Shipping is often a ecommerce company’s greatest expense. Therefore, anything your company can do to keep shipping costs down will have a big impact on profits.
Here are seven of our best tips for reducing ecommerce shipping and fulfillment costs.
1. Use The Post Office
Many companies calculate shipping based on UPS or FedEx rates. Generally, these rates are higher than United States Postal Service (USPS) rates, which could be an opportunity.
Very often, parts and accessories can be shipped via the US Postal Service for a fraction of the cost of UPS or FedEx shipping:
- The USPS Priority Mail Flat Rate Box is a great tool for shipping small yet heavy parts at low cost
- Many small, lightweight items can be shipped via 1st class mail, either in a padded envelope or a very small box
The video below has some good tips about reducing shipping costs for small items.
Did you know? The USPS has commercial shipping advisors that will come and visit your office, explain all the various USPS shipping options, and help you find ways to save. If you’re not using USPS, contact your local post office and ask for their commercial services person to find out more about an in-person visit. (Learn more about your shipping options.)
2. Use The Smallest, Lightest Packaging You Can
Oftentimes, etailers will use whatever boxes they have lying around to ship out customer orders (see video above). While this can reduce packaging costs, it can also increase shipping costs.
Shipping costs are based on both package weight AND package size. If a part is shipped in an oversized box, it can cost 20-50% more to ship than it would have in a properly-sized box.
Or, put another way: By “saving” $1 with a used box, you could be costing yourself $5 in extra shipping charges. So, use the right-sized box every time.
3. Implement A Same-Day Shipping Policy
A same-day shipping policy – with a cutoff of 3:00 or 4:00 pm – is a nice value-add for consumers. But it’s also a nice tool for encouraging shipping efficiency:
- When orders have to be filled the same day, staff can’t procrastinate and then get behind if/when there’s a surge of orders. And if they don’t get behind, they don’t have to rush orders out for customer satisfaction reasons (meaning your company won’t have to eat any rush shipping charges).
- Same day order processing requires a good, consistent system for pulling stock, packing boxes, and shipping.
- Orders are more likely to be filled correctly when they are verified and processed in the same step. It’s much harder to put the wrong part in the box when you’re working on one order at a time.
Same-day shipping is also good for sales – consumers are more likely to buy if they know their order will go out right away.
4. Publish Clear, Concise Shipping Policies That Anticipate Expensive Problems
Damaged shipments are a major pain point for all etailers. If, for example, the customer doesn’t alert you quickly about shipping damage so you can file a claim, a shipping policy helps explain why the customer is wholly or partially responsible for the loss. And if a customer tries to defraud you by claiming a product was damaged, your staff has the ammunition they need to deal with a difficult customer without giving profits away.
The shipping policies page is often treated as an afterthought, but it’s vital in terms of both a) protecting profits and b) preventing customer service complaints. If you haven’t gone over your shipping page recently, you really should.
5. Understand HI, AK, FPOs, And International Shipping Policies
If your company ships orders outside the continental USA, it’s crucial to understand how your costs change based on where you ship. Shipping to Alaska and Hawaii, for example, is mostly about understanding how long packages can take to arrive. But shipping to Canada, Europe, or the Australian outback? There’s a lot more to know.
PRO TIP: If you ship internationally, be sure to check out both DHL and the US Postal Service.
6. Read Shipping Statements Carefully, Investigate Every Fee And Surprise Charge, And Negotiate Accordingly
All the major shipping companies offer substantial discounts on retail rates to ecommerce businesses. It’s often as simple as calling and asking for a price break. (Learn more in this article.)
However, the discount on the retail rates might not amount to very much if your company is charged a bunch of miscellaneous fees. So, if you want to get a good deal:
- Pay close attention to all the fees and the retail rate discount
- When you talk to your shipping company rep about a discount, don’t only ask about retail rate breaks
- Ask about waivers or discounts for certain fees and services, and so on
- Know what you’re paying by looking at the statement, not the individual order label…oftentimes the calculated price for the label is too low
NOTE: SEMA members are entitled to a good UPS discount that includes some fee waivers. There are similar programs for other trade associations as well. Be sure to mention your company’s affiliations with the shipping company rep.
7. Talk To A Shipping Cost Optimization Company
There are a small number of “shipping cost optimization” companies that help etailers optimize their shipping invoices by monitoring fees, checking for billing errors, and alerting you to unexpected charges. These same companies can also help you with rate and fee negotiations.
Best of all, many of these companies will work for a percentage of the money they save you.
IMPORTANT NOTE: Many of the shipping optimization companies take advantage of ignorance and end up taking a large fee for doing a lot of the stuff we’re recommending here. So, before you hire one, get your shipping costs as low as you can on your own. Then, when you’re out of ideas, hire a shipping cost optimization consultant.
You wouldn’t settle for a sticker price on a car at the dealership, right? Don’t settle for sticker price when shipping parts. Keep a close eye on those invoices, make sure your staff is smart about the way they ship, and communicate policies to consumers in a way that is easy to understand while also protecting profits.