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The Recurring and Hidden Cost of Shipping
Livermore, CA January 15, 2010 - Wineries are making QuickBooks POS and
Active Club Management their number one choice to manage tasting room sales and clubs.
Wineries face many challenges that are unique to their industry. The ability to easily
serve clients in a tasting room, know a client's purchase history and remember their
preferences are key to building lasting customer relationships. Balanced with managing inventory,
ever-changing prices and managing the back-office should appear to be effortless and it does with
the newest release of QuickBooks.
Shipping logistics and club management add to the challenge. Many wineries try to use cash register
systems (Point-of-Sale) for processing club payments. Anyone who does is leaving themselves with
the aggravation of estimating the costs of each shipment, tracking packages, fumbling with
compliance, and communicating with clients who need to update credit card and or shipping
information in the club member profiles.
Wineries leave money on the table in several ways.
- Estimated shipping & handling expenses that are too low
- Not updating shipping charges when shippers increase their fees
- Shipments that get returned as undelivered
- Sale taxes that are undercharged
- Credit cards that go uncharged
REAL-TIME versus ESTIMATED SHIPPING COSTS: Wineries lose money when they "estimate" shipping
costs. We always ask the wineries if the amount they charge their customers for shipping
actually covers the winery's expense. The resounding answer is "we don't know but we hope so."
With Active Club Management you can "KNOW" that your costs are covered.
Active Club Management provides wineries with the option to apply flat-rate pricing for shipments or include
the shipping costs in the price of the package. Active Club Management has developed direct integrations with
FedEx UPS & GSO. The technology and business relationships with the shippers provide our clients with the option
of having every package rated with the actual shipping charges of the discounted, negotiated rates, have any
handling fee added and even can account for shipping discounts on quantity purchases. This means that every
client pays specifically for the actual cost of the shipment and the winery does NOT have any losses from
miscalculating shipping costs.
An additional benefit of real-time shipping rates is that when shippers increase (or change)
their fees, the adjustments are immediately reflected in what you charge your clients.
There is no time spent monitoring shipping fees and adjusting all your estimated shipping charges.
RETURNED DELIVERIES: The cost of failed deliveries often go unnoticed. The expense of returned packages
add up quickly and clearly reduce profits. If a package costs $ 22.00 to ship, plus the packaging of
$ 8.00, add the return package fee (from UPS & FedEx) of $ 22.00, and the cost of the wine of
$ 50.00 such a package creates a loss of $ 57.00 per package. On average if you have 4
packages returned per club release and 4 releases per year the costs becomes over $ 912.00 plus
the cost of staff time and frustrated customers.
Here is a breakdown of how a simple package being returned to a winery can add up. Expenses include:
- First, the cost of shipping the packaging to the customer
- the box, shippers and other packaging materials
- the 2nd shipping charge (from FedEx and UPS) to return the package to the winery because the delivery attempts to the customer failed
- the third shipping fee if a new address for the client is provided.
- The new bottles of wine that are resent to the customer at the new address. (Wine that is returned is usually not sent again because the environment in which the wine travelled was not controlled during shipping so in order to provide a quality product, new wine is packaged and shipped.)
- Staff time is spent crediting the customer for the wine that was not accepted by the customer
- staff time to manage all of the above
- Staff time to work with frustrated customers
The ultimate solution would:
- Allow wineries to use multiple shippers (if they wanted)
- Enable wineries to choose a shipper by destination
- Have the actual cost of each package being shipped rated and applied to each package with the winery's negotiated rates from FedEx, GSO & UPS.
- Allow a handling or box fee to be added to cover the expense of the shipper & handling.
- Have a single report from multiple shippers notifying them if any problems occurred with their deliveries and provide detailed notes in the delivery alerts to inform the winery of what the problem was.
In most systems wineries have to estimate shipping costs. This means that wineries guess or apply an
"estimated average" charge for shipping. And, they manually have to adjust the charges when the shippers
have rate adjustments.
Active Club Management provides real-time shipping rates with all three shippers (FedEx, UPS & GSO)
and allows wineries to use multiple shippers. This assures the wineries that they are getting the best
price for shipping and they are covering their true shipping costs. And, as shippers change their rates,
the rate changes automatically flow through to the customer(s).
THIRD-PARTY SHIPPING: Most wineries using a third-party shipper face several challenges.
- Estimating and applying shipping charges that cover all the third party charges
- Tracking deliveries and returned packages for compliance reasons
- Tracking packages for customer service
The difficulties of estimating shipping costs have been covered. Tracking deliveries and returns when using a
3rd party shipper can be reduced if your shipper provides you with the shipping tracking numbers. If you are
using Active Club Management or ShipCompliant the shipper can automatically upload the tracking numbers
into the systems and then you can track your packages. If you are using Active Club Management you will
be provided with a shipping robot. The robot will track your package and email you, once each night,
with any shipments from all three shippers, that are experiencing difficulties.
UNNEGOTIATED RATES: Rates and the competition to keep your business is fierce and are your best source of reducing your shipping costs. Here are a few considerations:
- FedEx has special rates for wineries in the North West (Oregon & Washington)
- Golden State Overnight (GSO) does not charge for returned packages
- Wine Institute members can receive FedEx special rates
- Leverage the FedEx and GSO rates with UPS and negotiate lower rates.
Shipping can be handled in many different ways. How you choose to manage the process, factor shipping charges,
adjust with rate changes and monitor the shipments can mean the difference between profits and losses.
Small changes can make a dib difference. We hope this information has help.
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