Ship, Ship, Hooray!

Shipping costs are one of jewelers’ biggest excess expenses, say retail and shipping experts. “An ungodly amount is spent by jewelers on shipping, and freight in and out,” notes consultant Kate Petersen. “It’s one of the biggest areas opportune for cost cutting.” Robert E. Reetz, Federal Express zone manager for corporate security, agrees. “Shipping is one of the highest controllable overheads of jewelers,” he says.

Why the excess? There are a number of reasons: too many overnight orders requested too often by too many staffers; not enough planning; and theft of packages carelessly packed and shipped. Meanwhile, the price to ship or mail keeps rising. In a recent JCK survey of 128 businesses across the country, four out of five jewelers (84%) said their shipping costs have gone up in the past year. Only 8% saw this expense decrease.

The average small jeweler sends or receives a few packages each day and several every week. A jeweler doing $1 million annually may spend only a few hundred or a few thousand dollars per month on shipping, but that can add up to many thousands of dollars per year.

Some jewelers think shipping costs can’t be restrained. “I have no idea [how to lower them],” one Virginia jeweler told JCK. “It’s a necessary expense and relatively uncontrollable.” In fact, say many jewelers and experts, this expense can be managed and reduced. Here’s how.

What does it cost? Some jewelers surveyed by JCK don’t know what their shipping costs are. But to cut any operating expense, you must know what you’re spending and what percentage of your total cost of doing business it represents.

Calculate what you’ve spent on mailing and shipping—both outgoing and incoming—weekly, monthly, and annually for the past 24 months. Consider not only postage but also costs for packing materials, labor, special types of packages and shipping (e.g., deliveries to customers, special or rush orders, repairs, returns) and frequency (i.e., how many shipments sent per day or week).

Plan ahead. Prudent planning prevents needless spending. For example, don’t wait until the last minute to reorder business supplies—such as stationery—and then request “rush” shipping. That’s an unnecessary expense.

Another example is what retail consultant Janice Mack calls “frivolous memo-ing of diamonds.” Rather than tie up money in diamond inventories, many jewelers use memo. But some use memo—especially overnight orders—too often, and the cost of those pieces coming and going several times a week or even daily quickly adds up. “Better planning of inventory and long-term assortments—and periodic review of a store’s practice of memo-ing diamonds—can prevent daily memo-ing to fill requests,” Mack notes.

Consider how often your store sends items, and combine as many as possible in the same package, because bulk shipments are less pricey per item. One in four jewelers (26.5%) tell JCK they consolidate as many orders, memos, returns, and shipments to the same vendors or repair centers as possible. Ask suppliers to do the same. “Doubling up orders from vendors helps offset shipping costs,” says a Utah jeweler. Many jewelers advise limiting how often you order and ship. Almost one in eight say they do so only once or twice a week.

Online shipping. Several shipping companies (including the U.S. Postal Service, UPS, Parcel Pro, FedEx, and One Service) offer services and options online and in computer programs. myUPS.com and Airborne’s Small Business Center at airborne.com (though Airborne doesn’t insure jewelry) are virtual shipping rooms for small businesses, simplifying the shipping process and making it more cost-effective.

Working at office or home computers, jewelers can buy postage, print mailing labels, maintain online accounts for billing and payments, place orders, set up online address books, schedule pickups and deliveries, get quick processing for air and ground shipping, track shipments and deliveries, and even get tips on improving operations such as direct mail. A new Airborne feature lets online users see “proof of delivery” signatures electronically captured on a driver’s hand-held scanner. Some offer rate discounts for shipping online. A new FedEx program, for example, gives small businesses 10% off express services processed through FedEx Ship Manager at fedex.com.

The UPS program used by Schnack’s jewelers in Alexandria, La., computes shipping costs, prints labels, and stores shipping records. Such computerized procedures, says owner Carl Carstens, “save much time and are more accurate, thus saving money.” At Gleim the Jeweler in Palo Alto, Calif., “We do it all by computer now,” says Georgie Gleim. “That includes receiving packages, shipping, printing labels, producing a registry log, and so on. It’s more efficient, easy to track, and there’s less worry about illegible labels or incorrect addresses.”

Be sure to insure. Make sure all valuable items you ship are properly insured—either through your own insurance or through the shipping company—and properly declared for protection in case of loss. The U.S. Postal Service, for example, offers up to $5,000 insurance for Express Mail and up to $25,000 on any package, while UPS will insure and ship any package valued up to $50,000 (though it won’t insure loose or uncut gemstones).

Don’t assume insurance coverage is automatically provided by most carriers, experts warn. Purchase as much as you need, but don’t over-insure, say many jewelers. Some hold down shipping costs by not insuring items under a certain value and by using less expensive means of delivery. Usually these are items whose values are within the range of their deductible or less, such as class rings. One Wisconsin jeweler “sends any item we can replace for $250 or less via first-class mail, instead of registered.” A California jeweler agrees: “For memo returns under $200, I put two stamps on [the package] and send it regular U.S. mail without insurance. Haven’t lost one yet.” Another California jeweler pushes the law of averages further by self-insuring or shipping items valued at less than $1,000 without insurance, contending that average loss statistics—less than one article per year—make this a justifiable risk.

Train the staff. Often, when a customer doesn’t see what he or she wants, the salesperson places a rush overnight order. But overnight shipping can cost $10 to $60, sometimes exceeding the cost of what’s shipped. That’s lost money if the customer doesn’t return the next day or rejects the item. That can lead to another rush order and still more cost. So teach your staff about special orders.

First, explain how special orders affect operating expenses—including salaries, commissions, and perks.

Second, tell them to “get specific details from the customer about the type of merchandise he wants,” says Kate Petersen. If he asks for a 1-ct. diamond, does he mean a round, oval, or pear-shaped stone? Over the past two years, Lynn Hupp of Hupp Jewelers, Fishers, Ind., has substantially lowered the amount of memo goods she orders by screening customers more closely.

Third, “Ask the customer when they really need it,” says Toby Joseph of Joseph’s Jewelers, Des Moines, Iowa. If time isn’t an issue, Joseph says, customers will usually accept second- or third-day delivery—especially if they’re charged for rush shipping. Also, find out when the customer can return to see the merchandise, and make an appointment.

Overnight shipping. Unless it’s absolutely necessary—such as for time-sensitive orders—use and request overnight shipping as little as possible, advise jewelers and shipping experts. As David Mazer of Foley Jewelers, Newark, Del., points out, “Does everything really need to be there tomorrow?”

Never ship overnight on a Friday, unless you’re sure the recipient will be there Saturday to accept delivery. Instead, schedule Friday shipments for Monday delivery. That’s the advice of authorities like Jewelers’ Security Alliance and Jewelers Mutual Insurance, as well as many jewelers. The reason? The longer jewelry goods go undelivered, the greater the risk they’ll be stolen.

Many jewelers surveyed by JCK say they now use less expensive but efficient forms of shipping and mailing such as First Class, second- or third-day delivery, or registered mail (which is insurable and traceable).

Prevent excessive ordering. Limit the number of people authorized to place or request special and overnight orders. In too many stores, too many staffers do that, without restriction. “When a store doesn’t control its ordering, when anyone can do it, there are excessive single-item orders—and that drives up business costs,” says Mack.

Comparison shop. As competition in the shipping business grows, so does the variety of prices and new services offered to small businesses. One example is FedEx’s DVX (“Declared Value Exception”) service, which offers jewelers substantial savings on overnight shipping for packages valued up to $50,000 (up to $10,000 for second-day air and $5,000 for three-day), while providing state-of-the-art security and tracking. Another is UPS Presort, which picks up, consolidates, and sorts outgoing first-class and standard-class mail of small- and medium-sized businesses at a lower cost per piece.

It’s smart to shop around. Some experts say retailers should change carriers periodically—and definitely change if they have a loss. Capri Jewelers in Richmond, Va., for example, cut shipping costs 5% in the past two years by switching to another shipper. A Wisconsin jeweler recently dropped the shipper he used because it became “increasingly expensive” and also “lost packages, [which were] time-consuming to track.”

Ask if shippers give discounts or lower rates if you ship frequently or use their computer services, are a member of a trade group such as Jewelers of America, or use a business-related benefit they offer. The UPS Small Business credit card, for instance, “gives us additional freight allowances on all purchases,” says John Starr of S&E Wholesale Corp., Buffalo, N.Y. Also, ask shippers if they give refunds if packages don’t arrive on time.

Comparison-shop online, too. The major shipping services have Web sites where you can check services, pricing, news, and other information. They include the U.S. Postal Service (usps.com), United Parcel Service (ups.com), FedEx (Fedex.com), Airborne Express (airborne.com), and OneService Shipping (oneservice.com), a specialist in high-value shipping available to Jewelers of America members.

Some, like Airborne, let small businesses compare their rates to those of other carriers. Independent Web sites where jewelers can compare rates of major shippers include BuyerZone.com, SmallBusinessOutpost.com/services, and smallbizmanager.com/services/pageshipping.htm.

Consider third-party shippers. These firms contract with high-volume shipping companies to transport some of their shipments monthly or yearly and then sell their shipping services, at lower rates, to business customers. The jeweler ships as much as he wants through them and is billed at month’s end at more favorable rates than he would get elsewhere on a per-package basis. Third-party shippers usually cover all shipping insurance costs.

Who pays? If you absorb shipping costs, publicize the fact in your marketing and get some public relations benefit.

Such costs also can be passed on to customers. Almost one in five jewelers (18%) polled by JCK say they regularly include shipping costs in their pricing or charge customers for special orders. (Note: Always inform the customer of this before placing an order.) Richard Kern of Churchill’s Jewelers in Santa Barbara, Calif., asks customers to pay shipping on memo diamonds if they don’t buy [them], while Newton’s Jewelers in Fort Smith, Ark., “charges all customers for shipping where applicable,” says Kelly Newton. Diamonds & Gold Ltd. of Green Bay, Wis., includes shipping in repair costs when it’s a chargeable repair and adds it to the cost of merchandise, which raises retail prices “just a little,” says a company spokesperson.

Some suppliers soften jewelers’ shipping costs with free drop shipping, special bulk shipping rates or—for some diamond dealers—by absorbing shipping costs of loose goods or memo items if sold, report jewelers surveyed by JCK.

Other suppliers do little to assist jewelers. As one Wisconsin jeweler put it, “They just pass their extra costs on to us.” These days, more jewelers believe their suppliers should help and are encouraging them to do so. The JCK survey found that many jewelers seek suppliers who cover shipping; negotiate shipping costs, especially for memo items; won’t pay shipping for back orders or refuse them if they arrive; and insist suppliers pay the extra shipping costs if they make an error in merchandise.