How can FedEx make money on this?

Discussion in 'FedEx Discussions' started by UpstateNYUPSer, Mar 10, 2012.

  1. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    I recently purchased a refurbished 16gb iPad 2 from Amazon for $349 which included free shipping. I have been tracking it and as of this morning here is the progress:

    http://www.fedex.com/Tracking?actio...y_code=us&initial=x&tracknumbers=497394766822

    My question is simple---how can FedEx make any money on this shipment? I know that "free shipping" is not really free but how can Apple or FedEx offer free international shipping and still make money? I guess the real question is just how much are the iPad's and other similar products marked up. Apple lowered the prices on their current iPads by $100 when they introduced their newest iPad and the one I got was refurbished, which means I saved an additional $50, yet I know they are still making money.
     
  2. vantexan

    vantexan Well-Known Member

    I'm guessing a jet flying from China holds alot of those small iPads. Collectively FedEx comes out ahead.
     
  3. Pottsburg

    Pottsburg New Member

    I ordered a Ipad 3 on Wednesday and its shipping via UPS. I wonder if we are loosing the Apple account soon?
     
  4. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    We have not been told of winning the Apple account.

    Please make sure to sign for it online and leave the release for the driver if you know you won't be home. I will be doing the same for the FedEx driver on Thursday.
     
  5. MrFedEx

    MrFedEx Engorged Member

    The discounts that large shippers receive are huge. Years ago, I got a look at a rate sheet for one of our biggest customers and was shocked that they were paying about 30% of what someone off the street would pay. They must make it up in sheer volume.
     
  6. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    That was probably for domestic volume--my iPad is enroute from China and I am not paying a dime for shipping.
     
  7. MrFedEx

    MrFedEx Engorged Member

    Amazon pays the shipping, but they're not paying anywhere near the full rate. You can call it subsidized shipping if you want, where the seller offers "free" shipping as an incentive to buy. Their costs are incorporated into your transaction, so they are essentially passing their volume discount on to the consumer.
     
  8. Ricochet1a

    Ricochet1a New Member

    The actual cost to move packages from bulk shippers (even internationally) is very small. It is less than $5 per piece for a package of small size. For something like computer products, the cost of air cargo to move them is so small relative to their "value" that shipping cost to move the product (even to an individual consumer) is a very small percentage of the total value of the item, often only a few percentage points of the value. Shippers such as Apple will absorb this cost in order to offer "free shipping" to consumers (making up the cost in slightly elevated product pricing or slightly diminished margin).

    The discount scheme FedEx uses for high volume shippers can be confusing, and when one compares their discounted price to full over the counter rate - actually shocking. The highest volume shippers only pay what amounts to 20-30% of full over the counter rate (they get a better deal than Express employees do in shipping, so much for "employee" discounts). The US federal government receives the best discount, it is close to 90% off of full rate. The US government pays less to ship something overnight than it would cost someone to ship the same item via USPS Parcel Post.


    I've seen discounts for customers (at Express over the counter sales), that after their account number is entered (and their particular rates are applied) come up to over a 80% discount - and the customers KNOW the discount they are receiving relative to everyone else.

    This is why when people asked me, "How much to ship this item by Express?" - my first response was, "Do you have an account with a discount applied to it?". They always answered no and I responded with, "Ship via USPS Express Mail if you need it there overnight, you'll save a bit".

    Most people don't have a clue as to what full over the counter rate for overnight really is. They think $10-15 to get an envelope across the US - it is more like $25-35 over the counter rate.

    The over the counter rate is the baseline for FedEx when it comes to negotiate rates with shippers. Then sales will analyze the volumes offered, the cost savings realized with bulk shipments then make the big analysis and try to figure out what UPS is going to offer in terms of actual shipping costs. Then a percentage discount is offered to the standard rate schedule.

    When one time bulk shipments are to be made, these shippers will contact all potential carriers and get a quote. Sales will do a very quick analysis of costs involved, spare capacity in the line haul network (if there is spare capacity, incremental costs to move the volume is close to zero) and whether they want to develop a "relationship" with this shipper - then offer a one time rate schedule. Most of the time, these schedules are priced at a flat rate per piece moved, and don't utilize zone pricing or require the shipper (or Express) to actually weigh each individual piece. They know the average weight of the pieces to be shipped, so they flat rate the quote to a per piece cost (say $10 for each piece tendered in China to get it delivered to any address in the US).

    This is why people get all confused when they go to ship something Express and get charged the proverbial arm and a leg, but can't understand how they got "free shipping" to receive an item of like weight in the recent past. Volume determines rate schedule - if you don't have the volume, you pay full rate.
     
  9. whenIgetthere

    whenIgetthere Well-Known Member

    I could be wrong, but aren't the intl. apple shipments bulked to Long Beach, then shipped from there? I thought I had heard that before. I could be wrong, though!
     
  10. Mr. 7

    Mr. 7 The monkey on the left.

    :youreright:
     
  11. Mr. 7

    Mr. 7 The monkey on the left.

    Dave,
    I del'd an ipad to someone the other day who was tracking it and the tracking said it wouldn't be there for another 2 days. I asked the guy if he wanted me to come back with it two days later.

    Point is, the tracking system for Apple and things out of China seem to have some quirks so, go ahead and put that note on your door Monday. A lot of int. stuff shows up on Mon. morning.
     
  12. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Thanks for the tip. Dave.
     
  13. whenIgetthere

    whenIgetthere Well-Known Member

    When I was in transportation before coming to fedex 12 years ago, I was getting a 55% discount from UPS. And we were by no means a big shipper, only a couple of hundred packages a day.
     
  14. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    A couple hundred packages a day would make you a big shipper in my center and would get you an empty trailer to fill and have swapped out on a daily basis.
     
  15. whenIgetthere

    whenIgetthere Well-Known Member

    A couple of hundred packages were only three or four skids a day. What was nice, the UPS driver didn't have to scan them like Express does. So we wrapped them and he was on his way in about 5 minutes!
     
  16. Ricochet1a

    Ricochet1a New Member

    The overwhelming majority of bulk shipments such as Apple new tech releases are shipped direct from China into the Express system - then hit either Memphis or for west coast US addresses, will go to Oakland for sorting out to various ramps. If the shipment is large enough, FedEx will even set up a special flight going from China to the other regional hubs (Newark, Indy, Dallas, etc.) bypassing Memphis. I think AFW was closed as a regional hub but reopened recently.

    If time isn't of absolute importance, what will happen is that cargo containers will be loaded "pure" with the shipper's volume at source (no mixing with other shippers volume). Then they will fly space available on existing flights. This gives the shipper a big discount on rate (they are using otherwise empty space on existing flights) and the cans will be loaded onto flights to the US space permitting. If time is important, they will be loaded "normally", and Express will utilize ad hoc flights to move the volume on time if needed.

    The only thing Long Beach CA does is containerized MARITIME cargo movement, not air. Asian manufactures do indeed ship volume by sea if it isn't time sensitive, and the overwhelming majority of it will enter the US at Long Beach.
     
  17. DOWNTRODDEN IN TEXAS

    DOWNTRODDEN IN TEXAS Active Member

    AFW was never actually "closed"...they just went from CSSD to AGFS...and it is slow there still.
     
  18. UpstateNYUPSer

    UpstateNYUPSer Very proud grandfather.

    Got my iPad yesterday--two days ahead of schedule. Put the shipment release notification on the door and the courier took it from there. I saw him later and thanked him.

    I love my new iPad. Brown Cafe has an app but I have found that posting or reading new posts is easier on my laptop.
     
  19. Mr. 7

    Mr. 7 The monkey on the left.

    Who's your buddy?
     
  20. DOWNTRODDEN IN TEXAS

    DOWNTRODDEN IN TEXAS Active Member

    Wish I could afford one...guess I'll just stick with my inherited-from-my-Dad-when-he-upgraded-his-laptop, 8 year old laptop.