Great Service and price gouging – is just price gouging.

I dropped into a local pack and ship store to overnight an envelope of documents.

$82.   Seemed high but it was a weighty package and it NEEDED to get there.

Other than reminding me not to ship overnight unless necessary, I would not have given it too much thought. However, very early that same morning I attempted to process through Fed-X, and though it turned out their shipping systems were not working  (strange for a shipping company) the cost would have been $54.

Small businesses differentiate themselves with exceptional and personal service.            50% markup.  There is no justification for that type of price gouging on a commodity unless you are the only game in town for many miles around.

As a small business you often can’t afford to fight competitors on price given your lack of volume discounts that your larger competitors can negotiate from suppliers.

So what is a reasonable range of markup for a commodity product of service?

I’d argue 20% is the max markup, where you can still make a valid argument for the exceptional service or customer experience surrounding a commodity.

Customers still want a SENSE OF VALUE, or they will not return .. just like I won’t be back to this mom and pop shipping store.  It is critical that have understand what that value level is for your client base.

Footnote: Amazon is obviously a beast in the shipping segment. and they are cutting into UPS/Fed-X markets with their own vehicles and their own Prime Airline planes. Will they get into the shipping business outright and offer to ship your packages?

I’d expect so.

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