As usual an askJOHN begins with a question - this time in the form of a complaint. And in America, because it's always fair to raise your voice and register a complaint, here goes with how we got here . . . and please keep in the back of your mind, it's 2023 but the FOB Shipping Point values used are an ever moving target (means they're gonna be even higher soon enough).
Q. Loving the servos, but why are the shipping costs to WI so high? $14 for a tiny box that takes over a week to get to me from Florida? It doesn’t seem right!
A. Short answer: you're right, $14 for such a tiny box isn't fair. But being 100% right in this also makes you wrong. You're lacking information. In theory $14 'is' a rip off, but turns out practice is different! Let me explain . . .
On real world practice
To begin, we pay $21/hour and spend 1/4 hour packing the average order. Orlando area minimum is $12 and if you believe that's what we should pay maybe you're not our kind of customer (no offense).
So the above, plus the shipping department which has fixed and variable costs to cover (and we don't assign any part of them to walk-in traffic - typically FL residents, snowbirds, and tourists). These are parts of the costs the mail order customer must bear alone.
This ends the TL:DR, let me break it down for you in long form.
Beyond postage/insurance plus the box/packing (an actual expense civilians typically forget but which a business must take into account), shipping also includes . . .
- shipping department square footage/insurance (proportion)
- computers/software/subscriptions (proportion)
- printer/supplies (per customer)
- labor (averages 1/4 hour) at $24/hr
. . . so why should you care about any of this? Simple, because the 'only' reason the shipping department even exists is for mail order customers like you.
So adding up the labor along with the postage and insurance, plus the box and packing is everything, right? Nope, that STILL isn't what shipping actually costs.
Shipping Cost Breakdown - beyond the box and postage
So on top of the price of the shipping box, packing materials, labels, and postage, there is also labor plus the fixed costs for the shipping department itself.
Why should I pay for the shipping department?
Simple, because you're the mail order customer (walk-in customers don't pay a penny of it), so mail order-customers only get the honor. Means you.
How do we determine this cost? Math . . . take the rent and divide by total square footage (for the whole place). Take this number and multiply by how many square feet the shipping department takes up (there's actually a slight adjustment for communal areas like hallways and bathroom but it applies to all departments and comes out in the wash). Now divide this figure by the number of orders (and remember, it's not just rent, because there's also insurance, electricity, plus other utilities like telecommunications, too).
Surprisingly, when you boil it down, because we ship a lot of orders, the $1.35 cost per order isn't horribly high. The 'real' cost drivers are labor and postage.
Background
Important in all this is this; please realize the folks who retrieve their merchandise in person will incur zero of these shipping expenses (logical since they're not using the shipping department). Thus, they don't pay for any part of the shipping department costs (and of course, no charge for postage or labor, either). It's all on you, the mail order customer, only.
Anyway, cutting this short, please believe me when I promise you this; after busting a nut offering the best servo available and doing it for a fair price, we wouldn't turn around and bend you over on the shipping to make up for it.
Why not? It's because the only thing the high shipping costs actually do is piss off people who haven't taken college level business math. Sadly, that's a lot of us. But look, as you're learning, we price things fairly. And not just servos but every part of your interaction with ProModeler.
Anyway, what I'm trying to explain to you is this: the $14 price is not our fault and you're actually not getting screwed. Let me wrap this up with this thought: as an operating philosophy of the business, fulfillment is NOT a profit center!
Details about where the real costs lay
What I am saying is: I'm deeply sorry - but - shipping costs what it costs, and we apportion the expenses to those who actually incur them (the mail order customer). That would be you!
Put another way, it wouldn't be fair to those who drive here to bear even one penny of that part of the operation, agreed? So because the shipping department exists solely to support mail order sales, then squaring the circle, mail order customers must bear 100% of the shipping expense. And note: the bean-counter reviews these figures every quarter and makes adjustments as needed.
Note: Labor is $21/hour but our actual costs are higher (FICA, taxes, insurance, etc.) Also, you should know this if you're wondering, free shipping was invented by marketing and doesn't actually exist.
So, the average order takes 16 minutes to pack and ship - but - we actually round it down for your benefit, so call labor one quarter hour . . . or about $6 (and this is per order). And if we were a typical shitty employer (e.g. paying less than a liveable wage by offering $12/hour), then the labor component of shipping would be about $4 vs. $6, so call dealing with us instead of some scuzzy guys a $2 tax because it amounts to a whole two bucks less on the cost for your order!
Note: the reason we don't fold shipping into our prices (so called Free Shipping offered by some businesses), is because most guys are savvy enough to realize there's no such thing as the tooth fairy (meaning TANSTAAFL), but I once again, digress.
Major point being this, free shipping would just shift shipping costs from someone like you in Wisconsin onto the shoulders of a guy 10 miles away in Altamonte Springs, which wouldn't be right!
Did I hear you say, you don't care? Well, he does and complaining in person is a whole other level compared to dealing with you via email.
Basic math
But truth be known, even if you lived just 10 miles away, by the time you paid tolls (we have lots of toll roads in Florida), and incurred the reasonable mileage expenses for a car (20 miles round trip) as per the IRS published Tax Code, plus accounting for local minimum wage for driving, along with that trip takes about an hour, so by the time all is said and done, call it $12/hr for that (and you're probably worth more than this), then if you put pencil to paper I guarantee you'd 'still' spend more than we charge whilst delivering to your door! How? Magic? It's because you can't beat a man at his own craft and the post office's craft is delivery.
Note: some folks do drive over anyway (hang the added expense and trouble). That's fine, for folks who need something 'right now' we have a 6-locker cabinet outside.
Wrapping it up
I'll close with (and locals will confirm), there's nothing to see if you come in person (other than a 6-door locker). Why not? Couple of reasons:
- it's because we're not a hobby shop!
- and because the machine shops are off limits except to those with a clearance (contracting officer approved reason to be on site - defense business).
So a warehouse visit is a big fat zero in terms of being of interest to modelers, which I mention by way of heads up if you are in these necks of the woods and think maybe we're like a hobby shop and a fun place to visit, because we're not 'and' it's not!
A detailed break down
So as you can see, we aren't screwing you on shipping, we're just not! And finally, this is the breakdown on 'your' numbers for your 12oz small box to WI - from most to least costly line item . . .
- $6.45 postage
- $6.28 wages
- $3.40 insurance
- $2.23 computer/subscriptions/etc.
- $1.35 apportioned/square footage
- $1.07 box/packing material/tape/etc.
- -------------------------------------------------
- $20.78 TOTAL
. . . so for your small box to WI, we charged you $14 and you didn't like it, but as it turns out, we actually spent $20.78 (or two bucks less at $18.78 if we were a scuzzy operation) meaning we actually went into the hole on your behalf so who's getting ripped off, ain't you! But don't fret because we don't.
Reason we don't fret, and you shouldn't either, is the numbers aren't individually perfect, but they 'are' balanced out over the total orders for the year within the shipping engine. So in keeping with Yogi and baseball, no harm, no foul. Bottom line? We focus on . . .
- making the best servos money can buy
- offering them to you for a very fair price
- delivery using what it really is costing us
Let me close with this: the title of this post is, '$14 for postage is a rip off!' and as it turns out, who is usually going in the hole for individuals is us!
Respectfully, I'm baring the soul of a business' inner workings (part of what's meant by trade secrets). This, to prove what I began with, shipping is not a profit center for the business.
Fortunately, for you, you're still getting the best servos in the world, doing so for a very fair price, and we're not even screwing you over with the shipping to make up for it! Win-win.
Better parts. Better prices. The formula is simple. Extends to all your dealings with ProModeler
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