Custom-etched iPods mean a real customer has in fact paid full price for the product, so it can be shipped directly to the customer for less than the total cost of routing it thru the brick-and-mortar pipeline (truck to store, inventory, shelve, pay for store space & utilities, pay in-store staff overhead, etc.).
True, the saving of engraving on the production line is probably enough to offset the cost of posting a single item.
Interestingly there was recently an analysis of why Apple offer free engraving. It's to reduce the number of used products (iPods especially) on the market.
Since the product is ubiquitous, built to last and doesn't change much - the used market would be a significant drain on sales.
