Posted by Michael Main on October 12, 2016
Michael Main here, I trust everyone is having a pleasant October with all of this cool air, and a relaxing break from the summers beating sun and high temps. I know our warehouse staff is certainly happy to see this!
Some of you (or most of you) might be aware of the new flat rate shipping we had started offering customers for Obutto cockpits. We fought SO HARD for this deal, and we made it work. We sent out a survey first, to see if the shipping costs were part of our problem with abandoned carts, and according to those survey responses - it was.
But surveys be damned, our abandoned cart rate has increased 2x since offering it. Then there are other issues, such as automated tracking information when the order ships.
See, freight works much differently then FedEx/UPS - tracking numbers are not available instantly. A bill of lading must be created (Very complicated and time consuming process.) and then a PRO Number is given by the driver for every package. This PRO Number does not work with any of our integrated/automated services, so it all must be entered by hand. With several hundred shipments, this process is again - very time consuming. While all of this is happening, customers are literally bombarding us with phone calls, emails, and pigeon notes asking "Where is my tracking information?!?!?!"
The short answer is, we have it. The long answer is, it's going to take some time before we give it to you so that we can sort all of the response information we receive. We do not want to mix up PRO Numbers, and send you the wrong information.
Also, one other thing here is, the $155 "Flat Rate" does not cover the actual cost. The actual cost to ship these to everyone, is $225. We are absorbing $70 of the shipping costs to make the sticker shock on shipping a bit less. You see, shipping costs are viewed by customers a "Lost money, with no return value." Which means, most people view shipping as something that costs something, but "I see no value in it, so if it's not free - I do not want it."
This is why Amazon Prime, "Free Shipping" and "Free shipping on orders of $100 or more" are so popular with online shoppers. But you see, shipping is NEVER free. You are paying for it, in one form or another. In fact, Amazon Prime is an added service, your actually giving Amazon MORE money/profits by signing up for that service, an extra $100 per year in cold, hard cash. If you shop a lot, it may be seemingly worth it, but they are getting it from both ends, because you see - the actual shipping costs (2 day) is already built into the price of the product you are purchasing. Prime member or not, you are paying additional for shipping. Prime is an illusion.
I'll show you an example:
You see some prices in the $15-$20 range, now click the "Prime" box where it shows the same listings, but available for Prime shipping - notice how the price has increased? This happens with almost all products.
Products sold exclusively through Amazon with Prime, are already increased, and mostly in-line with a manufacturers "MAP" or Manufacturers Advertised Price. MAP is when a manufacturer sets the price, and gives retailers the ability to use already accounted for average shipping costs to provide "Free Shipping" for the product, plus profit margins tied in.
When you head to Home Depot or Lowes and look at a Washer/Dryer combo - something that weighs in at 200+ lbs with "Free Delivery" - the delivery is already paid for. The sticker price includes the delivery price. Delivering that product is NOT free. When places like this charge something like "Get it delivered for $29.99" they are just collecting even more profits. The costs are already in the product!
As a consumer, I understand the "No Value" in shipping - sure, it gets the stuff to me, but once I have it, that value is gone. I wasted whatever amount I paid from that point on. The illusion of "Free Shipping" gives me the impression that "Hah, I won! I got this stuff to my freaking door for a steal! Stuck it to the man!" But the "Man" is really sitting back thinking "Hah, we really stuck it to them! Free shipping? Not in your wildest dreams, buddy!"
So you see, the retailer wins, regardless. In most cases.
Now, check out the below - this is an average order for us for a customer:
Weight of this shipment: 284lbs
This is a shipment going out today - it contains the Obutto R3V Frame (125lbs) The seat (50lbs) Triple Monitor Mount (15lbs) Acrylic Tabletops (18lbs) two Flight Sticks (13lbs each) and a Speaker Mount (10lbs) - The pallet weighs in at about 40lbs. Total Shipment Weight: 284lbs
Shipping charged to customer: $155
Total Charged to Main Performance PC: $225
RR Donnelly's ACTUAL cost: $323.79 - They lost on this shipment due to our contract agreement with them RR Donnelly is the worlds largest distributor of Paper Products, with shipping discounts that rival that of Amazon.
This cost mostly has to do with the above customers location, and it being a residential delivery - so a liftgate is required, and a tractor trailer has to be driven through a residential area to deliver it. In most cases, RR Donnelly will make money off of us, but this is a worst case example for them. Out of over 55 Obutto Pre-Orders, they made money on about 40 of them.
We are in a peculiar position though - when Obutto first started, the price of shipping was not accounted for when Obutto first introduced their cockpit, so Obutto (Even before we started selling it.) Was charging shipping - several hundred dollars in some cases. I think the oZone sold for $279 + $70 Shipping. They lost money - trust me!
What should have happened, was the price of the cockpit should have been $500 from the start, shipping included with "Free Shipping" presented at checkout. Thus bringing the actual selling price down to about $350. The problem with that, is then your profit margins fluctuate, and figuring out what you actually made on a sale is far less predictable. Not a good situation to be in, unless you have the product selection in your arsenal (Like Amazon) to more then make up for it.
The average profit margin for a big ticket item, is around 30-40% - or $30 or so dollars for every $100 in cost. The average profit margin for an HDMI Cable? Around 350-400% - So think about that the next time you buy that $9.99 6ft HDMI Cable on Amazon with "Free Prime Shipping" - You paid $99 for Prime, and gave them 350% profit margin - but hey, you got it to your door for "Free" right? Not so much. But $9.99 is a great deal for your average HDMI cable. But did you know there are places where you can buy them for $1.00? Same exact product, same exact quality - pay USPS Postal Shipping of $3.50 and get it to your door? Whoa.
Amazon has done a wonderful job of being "The place to go" for whatever it is you need. You walk into Best Buy and that same cable on Amazon is $19.99 - over a 1000% profit margin there, so you check your phone, find it on Amazon for $9.99 - Add to cart, buy now - "Free Shipping". But that whole time you did not know about Cables2Go, or Monoprice or BuyTopElectronics.com - who sell the exact same thing for a fraction of Amazon.
Anyway, I am beginning to rant here, and most of what I am saying is probably not making sense. We are going to have to do away with the "Flat Rate Obutto" shipping, mostly because it simply is not working for us, or our customers who want the experience they are so used to with Tracking Information being available immediately and quickly, and the big brown truck pulling up out front and the driver lugging 200lbs of Obutto goodness to their doorstep. Unfortunately, this also means more expensive shipping costs going back to the customer.
But, please do keep the above in-mind when shopping online - Im not saying some retailers dont "Rip people off" with ridiculous shipping costs - it does happen. But please consider what you are purchasing, the size that it is, and how it's being shipped.
If anyone is interested in seeing what they would pay themselves to ship an Obutto cockpit - head to the below links:
Enter the dimensions for the Obutto oZone: 40x24x23 Weight of 115lbs, declared value of $400 and signature required. For the SHIP FROM - Enter Auburn, WA 98001 and the SHIP TO - enter your location and zip code. Compare those prices to the prices calculated via our website, and you'll see that we're definitely giving you a discount in shipping.