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To: Bill Harmond who wrote (7720)	6/21/2001 11:34:03 AM
From: Glenn D. Rudolph	Read Replies (1) \| Respond to of 57684

SI is messed up: "How much is fulfillment as % of sales? Bill, I can't say I know a correct method to calculate this. It is a "funny" metric for a non pure play firms. None of the fulfillment labor or space in use is an added cost to our ongoing traditional selling staff and rent. I have not needed to add additional hours to employees or rent additional space for fulfillment this time of year. This likely will not be the case in the fall. Presently, the employees do fulfillment inbetween our regular operations which indicates to me we were not totally efficient in the past from a labor prospective. That is not uncommon in retail since one never knows how many customers will walk through the door on any given day. We are using UPS with a pick-up service. Inititally their fee was about $6.00 per package depending upon the amount of insurance we required and the location of deliver using ground shipping. I negotiated after the first month a much better fee based on our history. This gave us some negotiating power. We now pay $4.50 per package to second day shipping domestic shipping up to $1,000 insurance. We charge a flat shipping rate of $6.00 per shipment. So intitially, when one figured in the cost of the shipping box, UPS fees, labor of some number and our own very nice jewelry box, we were losing money on fulfillment. About $1.75-$2.00 each package. Here are quantitative expenses now: UPS including insurance $4.50 Shipping boxes now provided by UPS at no additional cost due to second day service Our own box (velvet) $1.10 each. Included thank you cards $0.05 each Toner for laser printer for labels maybe $0.01 each and wear and tear on printer $0.01 each. No additional wear and tear on computers. Five minutes of labor for fulfillment including software input to print mailing label. This fall we will require increased labor for fulfillment but average ticket price should increase too. Average ticket now with shipping fees $145.00. Lower end product due to no reason to buy during the summer, etc. That makes fulfillment at about 4% of sales without attributing any labor and rent expenses to fulfillment. A guess if I took labor and rent as part of the expense would make fulfillment 8-9% of sales. Now if I can convince UPS to provide the same service for $3.50 each well <VVBG> "