Mastering Shipping with Subscription Boxes

Mastering Shipping with Subscription Boxes [Transcription]

By Jesse Richardson [transcribed and truncated by ShipMonk] / Mar 10, 2017

Jesse Richardson from the Subscription School hosted such an amazing, education-filled webinar on Mastering Shipping with Subscription Boxes, that we had to transcribe and truncate parts of the recording into an action packed blog article.

 

We’ve included time stamps for each section in case you wanted to go back and watch specific sections of the video and hear Jesse’s full explanations and answers.

 

Mastering Shipping with Subscription Boxes focuses on:

  • The different carriers and shipping options
  • How to ship with USPS, UPS, FedEx, and DHL
  • Label printers
  • Ways to save money on shipping costs
  • Things that you can you do to save a couple dollars per box
  • Why optimizing shipping is really critical for your subscription business

 

 

Why should I even care about shipping? [6:00]

It kind of seems like a mundane, uninteresting part of your business? I mean, granted it's not the most, it's not the most interesting thing about subscription boxes. It's certainly not the most fun thing to do. You might really love doing packaging design, you might really love finding the best products. But, it is really important and the reason why it's important is because shipping can be a really rigid cost. When I say a rigid cost, I mean, once you have a shipping cost, it's really, really difficult to get that to go any other direction than up. When I say up, I mean more expensive. Over time, our carriers are going to increase our rates because of fuel charges, other weird surcharges, delivery charges. It might be something associated with some piece of legislation that just went through Congress or something like that, and now shipping carriers add this other new taxation.

 

Whatever it is, usually these prices only go up. They rarely ever go down. The USPS, for example, in January [of 2106] announced new cubic pricing rates and they were quite a bit more expensive, I think maybe a quarter for each tier than they have been for the last couple of years. So, I don't think I've ever really seen shipping prices go down, and because of that, you want to make sure that you're optimizing it from the start, so you're making sure you're getting as low as a price as you can as early as possible so you can be saving as much money as possible.

 

I mean this...

A shipping cost per box affects every single one of your shipments. This isn't some one time expense that you kind of realize and then you kind of move on from. This is a recurring expense, it's a part of your cost of goods. It's a part of the fulfillment cost of your product. It's included in every single box's price and it's unavoidable. It's a part of doing business as a subscription business. I mean, we're shipping nationally. We're shipping all over the country and that means that we have varying shipping rates and that shipping is a reality of the business model. But that said, it doesn't mean that you can't get lower prices and you can't optimize as part of your business.

 

That's going to depend on a few things:

  • Where you're buying postage and who you're buying it from

  • The size of your box

  • The weight of the contents

  • Maybe even the types of contents

 

Maybe you're shipping something that's either really fragile and needs some type of unique shipping method or you're shipping something that's like alcohol or something, or you've got something unique about it, that can sometimes affect the price, too.

 

 

What king of label printer should I use? [10:01]

Here are three label printers that are kind of the three different tiers of printers. So, it really depends on what stage you're at in your business.

 

If you're just starting out and you're doing maybe 100 or 200 shipments a month, the DYMO 4XL, it prints really cleanly, it's a thermal printer, so it uses heat and not ink, so you don't have to worry about ink costs a bunch. It's about $300. You might be able to get it for cheaper on Amazon, maybe 200 bucks I think is the lowest I've seen it.

 

If you're doing a little bit more and you have a shipping day where you're doing 1,000 or 2,000 boxes, the Zebra GX430T is kind of the start of the professional tier. I use a Zebra printer. They're really easy to use, the quality of the labels is also really high. I've never used this exact label printer, but the idea is once you get to this stage, you want your labels to be coming out really quickly. You don't want to have to wait every couple seconds for a label because when you're dealing with 500, or 1,000, 2,000 labels, that can mean literally eight hours of a label printer printing, which is a total pain in the butt.

 

Now, if you're shipping 10,000 boxes right now and you are sick of using your Zebra printer, your tiny one, the Zebra ZT4000 is the start of the commercial professional label printers. This uses a, not a spindle, they call it a, it's basically a big roll of labels in the back here, and they come out really nice. It's like a ribbon of labels and this thing shoots it out super fast. If you're trying to find a new solution, those things sell for 1,300 bucks. Sometimes, a shipping partner will let you use theirs, so if you're working with FedEx or UPS, they'll sometimes bring one into your facility which can be really nice. It depends on your shipping carrier and if they have that option. But the amount of time it'll save you... And ships splitting up into different batches, it just makes it so much easier to deal with.

 

 

Let's talk about shipping methods [12:44]

So you have access to several carriers just as a subscription business, or as any type of shipping business, or e-commerce business, but let's talk about who's best. Let's talk about weight, let's talk about volume. Let's talk about how do you get these shipping costs down?

 

I'm going to give you basically five different carriers and the fifth carrier, that's going to be really be about international shipping. But these first four carriers are basically the four big ones for the US and for domestic shipping.

 

DHL

DHL can be one of the cheapest solutions for shipping. It's low-cost, isn't the only thing you need to pay attention to though. DHL, let's talk about the positives. DHL sets itself apart because of its international shipping. If you've imported products from overseas, you've probably used DHL. DHL's got a huge international network. It's one of the biggest and one of the most reliable for international shipping. And when I mean international shipping, I mean shipping from the US to other places. It's got locations in 220 countries.

 

FedEx

We all know about FedEx. We got those FedEx print and ship stations all over the place. FedEx is generally seen as one of the faster, more reliable shipping partners. They're a little bit more expensive. Their costs are definitely higher than DHL or the USPS. FedEx kind of originally got its name in the shipping world decades ago because of their next-day air. They were really the ones who championed the whole next-day air shipping method, and because of that, they've gotten that reputation of being fast. Their dashboard's simple. Another cool thing about FedEx, they offer SmartPost.

 

SmartPost is an affordable way to get larger boxes that are low weight, I think the weight limits something like 20 pounds, to residential addresses. It delivers to all US states. It's a good option for cost saving. So if you wanna use FedEx because of their reliability, but you wanna save some money from their normal postage, use SmartPost. The thing that kinda stinks about SmartPost is it takes a lot longer to arrive. And the reason why this is, is because they... It's actually partnered with the USPS, and it's through a method called DDU injection where it's basically that FedEx hands off the packages to the post office, and then the post office delivers them.

 

It's really good for home addresses, but they don't deliver to PO boxes, and that's something that can matter or may not matter. You wanna look at maybe your addresses that you have and see how that might affect it, and then you could batch those people off in their own USPS shipping batch, so you could do 95% of your shipping through FedEx SmartPost, and then you can do the other ones through just USPS, if you need to get to PO boxes. SmartPost does deliver to APO, FPO and DPO, but they don't deliver to PO boxes.

 

UPS

UPS is obviously a large, well-known shipping provider. If you've ordered things online, especially if you've been ordering products from across the country, a lot of people use UPS because their freight's a lot cheaper, so it's generally cheaper for heavier packages than what you'll get with FedEx. It's also super reliable.

 

USPS

You'll have a lot longer lines at post offices. It can be a little bit of a pain in the butt to work with them, but it's probably one of the best, if not the best, options for a couple different reasons.

 

Number one, from my experience, it's always been super safe, clean, reliable, and secure. Shipments have a, generally the rates I saw, were 1% or less error rates. And when I say error rates, I mean, packages that arrive damaged, misdelivered, or went missing, so very low. When you use cubic shipping with priority mail, it comes with a certain amount of insurance already built into it, so that's kinda nice, so you can always open up those claims and get your money back. Another interesting thing about USPS, if you care about this type of thing, is they have a growing electric fleet of vehicles. They transitioned to electric fleets and they are transitioning further because it helps keep their cost down so they're not as affected by oil prices, which I think is really cool.

 

So if you're interested in not only the environmentally conscious aspect of that, but also for hopefully a little bit more stable prices, that's another kind of perk about the USPS, that they've kind of built in so they can ensure that their prices don't get crazily impacted by oil, which is a reality. They have really low rates for packages under 2 pounds. If you're shipping a really light box, it's going to be really cheap. USPS First Class would be an example if it's under 16 ounces, it's ridiculously cheap, you can ship boxes for two bucks, depending on your zone.

 

Cubic shipping is awesome too. Cubic shipping, I think, is the way to go. If you're shipping a small or medium-sized parcel through the USPS, using the cubic shipping contract with them is going to save you tons of money. It's going to blow the prices you get out of the water from what you normally had access to at the USPS, an actual post office. With cubic shipping, for example, like I said, you wouldn't go into a post office and say, "Give me your cubic shipping rates." The person probably wouldn't even know what you were talking about. You would get cubic shipping through a reseller like Cratejoy, Cratejoy uses cubic shipping, or through somebody else. And you could get a contract yourself. It requires something like 50,000 packages sent a year, so if you're not that big obviously it doesn't make sense to do that, but using cubic shipping is beneficial for a couple things.

 

 

Cublic Pricing [22:46]

It's based on volume, not weight. And so you can have a 5x5x5 box and you can have 20 pounds in that box and if it's 1 pound or 20 pounds it's going to be the same cost to you. Because of that flexibility of price of weight, it reduces the variation of price and that means it's going to be a lot more projectable for your financial planning, it's going to be a lot more projectable for your cost of goods. If you plan on using the USPS when you're first pricing your subscription box and you get a solid quote for 7 bucks or so a box, you can pretty much rest assured that you're going to pay 7 bucks, on average, per box, regardless of what you put in your box each month. That can be a really great way to save money on shipping is through cubic shipping and that's something we're going to talk about a little bit later.

 

And then obviously with the USPS, it's guaranteed delivered to APO, FPO, DPO addresses, PO boxes. USPS delivers to all US addresses, basically, even if they're overseas and stuff like that. It's a great solution and I think it's the best one. And check this out, I mean the USPS is acknowledging subscription boxes, and that's pretty cool. If you go to USPS.com, you'll probably see this banner that shows NatureBox, and BarkBox. Those are two huge subscription businesses. They're making really big efforts and they actually recognise that subscription boxes are a growing industry. And so they are doing bigger and better things so it's easier for us to schedule pick-ups. It's easier for us to save time and money with them. Because of these reasons, I think the USPS is probably the premier shipping partner for subscription boxes and the ones that I would suggest.

 

 

International shipping options

If you're wondering about international shipping, I can give you a little bit of advice on this. If you're shipping from the US, if you're using something like USPS, you'll be at First Class International. Generally though, most of the carriers going out from the US to the outside of the US, their prices can be generally the same. You might be able to save a little bit more money with, for example, DHL or something like that.

 

But it's not going to be a huge margin of difference between each one of them. Obviously that depends on what you're shipping, and how much it weighs, and what the value of that package is. Kind of where that comes into play is custom forms. When you're filling out custom forms, you want to look for a carrier that makes it easy for you to do that and you want to find a platform that makes it easy for you to do that. So shipping from the US, that's what I would suggest. I would suggest USPS First Class International mail. And when you're looking for a platform to do this with, look for one that makes it easy for you to fill out those custom forms.

 

Outside of that, I don't have a ton of experience shipping outside of the USPS First Class International. The only ones I've heard that are good in terms of prices is DHL, and the only one that I've heard in terms of reliability is UPS. What if you are shipping internationally, and I mean you're based out of the UK, or Canada, etcetera? If you're in Canada for example, or even if you're in the UK or actually any country, if you think that most of your subscribers are going to be inside the US, I would suggest outsourcing fulfillment. And when I say "outsourcing fulfillment", I mean directing all of your packaging and your products to a US-based fulfillment center.

 

By doing that, you can skip all the work of customs. You can skip all the work of the different tariffs and taxes that you'll have to deal with. When you ship products in the US, you'll have to deal with that. Of course, if you can use a US-based distributor that already has the products that you want to have, you can skip that step too. But outsourcing fulfillment to the US, especially if you have a large base of US-based customers, it can be one of the easiest ways for you to save a bunch of money.

 

 

How can I lower shipping costs? [29:15]

We want to get the shipping costs as low as possible for two reasons:

  1. Save money and it benefits our bottom line
  2. When shipping rate increases do occur, they don't impact us super significantly. We make sure that we have the lowest price possible, and so future changes hopefully don't really impact our revenue.

 

USPS cubic shipping

So this is something that we have already talked about, but I want to go over it a little bit more in detail and some other kind of, kind of tidbits about this and when you wouldn't use cubic shipping just so everybody's on the same page here. So cubic shipping is based on volume not on weight. So what does that mean exactly? It means you determine the amount of space within the box. The way you determine it is by multiplying length times width times height, and then you divide that by 1,728. When you do that, you're going to get a number that's like 0.14 or 0.27 or something like that. That's going to define your shipping tier.

 

For example, if you, if you have a box that's like 8 inches x 3.75 inches x 6 inches that would probably put you in 0.1 cubic tier, and it, it would probably be like 0.18 or 0.19 my guess would be. That'd be a pretty big point cubic tier one box. And so you can see here on the left-hand side of this table what the prices are. So you see the number of zones here? Zone 1 and 2, Zone 3, Zone 4 all the way up to Zone 9.

 

Each zone has a different price associated with it. So for example it's based on where you're shipping from. So if you're shipping from Portland, Oregon and you're shipping to let's say, Florida, that would be probably like a Zone 8 or it might even be a Zone 9. And so what that means exactly is that the amount it cost to ship to that state is going to be $9.47 or $6.95 depending on if it's Zone 8 or Zone 9. Now if you're shipping to Washington State, it's probably Zone 1 and so you're looking at $5.60. And so, you can see here how the zones of cubic shipping can really impact your shipping price. And that's something that we're going to talk about later, is a way to get shipping costs down. And you can see how if you move from the left to right here how the different cubic pricing works out depending on your tier. So, if you're trying to optimize shipping, one of the things you can do here is to try and decide what, what cubic tier do I want to be in? Obviously, the cheapest, cheapest is 0.1. And so try to figure out dimensions of a box especially when you're doing custom packaging, that would put you in cubic tier 0.1.

 

If there was a difference between 8, 6 and 3.5 inches to 9, 7 and 4 inches, if the, if the latter example right there put you in cubic tier 0.2, you can see here you're looking at an average of, it'd be 15 cents, 15 cents more per shipment. Multiply that by 2,000 shipments or 1,000 shipments or how many, however many you think you're going to be doing and that adds up. It's going to be a couple of hundred dollars. And as you scale, you get to 10,000, 20,000, 50,000 subscribers, it's going to be literally thousands of dollars. And that money can be reinvested in customer acquisition, it can be reinvested in website design and optimization, that type of thing. So choosing your cubic shipping tier is not something you should kind of just haphazardly do. I would really suggest especially if you're doing custom packaging, to spend a lot of time thinking about how you can use cubic shipping to your benefit and how you can get yourself in the right tier to make sure that you're saving as much money as possible.

 

When, when would I not suggest USPS cubic shipping? Well, probably if it's under 16 ounces of weight. If it's under 16 ounces of weight First Class shipping through the USPS is going to be cheaper.

 

Working with a fulfillment partner can be a great way to save on shipping

There's a couple of ways to work with a fulfillment partner. Either you can work with a fulfillment partner and you send them a PDF file with all your labels, or you can ask them if they can print the labels for you. Not print the labels for you, but actually purchase the labels for you.


If you're having a hard time determining what the best rates are or if you don't feel confident doing that research, just ask your fulfillment partner. Most fulfillment partners, if they're big and they're well established, there already dealing with huge amounts of shipping. Probably a lot of it's through UPS because of it's probably a lot of freight, like a lot of big boxes being shipped around. It's not so much small parcels, but it's definitely worth asking them. So the three questions I would suggest asking them would be, "What provider do you use? Do you have access to USPS Cubic Shipping Rates? What's the up charge you provide for that?" Because remember this table I gave you guys is the base pricing so if you had your own contract, this would be the pricing you'd get.

 

Ask them, "What's the upcharge you have? What's the percent upcharge?" Try and negotiate that down with them and then ask them, of course, "Well, can I buy this shipping from you? Do you resell to your partners?" And I can provide you guys with the CSV or an Excel file with all my shipping information, which is super easy export, like from Cratejoy, you just download all your shipments, send them to your Excel file, they'll print off all the labels and ship all your boxes for you. So that's a big perk of fulfillment partners.

 

ShipMonk note: Even better, ShipMonk integrates directly with Cratejoy, so there is no need to download shipping information. Your orders will get automatically imported through our software and submitted for fulfillment.

 

 

Q&A [43:26]

ShipMonk note: For brevity purposes we listed the questions along with the timestamp from the video, you can jump to the answers that pertain most to you and your business.

 

"I live in North Carolina, I'm having a hard time finding a fulfillment company in my area that understands the subscription box. The companies are trying to charge between $4.50 to $6.25 per box to pack." [43:50]

 

"I'm using a laser printer for small batches, or does it need to be a thermal printer? Or, can we use a laser printer?" [46:08]

 

“Are printing your own labels the only way to do it?" [47:11]

 

"Can you also talk about shipping perishables?" [48:38]

 

"Can you explain the difference between AFO, FPO and DPO addresses?" [51:44]

 

"I use ShipStation to do my shipping and cubic shipping is not available. I spoke to the customer service and I was told that it had to be Priority Mail. How do I get cubic shipping rates?" [52:40]

 

"Should you bring your own box into the Post Office to go with the USPS to get a quote?" [54:34]

 

"How does ShipStation work with Cratejoy?" [57:52]

 

"How long does cubic shipping take?" [58:37]

 

"If I anticipate my box to be less than 2 pounds. How do I determine the First Class rate and can that be done via Cratejoy, or is that just for the cubic shipping?" [59:58]

 

"Is there integration between Cratejoy and Shopify? [1:01:14]

 

"What's the ballpark range for fulfillment per box?" [1:01:58]

 

"Concerning contracting with fulfillment, would you suggest an annual contract and if so, how might you write the volume clause? Or would you suggest a table with the contract which shows volume and price for each tier?" [1:02:34]

 

"How do you QC [Quality Control] a fulfillment house to ensure...Quality control your fulfillment house to ensure they ship it the way you want, your brand depicted in the market and the products arrive as advertised or do you wait to hear from the customer?" [1:03:55]

 

"So the regular flat rate shipping boxes from the USPS are gonna be much more expensive than cubic? Sorry this whole shipping thing is actually like learning a different language for me." [1:05:50]

 

"How do I use Cratejoy for shipping then?" [1:08:11]

 

"Is it more expensive to have tissue paper versus crinkled paper?" [1:09:15]

 

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