Thursday August 14, 2014

Lemons to Lemonade- UPS Edition

picture of a box that says free shipping on it.

The shipping industry is getting disrupted hardcore, led by the likes of Zappos and Amazon with their outrageous and much-loved free shipping policies. Amazon, in particular, has ground down it's shipping vendors to outlandish pricing and terms. 

As a consumer, I love it. Via Amazon Prime, I can get virtually anything I can think of tomorrow for $3.99 shipping. A couple years ago it was outrageous and awe-inspiring. Now I just expect it. 

For businesses though, it's creating quite a ruckus. Amazon has a huge [and growing] advantage over run of the mill retail operations. They're also having an impact on retail shipping businesses like UPS Stores, Postal Connections, The Shipping Annex, etc. 

Up until the last few years, if I bought something off a website and wanted to return it, I had to pony up for the return shipping- maybe as much as $8 or $10. Online returns and exchanges were a great additional source of new income for these little shipping stores. 

Now the online retailers cover the cost and simply provide the consumer with a pre-paid voucher. And as I understand it, simply pay the shipping store a $1 or $1.50 handling fee. And the volume of these kinds of drop-offs has increased by an order of magnitude. 

Some of these shipping retailers are pissed. Case in point: 

I bought my wife a HydroFlask water bottle recently- and picked the wrong color (of course). In my excitement, I threw away all the packing materials that Amazon shipped with it to keep it from bouncing around. 

I processed an exchange with Amazon, printed off the prepaid label and took everything down to my local shipping store. The box was open, needed to be taped and the label attached on top. 

When I walked up to the counter, I said, "I just need to ship off this pre-paid package". The guy kinda looked at me dismissively and said, " okay, well, it needs to be taped up and the label put on the box, and you're going to need some packing material so this doesn't bounce around". 

I waited for a second, not fully understanding his point- Isn't that part of what they're paid a handling fee for- the 15 seconds it takes to tape the lid, the 4 cents worth of tape needed to apply the label, and 2 cents worth of packaging peanuts? 

But he just looked at me blankly. So I kind of blurted out, "So do I need to pay you to do that?" My agitation wasn't lost him. He replied that it would be "Umm, $5". 

And, blah blah blah- he taped, packaged, labeled, and I walked out 90 seconds later, certain I'm now going to drive an extra 8 blocks next time to the other shipping store. 

Things change no matter what industry we're in, and we have one choice- embrace it, find a angle we can exploit to make the most of it, or we can bitch, moan and treat our customers with begrudging annoyance. 

Let's analyze my example above- 

If I'd come in and paid retail to send that water bottle back to Amazon, I'd have chosen the cheapest method- probably $6? And let's just say I took 1 minute at home to tape the lid and shove some newspaper inside to cushion it. What kind of margin do you think he would have made on the deal? If I had to guess, no more than $2. Probably less. 

The way it actually went down, how much did he make? The $1.50 for handling, and then $5 for packing things for me. he probably cleared 4+ bucks even if you factor his time on top of the materials. 

What the hell is there to be upset about? I mean, I get it. UPS and Fedex changed the rules. At first blush, they've eliminated much of the retail shipping transactions. But obviously if you stop there, you miss the opportunity in it. 

If this guy had right thinking, he intentionally promote the convenience layer they provide- "just throw your Amazon stuff in the box and we'll take care of the rest for cheap". I don't mind paying 4 or 5 bucks for convenience. 

Furthermore, what if that shipping store created an annual shipping club where the packaging materials and package prep was free and unlimited for an annual membership fee of $15? "Just drop your Amazon/Zappos/Best Buy/etc stuff and go!"

My guess is they'd have a new profit center for their business.

The whole "Make lemonade from your lemons" concept never ceases to offer transformation. There's an opportunity in every challenge.  

Chris Nordyke is an integrated marketer and strategy consultant. He works with owners and senior business leaders to transform and grow service companies via a unique holistic approach that drives referral business and client retention. Click here to schedule a complimentary consult with Chris.

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