As the success of ecommerce flourishes in light of failing brick-and-mortar retail stores, many companies may be looking at ways they can incorporate strategic cost management into their ecommerce business. Shipping costs play a significant role in the operations of the company, and thus, finding ways to keep its associated costs down will be of high importance.
How Do You Reduce Shipping and Returns Costs as an Ecommerce Business?
As a retail business, shipping costs can eat away at your profitability. As customers demand quick deliveries, the pressure on businesses to cater to consumer expectations can put a strain on operations and expenses. With many ecommerce businesses expanding rapidly, many organisations may find themselves shipping overseas which can be very expensive, especially at the moment. Passing shipping costs directly onto the customer can be a significant threat to securing the sale, with many customers abandoning their cart if the delivery costs are more than what they believe is a fair price (fundamentally, customers love products with free or low-cost delivery). The challenges that ecommerce sites face with shipping costs are vast, especially when you consider that shipping can equate to around a quarter of an ecommerce company’s costs.
Whilst free shipping may seem like best practice in the ecommerce world (with large players like Amazon offering services like Prime), there may be companies out there who simply can’t offer such a competitive deal on shipping. Yet, there are still ways that you can help to reduce shipping costs to keep your customers happy.
Consider a Range of Carriers
The most important step in reducing shipping costs is research. The number of retailers who fail to conduct thorough marketplace analysis and end up limiting their custom to a handful of shipping providers is astonishing. With a wealth of regional, national and international carriers operating by ground and air, its vital that businesses understand the most cost-effective options for their business, especially now as trade becomes a complicated matter due to political changes.
Utilising one carrier for both your local and international deliveries can see you paying more as local and global carriers offer different cost packages. Operating through a range of carriers can ensure that you get the best rate for each area that you sell products in. It also may not make sense for your business to pay for one, flat shipping rate from one carrier for every product you offer, especially if specific deals work out better for different merchandise. Carriers tend to offer a range of rates for varying products dependant on their characteristics, such as product price, height and weight, and fragility and build.
Through thorough analysis, as offered by our specialists, we can not only identify the best shipping deals for your business but pinpoint any fees that a carrier may place onto your contract. Common examples include extra charges for Saturday deliveries and additional fees for signed deliveries (which may be essential with high-cost products). Our specialists negotiate with a network of carriers to provide you with lower shipping rates, therefore, offering you higher profitability on product purchases.
Price Points Should Take Shipping Costs into Consideration
Many companies may price their product considering the production costs and competitor analysis yet may neglect the shipping costs they incur. As customers expect low or free delivery service as aforementioned, this can see companies losing out on money. Understanding the entire pricing structure of carrier services will ensure you can tailor your product price to maximise profitability.
The price of shipping will be determined by a number of factors (dependent on carrier), and these product characteristics must also be considered when pricing a product for sale, especially if you are planning on offering low-cost shipping costs to customers.
The price of shipping a product can sometimes be based upon the space it will occupy in the shipping vehicle (its dimensional weight), rather than how heavy it is. This means that some businesses may be losing out on money by shipping lightweight products in larger packaging. These considerations should be made when pricing the item to ensure you do not lose money on shipping.
30% of all online orders are returned. This is typically an overlooked area but vital in order to reduce “basket abandonment” as consumers more and more will purchase multiple items in order to send one or more back e.g. clothing in different sizes or colours. Free and seamless returns procedures are a real advantage and there are low cost returns portals available that enable the retailer to provide simple and hassle free returns services to the consumer.
Add-on services are also available for faulty goods in order to save time, money and the carbon footprint e.g. In Country warehouse facilities for goods grading that lead to either disposal or resale in the ”seconds” market without physically touching the retailer.
Custom Packaging Solutions
Successful ecommerce businesses will usually send the same item in high volumes; therefore, it makes economic sense to outsource packaging production because this will save money in shipping further down the line. Custom packaging will be a cost-effective option as it will be made to fit the product, removing any excess or unnecessary packaging that would incur extra costs.
Packaging considerations made in custom packaging solutions include using the smallest possible package for each shipment, the type of material used and the consideration of box shapes to ensure a more cost-effective dimensional weight.
In order to grow and remain competitive in the marketplace, ecommerce companies must find ways to reduce their shipping costs and increase their profit margins. Ecommerce companies can simply not afford for shipping and returns to be afterthoughts.
To find out more about how Expense Reduction Analysts can help your company streamline its shipping operations, get in touch with our team today.
Article by: Charles Reid