Freight: The Silent Profit Killer

What goes up must always come down, unless the thing that went up is a price increase. Once vendors get consumers used to paying a higher price for something, they rarely bring prices back down, even if the supposed factor that caused the price increase happens to reverse course. Case in point: freight charges.
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What goes up must always come down, unless the thing that went up is a price increase. Once vendors get consumers used to paying a higher price for something, they rarely bring prices back down, even if the supposed factor that caused the price increase happens to reverse course. Case in point: freight charges.

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Remember a few years ago when a spike in diesel prices caused an increase in transportation and shipping costs? Many manufacturers used this as a time to pass the costs on to us, raising shipping charges and/or changing freight policies. Now that diesel prices have mostly returned to norms, have you seen any of these costs reduced?

While we might have to take shipping charges in stride as a cost of doing business, these costs can suck all the profit out of an order, especially with low-margin-to-begin-with video. This is a hot topic on my mind as of late as our preferred TV vendor is about to undergo a freight policy change that will significantly impact our business and our ability to close those walk-in single-TV sales.

The company’s prior policy allowed for free freight on orders over $1,000, where the new policy requires an order greater than $1,500 to qualify for free freight. And while $500 might not seem like that significant of a change, the reality is that none of the 55- and 65-inch UHD sets that we primarily sell will make it to that amount. In fact, buying two 55-inch sets won’t meet freight. And the freight charge on a single TV order can run as much as $197, with the minimum cost on a 43-inch TV being over $150!

Our rep’s suggestion was that we pad orders with receivers and Blu-ray players to meet the magic number, or that we wait and group multiple TV orders together. However, the reality of custom installation sales means that’s not always practical or realistic. First, you pretty quickly get to a point where you will have a glut of receivers and Blu-ray players in inventory. Second, people that have made the decision to buy a TV generally WANT a TV and don’t want to be told that you will order it for them just as soon as you can cobble together a few other sets to include with it. Third, very often there are limited-time sales where you must order a set during a specific window to qualify for the discounted price, making waiting impossible.

We have already stopped selling essentially all other TV brands (except for SunBrite, which is unique and comes with SnapAV’s terrific freight policy) and pretty much any TV under 40 inches because of the prohibitive freight costs, usually meaning we often can’t even bring the TV into our store for the suggested retail price. Recently I had a customer call looking for a specific sized TV – 60-inches diagonal – to fit an opening. In the past, a 60-inch TV sale was a solid money maker. Heck, I can remember the first 60-inch flat-panel set I sold went for $19,995! Unfortunately, our preferred vendor only offers models in 55- and 65-inch sizes — too small and too big. I looked into brands that offered the needed size, and after factoring in freight charges, we stood to make $11 on the TV sale, which certainly was not enough to take on the onus of responsibility of a set. I suggested what he should buy, and he got it on Amazon — with free shipping – and had us just come and install it.

Regrettably, this looks like another nail in the video coffin for custom install video sales…

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