In this post, I hope to pull back the curtain and reveal why you need to be using a 3rd party shipping service for all your online selling. I haven’t been doing this until very recently and to be honest, it was a lack of knowledge and not seeing the hidden big picture.
After I explain the concept, I will then show an example of how I am using it myself.
I will be the first to admit that I have left a lot of money on the table in my years of online selling and I know many sellers that use 3rd party shipping websites but I never connected the dots ( and nobody went of their way to explain it to me)
There are several services you can use to ship your online sales with besides the built in shipping of say Amazon, eBay, Etsy, Mercari, etc. If you have ever had to ship something you have sold from say eBay for example on USPS, you know it is a pain to do all the copying and pasting of the address and then going back and putting in the required tracking code. Most of these sites do it automatically for you.
I personally have been using Pirateship for eBay and Etsy orders and but I haven’t taken the time to set up Shipstation for Amazon yet ( it would cover eBay and Etsy too).
To be honest, the reason I have been using Pirateship for eBay and Esty is that they offer cubic shipping for USPS Priority. ( Amazon already offers that in their shipping console) and that saves you tons in shipping cost.
Cubic shipping can be a massive savings for you. If you go through the Pirateship training, they show you have to maximize your savings.
So that is a big benefit, that is not really the real reason you should be using Pirateship ( or any other service like Shipstation)
It is about cashflow!
So let’s say you make a sale on Ebay and you go through their shipping.
First the money from the sale is already in your Paypal account ( this is a big advantage over sites like Amazon and Etsy) but when you buy the shipping, that cost is withdrawn from your Paypal.
So you have less capital to work with.
Say the sale was $100 and you spent $20 on shipping. You now have only $80 at your disposal to reinvest into inventory.
Now if you use the 3rd party shipping service, the cost of shipping will be charged to your credit card and you can use the money for free for the 30 day billing cycle. ( This is a very important concept to pick up)
So for example, I know an Amazon seller that does most MF ( Merchant Fulfilled ) and during Q4 , ships upwards to 500 packages a day via a 3rd party shipping website.
Now with Amazon the effect of using free money is sort of the same except with 2 week payouts, the numbers can get very large if you realize the scale of say 500 packages a day.
If you ship through Amazon, they will take that out of your payment.
Now if you use the 3rd party shipping, it is all being charged to a credit card and depending on the billing cycle, you can use the credit cards money for free for at least 2 weeks ( which could be huge during Q4) and maybe longer ( or bite the bullet and make a minimum credit card payment for a month or 2 and have a lot more capital to work with during that time)
Well that is all fine and dandy, but I just sell FBA you say.
Well the guy I am referring to sells Prime, Seller Fulfilled Prime that is and if you understand how all this works, cash flow is very important when you can source and have your products up and available “prime” in the same day.
So none this honestly applies to me. I do utilize the cubic shipping of Pirateship but I don’t really need to worry about the cash flow. I never seem to get maxed out and run out of funds, but this next part is why I need to use the 3rd party shipping websites.
That same seller I am referring to, seems to disappear each year after Q4 and travels a lot. I see him making almost weekly weekend trips all around the US on top of other bigger trips.
This is the thing that took awhile to click in for me. How was he doing all that traveling?
Well the quick answer is credit card points.
He uses a Southwest rewards card for all his 3rd party shipping.
So some quick math. 1 Southwest point is worth about $.015, which doesn’t sound like much but let’s say he pays $10 shipping on each package and is shipping 500 packages a day.
That works out to $75 a day worth of free flight money. ( you could also do the same thing with a cash back credit card)
So this is what I wanted to do and didn’t know how to do it.
So here is the real world example of how I am using the credit credit reward from all my shipping expenses
I did sit through a credit card reward session at a FBA seller conference and was totally lost on all this stuff ( I think it was for advance people, not newbies)
Finally my son explained the whole Southwest companion pass thing to me ( this is what you want)
So you get a companion pass which basically allows someone to fly free with you ( it is actually like $11 round trip in fees but basically free).
To get this companion pass, you need to earn 125,000 points in a year. This is what got me confused. I was thinking that meant I had to spend $125,000 on the credit card and that is some serious spending on a credit card for most people.
So this is not how it works.
If you sign up for a personal credit card with Southwest, after you spend $1k ( in 3 months), you get 40,000 points ( plus the 1000 points for the $1k of spending) Now I got a bonus of 50k points for $2k of spending for signing up via an inflight offer.
These point will go to your Rapid Rewards account.
Next you open a Southwest business card. This gives you a
70k point bonus after spending $5k. ( so 75k points after your spend)
These both go on the same Rapid Reward account.
With the bonus offers, it really doesn’t take much spending at all to reach the companion pass level since 110k or 120k is from the bonuses. There are a few tricks to make it even better. If you start this in January and say you reach the 125K level in July, you get the rest of that year and the whole following year for the companion pass.
So this is how the Amazon seller I know travels all over the place ( for free at that) . He charges all his shipping to his credit card which gives him points and he has the companion pass for his wife, so they fly free.
As you can see, I have been missing out on getting all this free travel ( and paying full price for the airfare I have been using) simply because I hadn’t signed up for this program ( I had the shipping spend but it wasn’t counting for anything)
There are multiple other ways to benefit from the spend you have for shipping with the various credit card offers but you will not receive any of that if you just use the shipping service provided but the e commerce sites you sell on.