Ask for a letter gauge from a post office - this is a large cardboard thingy which has slots cut into it - for 2 cm.  My PO was glad to hand it out and it is free.  

Then you will be in no doubt whether your item complies, if it fits through the slot, it can be sent as a letter.

Buy lots of stamps and yes, post them in the red box.   Follow the Aust Post guidelines on their site and on the letter gauge for number of stamps, you will not go wrong.

Of course it depends on what you sell - obviously some breakable items should never be sent as a letter.

PS:  if possible, change  your post office, there is nothing worse than a post office with a bad attitude.