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Are You Spending Too Much on Shipping?

July 29, 2018

Are You Spending Too Much on Shipping?

One of the easiest ways to provide excellent customer experience in your online business is by providing convenient, excellent and affordable shipping. However, this comes at a cost, and in a business environment where all expenses seem to be rising, you need to have a look at your shipping costs once again. You have to maintain a balance by offering the best customer experience while at the same time cutting costs on shipping logistics.  According to a recent survey carried out by Jupiter Media Matrix Inc and published by Forbes, 63% of customers abandoned a purchase due to excessive shipping costs.  With such insight, the free shipping threshold set by giant retailers such as Amazon becomes all the more significant.

So, are you spending too much on shipping? Is there anything you can do about it? This article gives insights on how to optimize your shipping strategy without compromising on the customer experience.

How to Start Reducing High Cost of Shipping

Most experts put freight spend at 9-11% of sales. According to a Canadian Shipper Report, transportation spend is about 10-11% for businesses with less than $250 million in sales. For those with revenues more than $9 billion, freight costs range between 2-3%.  Some of the ways to deal with high shipping costs include:

  1. Identifying Overspending in Shipping

Common pitfalls leading to high costs of shipping include:

  • Using flat rate boxes to ship everything: “If it fits in the box, it ships at the same price every time,” and this is a great thing for you up to a point. Other alternatives can save you money depending on the item you wish to ship including Regional Rate Boxes and Priority Mail.
  • Relying on SmartPost and SurePost alone: These two options are great but they still depend on the United States Postal Service at the last mile to deliver a package to the customer’s doorstep. A cheaper option would be to use the United States Postal Service all the way as they now match the rates offered by SmartPost and SurePost and other shipping services.
  • Failure to account for dimensional weight: If you haven’t started factoring in a dimensional weight (DIM weight) introduced by FedEx and UPS in 2015, you might be paying more for your shipping. Today, shippers use DIM weight calculation and an actual weight calculation for every package, and you pay the higher rate. You have to start considering overall package size and weight more keenly to pay a lower rate when shipping.
  • Failure to use other packaging options: Don’t use boxes for everything and instead consider Poly mailers for items which are not fragile. It cuts down the cost of shipping.

 

  1. Optimize Your Free/Affordable Shipping Strategy

To offer free shipping without breaking the bank, consider the following options:

  • Free Shipping for Domestic Orders only
  • Free Shipping for orders over a certain order amount
  • Free shipping for return customers
  • Free Shipping for a minimum number of items purchased
  • Adjust the price of product downwards to reduce “stated” shipping costs

 

  1. Find Ways to Reduce Costs of Shipping

Consider the following strategies:

  • Buying packaging from discount suppliers
  • Negotiating bulk discounts
  • Reusing and recycle
  • Using shipping rate calculators to find the best rates
  • Batch-process as much as you can for higher efficiency and reduced costs
  • Use hybrid services for bigger shipping discounts. Delivery takes longer but you save money in the process.
  • Use a third party logistics company/international warehouse

It is also important to audit all invoices for errors, consolidate shipments and seek referrals from other businesses to find the best shipping rates. If you feel your shipping spend is too high, these strategies will help reduce costs and keep your business going.

By combining an affordable shipping experience with seamless payment processing using the best payment gateway, your business stands a better chance in the competitive e-commerce landscape. It is a high time you choose the best payment gateway and be able to streamline your shipping process.


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