Thursday, September 28, 2006

P&P Conundrum - Thinking Aloud

It's been some time now since the new Royal Mail postage charges came into effect . According to their publicity, "over 80% of all mail will cost the same or less to send".

Is it any surprise that over 80% of my mail to customers now cost more, quite a bit more, largely because they now fall into the 'Large Letter' (minimum 44p) or 'Packet' (minimum 100p) category even though something may weigh very little. I have had to stump up higher postage -- or 'post-rage' as I accidentally typed!

I run a 'happy' business. I am happy that Organic-Ally sells only what I believe to be earth-friendly goods made in people-friendly environments.

Customers are happy and they write to tell me how wonderful these goods (reusable hankies, cosmetic pads, gift bags, string bags, etc) are.

My son is happy that Mum is working from home and is there to pick him up from school.

And husband is happy that ... well ... husband is happy that I am happy.

This new postage structure however is causing a headache.

I have based my P&P structure on weight so that customers who buy lightweight items do not pay a hefty standard P&P. I believe this is fair.

I offer low and even no P&P to customers who just wish to try out 'single items' and require no 'minimum order'. Many retailers resort to using a 'minimum order' or standard P&P charge (pegged at the highest possible value acceptable to the customer) to make selling online worthwhile.

I'm in this business mainly because of my environmental concerns (though making lots of money will be great). Many customers have been put off buying a string bag because it normally costs £3.95 P&P. (I sell the tote string bag at £3.49.) It is therefore important to me that as many as possible get a chance to try our bags and hankies. So single organic cotton hankies are despatched free and single string bags cost 50 pence in P&P.

After taking into account the various overheads, there is very little, if any, monetary profit to be made. But it is OK, because every string bag sold means the reduction of hundreds of plastic bags used and this, as far as I am concerned, can only be good.

But while single hankies used to cost me 23 pence to send Second Class, they are now a whopping 37 pence (a 14 pence or 60+% increase), or 44 pence First Class (I don't even want to go there) because these hankies are rolled up and do not meet the 5mm maximum thickness to be sent as a 'Letter'.

The envelope + rolled-up hankie + delivery note weigh a grand total of 18g.

So until my supplier sends me single hankies flat instead of 'rolled up', I will resort to unrolling the hankies before sticking them in the post. I hope customers do not mind this too much.

It's in keeping my commitment to charging just 50 pence for a single string bag that poses the biggest headache.

I can now just about squeeze (and I mean squeeze) a single string bag into the 'Large Letter' category and squashing it into less than 25mm thick to keep its postage at 44 pence, or it has to go as a 'Packet' at 84 pence (up to 100g). Where customers used to pay £1.00 for two string bags and I paid postage of 84 pence for up to 200g, I will now have to pay £1.27 postage because two bags need to be posted as a 'Packet' (and I have not even factored in packaging).

It has been suggested that retailers like myself should just peg everything at the 'Packet' price (postage starting at £1.00), but this is utterly unfair to customers of flatter, lightweight items (like packs of hankies and table napkins).

Or how about including postage in every item?

This only penalizes customers who buy more. For example, one Box of Eight hankies would require £1.27 postage (ie excluding cost of packaging) but two boxes would require only £1.70 postage. Including postage with each item would mean customers having to pay, in this case, £2.54 instead of £1.70 (excluding packaging) when buying two Boxes of Eight .

What if I 'zero-weighted' the flatter, lightweight 'single items' (ie include postage in the prices of single string bags, hankies, gift bags, etc, but code these items as weighing 'nothing')? That way, customers buying 'single items' will not be overcharged. Buying more than one 'single item' cancels the 'single' status, and the customer would pay accordingly, thereby ensuring that I do not need to lose money on postage.

The one little, perhaps insignificant, problem with this is promotional discounts are calculated on order value, and if a customer orders several 'single items' that have been zero-weighted to make up x amount to capitalize on a promotional discount, they would end up paying more than other customers. Not fair!

Thus the past two weeks (when I'm not reviewing a PhD thesis) have been spent puzzling over which is the best way to calculate postage and packing so that all customers are happy.

One way around this (and I think I might be close to finding the solution) is to 'understate' the weight of certain items and establish several weight categories in the lower weight region.

For example, a string bag falls, in reality, into the 100g category, but by coding it as being only 60g, it could be charged as 50 pence in my '30g to 60g' weight category. Two string bags will take it into 120g at £1.40 (say) requiring postage of £1.27 as a 'Packet'.

Large Hankies and Table Napkins will be coded as '45g' even when they weigh more to take advantage of a 50p P&P. Two of these items will be still be only '90g' which I can despatch at 65p. (This, in fact, is a rare example of postage being cheaper in the new price structure.)

Apologies if you think all this is unnecessary gobbledygook. Or you might be thinking: why does she bother?

I'm only trying to make it as fair as possible to all customers.

Back to Organic-Ally.

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