Practical Ecommerce

Ten Ways To Reduce Your Shipping Costs

Online merchants are often caught between the increasing demand for free delivery and rising shipping and fulfillment costs. Thankfully, there are some simple ways to reduce the cost of shipping and order fulfillment. Here are ten of them.

1. Rate Shop

Rate shop your parcels among all available carriers and delivery methods. If your package weighs less than 13 ounces, you can use first class mail, as this is the lowest cost delivery method available for lightweight packages. Priority mail is almost always cheapest for packages over 14 ounces to about 3 pounds and FedEx or UPS ground is cheapest for heavier packages although negotiated carrier discounts must be taken into account. Use of USPS flat rate cartons may turn out to be less expensive than UPS or FedEx if your package density (pounds per cubic foot) is great enough. This can only be determined by trial and error however. My article “Shipping Rates: Comparison Shopping Saves Money” may be helpful in creating the rate shopping solution that works for you.

2. Use Air Delivery Only if Necessary

Use express air delivery only when really needed. A common mistake is to ship an entire order in-bound or out-bound by next day air delivery when actually only a percentage of the shipment is required on a rush basis. To avoid wasted expense, use express delivery for only enough merchandise or supplies actually needed in the short term and ship the balance by lower cost ground or truck freight. Likewise, use FedEx or UPS ground or USPS priority mail instead of express delivery for Zone 2 addresses, as the packages will arrive just as quickly.

3. Monitor DIM, Oversize Charges

Adjust your carton sizes to avoid dimensional weight (DIM) and oversize surcharges. FedEx, UPS and USPS all have weight minimums and oversize penalties, which are referred to as DIM charges. These extra fees are calculated on the relationship between package weight and package size. Once you understand how these billing rules work, you may be able to adjust the length, width or height of your stock cartons to eliminate the extra costs. See my previous article, “Dimensional Weight Errors Can Cost Big Bucks,” to understand how the DIM rules work and what you may be able to do to reduce the extra expense involved.

4. Use Rewards Cards for Payments

Use a rewards credit card to pay your shipping and supplies bills.
American Express credit cards offer a 5 percent savings on FedEx shipping services plus other discounts. Also, any rewards credit card that earns miles or cash can be used to pay your Endicia.com, Stamps.com, Pitney Bowes, UPS, FedEx or truck freight bills. Even 1 percent cash rewards card yields $1,000 in pure savings per $100,000 of in-bound and out-bound shipping fees.

5. Process Electronically

Use electronic package processing to earn discounts. If you use a postal system such as Endicia or Stamps.com you can earn a discount on express and priority mail plus discounted ship confirmation fees if you submit the details electronically. There is a monthly fee that must be netted against the discount savings, but the cost reduction potential is substantial if you ship mid-to-high volumes per year. If you are shipping in volume, a rate shopping system can quickly pay for itself by searching all the available carriers and kinds of delivery options for the best combination of cost and delivery. If you don’t ship in volume, you can still develop a set of your own shipping rules that will help your warehouse staff avoid the most common package processing errors.

6. For Freight Shipments, Use a Broker

Use online freight broker systems to shop among truck freight carriers. You can use an online freight broker system like FreightQuote.com or FreightCenter.com to find the best deals for individual in-bound or out-bound truck freight shipments. Getting the best rate depends on gathering the facts about each shipment and determining the freight class accurately. My guide on this topic is posted here, in a previous article, entitled “Truck-freight Shipping: How to Lower Your Costs.”

7. Seek Group Discounts

Join a trade organization that offers delivery discounts. There are trade associations that offer their members UPS, FedEx and truck freight shipping discount programs. For example, the American Booksellers Association provides several aggressive FedEx and truck freight discounts. Your savings have to be netted against membership fees of course.

8. Request Discounts on Supplies

Negotiate discounts with your supplies vendors. As you build shipping volume, switch to ordering shipping supplies with blanket orders subject to monthly releases in the quantities you need. I explained an easy calculation of your bulk buying return-on-investment in “How To Buy Shipping Supplies.”

Just as you use your increasing buying power to reduce our shipping supplies expense, you can negotiate volume discounts with FedEx and UPS as well as participate in postal consolidation programs.

9. Watch for Billing Errors

Audit your common carrier invoices for errors. You can assume that 5 to 10 percent of FedEx, UPS or truck freight invoices have an error or a reimbursable service failure that is costing you money. You can do your own checking or there are a number of auditing companies that will examine your invoices on a percentage of savings arrangement.

10. Consider Outsourcing

Outsource order fulfillment to reduce your overhead costs. Outsourcing fulfillment is actually quite easy and I described the process in “Fulfillment: Guidelines for Outsourcing.” The trick is to get a good match between your order processing needs and the fulfillment company’s systems, methods and materials. Fulfillment fees are normally based on per order and per item charges plus USPS, FedEx or UPS reimbursement. To this you add monthly storage and optional warehouse service fees. You should expect a 100 percent satisfaction guarantee and a free trial before you make a commitment.

Summary

Online merchants are under increasing pressure to reduce shipping and fulfillment costs. Thankfully, there are lots of ways to reduce order processing waste and inefficiencies.

John Lindberg
John Lindberg
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Comments ( 5 )

  1. Elizabeth Ball August 13, 2010 Reply

    One idea which wasn’t really covered is to reprice your highest margin products to automatically include ground shipping plus a little wiggle room and then to promote them as items with free shipping.
    It’s a win-win-win.

  2. John Lindberg August 13, 2010 Reply

    Hi Elizabeth,

    That is an excellent point and I should have mentioned this in my article. When working with clients who have a lot of SKUs we often recommend that they build a spreadsheet listing each item, its retail price, wholesale cost, margin and weight — and then calculate the profit margin per shipping pound.

    The last step is to sort the list by margin per pound and look for the red line between those items that have enough margin to support a free shipping offer and those that don’t.

    There may be some SKUs that don’t have enough margin per pound or retail price per pound to justify shipping at all. This is called the diamonds vs. coal shipping problem and it is surprising how many online merchants find themselves trying to sell products that are not practical to ship.

    John Lindberg – President
    EFULFILLMENT SERVICE INC

  3. bigbird August 17, 2010 Reply

    We have relationships with several LTL carriers. One has an 80% discount with us and through an excellent long-term relationship with the account executive any issue is quickly resolved. It pays to have great relationships with you account executives of carriers.

    Thanks,
    Keith Eckberg
    Director of Business Development
    http://www.IntrepidGroup.com

  4. iamsam June 6, 2013 Reply

    I have been using http://www.parcelzoom.com – they have cheap shipping fee using DHL, USPS, UPS and Fedex and providing free USA shipping address. Best part, I think, is they have 24/7 customer service.

  5. Amanda July 23, 2014 Reply

    I think one important point you did not elaberate is using the package consolidation services provided by package forwarders like http://www.usgobuy.com/en/services-and-fees.html, they can reduce the dimensional weight of your packages, especially when you are shipping items that take a lot of spance but light in weight!

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