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It turns out that Chinese counterfeiters can offer free shipping because they pay only about $1.40 to send a mug 8,000 miles from China to an American home, or five times less than what we pay. Let the absurdity of that situation sink in for just a moment, and then consider that we can’t ship a mug across the street for $1.40. And if I were to ship one Mighty Mug to China, the U.S. Postal Service would charge me $22.00—or $62.50 with tracking. As the weight of the package increases, so does the problem: We pay up to $17.61 to mail a four-pound package, but a shipper in China pays $3.67.
The culprit is the Universal Postal Union, or UPU, which a century and a half ago set the conditions for global mail exchange. The UPU required postal authorities to give equal treatment to foreign and domestic mail, and established a uniform flat rate to mail a letter anywhere in the world. At the time of signing, it was revolutionary: No longer would senders have to calculate postage for each leg of a journey from country to country. The UPU also created a system known as “terminal dues,” which provided discounted rates for shipments of items up to 4.4 pounds, with the largest discounts going to shippers in developing countries.
Despite being the world’s second-largest economy, China is still classified as a developing country, getting the same subsidized rates as countries such as Cuba and Botswana. What this amounts to, in essence, is a massive undue subsidy paid for by U.S. ratepayers in the form of higher shipping costs.
These subsidies were not much of a problem in the past, when consumers generally bought household products from street-level retail establishments. Now they shop online, and mail has become the primary pipeline for products to travel from a business to a home. There is no efficiency that we or any business can implement to overcome the shipping subsidy that the UPU framework creates. This situation has helped fuel an avalanche of knockoffs online.
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Because we have a patent on our product, we can request the removal of knockoff listings, but it’s a game of whack-a-mole. As of today, we have removed more than 1,800 knockoffs, most shipping directly from China, with still more to go. We even use a cutting-edge AI-driven system to detect and take down fraudulent listings—the smartest solution to the dumbest problem imaginable.
Beyond losing direct-to-consumer sales, the UPU has also caused us to lose major retail and distribution opportunities. When potential partners do a simple web search and find knockoff items selling at 50 percent to 75 percent of our price, they stay away. Why stock a Mighty Mug in your store if customers are likely to just buy the cheaper version online?