Post and Media Mail and give the buyer an option (see the USPS's "Guide to Mailing" for more information on these services).
Previously, I only sent items via Priority Mail so that my customers would get their packages quickly. Now my new shipping rates will be altered to give buyers the option to pay extra for that quick service. If they're not willing to pay, they can get the fairly inexpensive ground service. By offering my customers a range of cost options, they'll feel more in control of how they spend their hard-earned cash.
Another thing to consider is the post office's increase in insurance rates. Previously the post office charged $1.30 for insurance for package values to $50, and $2.20 for packages valued to $100. The new rates are $1.30 and $2.30 respectively. One very smart way for a seller to turn the insurance from a high expense into a profit center is to consider using private package insurance. I've used the services of a company called U-Pic.com for several years and have saved considerably on my insurance. My customers get optional insurance and pay the standard USPS rates. I pay U-Pic their standard rate, which is a 60-percent savings to me over the USPS rates. I actually profit while insuring my packages!
Alternative Shipping Methods
Become knowledgeable about competitive shipping services, costs and features. My first knee-jerk reaction was thinking I would switch all my shipping over to UPS or FedEx Ground, but then found out that they've had rate increases as well.
Another thing to consider when using Priority Mail is the availability of free boxes--delivered direct to your door by the post office. This doesn't seem like much, but you can save up to 65 cents per box when you buy in bulk.
With just these few sample prices, you can easily see what a bargain you're getting by using the post office's boxes.
Also, consider printing your postage through PayPal (if you're a low-volume seller) or endicia.com if you're a PowerSeller so that you can get free delivery-confirmation labels for Priority packages.
Creative businesspeople will always find a way. I trust that you, too, will find a way to weather this distressful rate increase.