The candle order you placed because a top customer wants more lemon and sage votives arrives with everything except those items.  What do you do?  If you tell your east coast vendor to ship the backordered votives to your west coast store when they are available, you may be in for a big surprise: UPS ground shipping for your 10 lb. package will come to $23.

It’s not hard to see how paying the freight for this special order will eat up any potential profit on the sale. Shipping cost have been increasing steadily over the past few years, and at the same time the margins for many independent retailers have shrunk.  You need to control your freight costs if you want your store to stay in the black.

When selecting a vendor, especially for heavy items such as food, soaps, glassware and candles, give some thought as to the location the goods will be shipped from.  It is both environmentally and economically wise to buy from a local or regional source when possible.  You should also look for suppliers who offer free freight, or freight discounts. Often bumping an order up to a higher level in order to get a discounted freight offer is worthwhile.

Backorders pose a special challenge to retailers, because we often really want the good that were missing from our initial order.  Our purchase orders state “no backorders under $50 unless the vendor is paying the freight,” although if we’re working with a rep or writing an order at a show we aren’t using our forms.  We need to remember to state that policy, and if possible have it included in the notes about our account.   There is a cost involved in processing back orders even if we don’t pay the freight, but we don’t mind that as much as having to sometime pay more than the value of the goods in shipping cost.

Track the freight percentage on your orders so that you can take high freight costs into account when setting your retail prices. My husband (and business partner) often writes the percentage at the top of the invoice as a reminder to modify any order that is costing us over 10% in freight.  Occasionally I’ll see one with 32% or more written in big numbers at the top — and I know that he won’t be reordering that line without talking to the rep or vendor about how to keep the freight costs in line.

Happy Retailing,

Carol “Orange” Schroeder