Here’s how to keep your business on an even keel when costs are rising all around you!
On April 30th, Royal Mail will be increasing their postage prices very significantly with the cost of some stamps rising by 39%. This is a massive increase and will definitely have an impact on all online sellers – not only on eBay, but Amazon and those of us who have our own websites too.
I’ve noticed quite a lot of online comments about this subject and unfortunately those comments have mostly been negative.
There have been many suggestions from one seller or another that they won’t be able to cope with the price increases and will have to close down their business come April 30th. But this kind of comment actually really annoys me because when you are running a business you must expect things like price increases for services and so on and when they happen you must adapt and carry on!
The reality is that all sellers will see an impact on their profits – the prices aren’t just rising for you or for me – the prices rise for everyone and there are very few sellers who will simply absorb the increases and carry on – especially on eBay.
So what this means is that we all need to look at these price increases objectively and find a solution to get round it – that’s what you do when you run a business, not throw in the towel when things don’t stay the same! Royal Mail’s price increases are high but how you react to them will make or break your business.
Those sellers that say they will have to close their businesses down – I wonder whether they have considered any of these four solutions that I’ve detailed below…
Check your Margins
Look at your margins as a whole. Can you save elsewhere the extra that you will pay on postage?
For example, are you using the cheapest supplier you can find for your packaging materials? Have you contacted your product supplier and negotiated a larger discount? If you have been a loyal customer for a while there’s the possibility that you can get a price reduction on your best selling items simply because you are a regular customer.
Are you listing your items in the cheapest way possible? For example on eBay are you using multiple quantity Buy It Now listings for your products that you have available in bulk rather than listing items singularly? Can you tweak your prices just by a few pence or so?
If you sell in volume, all these pennies will add up to pounds! And if you can implement all the possible savings I’ve just mentioned plus tweak your prices as well you may even end up making more profit! Take a look at your business because you are sure to find ways you can save money and in some cases cancel out the Royal Mail price increases totally.
Increase your postage charges or alter the speed of service
In my opinion, many sellers will be increasing their postage costs so if you decide to do this (which is the most logical solution) then you are not alone. If you currently offer free postage then I would highly recommend that you start charging! It’s well known that if you offer free postage on eBay you will possibly maintain a higher position in the search results – well to be honest, all that could be about to change.
With costs increasing it won’t be viable for many sellers to offer free postage anymore and I think we’ll start to see ‘free’ postage dying out gradually. Once this happens it really won’t make a difference to the search results as there will be so few sellers offering free postage anyway. Offering free postage after April 30th will be an option for very few businesses because the price rises are so significant so don’t be afraid to add a postage charge. Buyers don’t like it when you over-inflate that charge so keep it minimal.
The other option of course is to switch to second class post to save money where you can. I have seen many comments on the eBay forums regarding this tactic and it seems that this is a definite solution for some sellers. So, you’ll need to decide whether to stick to first class post and offer that ‘superfast’ service that buyers always seem to want or switch to second class and offer the same service as everyone else.
Hmmm… it’s a tricky one but only you will know which decision will benefit your business.
State a ‘maximum postage charge’
How about stating a ‘maximum’ postage rate for all items you have listed? So for example going by the new Royal Mail prices it will cost you £2.70 to send a packet within the UK weighing up to 750g. That’s quite a hefty parcel. So your buyers will know that whatever they purchase from you they will only pay £2.50 whether they buy one item or six items. This will encourage buyers to purchase more than one item so although on some occasions your postage will cost more than you are charging you will more than make up for this with the extra sales. If you sell items that compliment each other then you could suggest something along the lines of:
“Choose any number of items and pay just £2.70 for fast 1st class postage”
As I’m talking about eBay businesses here and most businesses on eBay stock more than one (usually related) item, simply set your postage price at £2.70 and advertise this heavily in your listing. In effect you are offering flat rate postage. It’s easy, you sell more items and you don’t lose out on the postage increases!
Use a different postal service!
Rather obvious really, but the thing is with this idea, Royal Mail is often the only delivery service we think of using but there are of course others. Unfortunately they are often more expensive – especially for letters and low weight packets – and the service can be questionable. However if you are dispatching heavy items you should check out these two alternatives who both offer competitive pricing and a full tracking service:
My Hermes – http://www.myhermes.co.uk : They will collect from your door, but take a little longer to deliver…although they are especially competitive for parcels over 1kg.
Parcel 2 Go – http://www.parcel2go.com : They are actually a broker for large, well known courier companies such as DHL, CityLink and UPS and they will also collect from your door. Prices are competitive and you can book online and pay with PayPal.
Finally, if you haven’t done so already you can download Royal Mail’s new prices here: http://www.royalmail.com/prices2012