Shipping policies can help make an Internet merchant successful. But shipping also is one of the largest cost centers. Amazon, Zappos, Overstock and Buy.com have stacked the cards in their favor by offering either free shipping or very aggressive shipping programs and policies. Consequently, many consumers have come to expect either free shipping or very low cost shipping alternatives. How can smaller and medium sized retailers compete in this environment?
To understand low-cost shipping, retailers need to analyze its costs and benefits. Doing so will ensure that they meet consumer expectations and address operational realities.
3 Ideas to Reduce Shipping Costs
The following are three ideas that small and medium sized retailers can take to keep their shipping costs in check.
Explore all potential carriers and services. Hybrid shipping options that combine United States Postal Service delivery for the "final mile" with FedEx, UPS or DHL Global Mail for the long haul can make a huge impact on a retailer’s bottom line. These services can eliminate very costly surcharges that can add up to 50 percent of the total cost on a traditional ground standard package, especially for residential deliveries. Be persistent in asking UPS, FedEx, and DHL about these services. Don’t take “no” for an answer. Your carrier may try to stick with the bread and butter ground shipments by telling you that you don’t have enough volume to qualify for these products — but persistence pays off.
InXpress is a good hybrid solution for smaller retailers that have a decent amount of international or air volume; it has compelling programs, even for companies that ship less than $75,000 annually. Also look closely at USPS for the entire shipment and not just the " final mile" delivery, especially on international shipments. Duties and taxes are often much less expensive going through the USPS than via other parcel carriers. In fact, many international customers won’t purchase from online retailers unless they offer shipping via the USPS.
Use data to your advantage. Shipping and billing data are very complex. Spend the time to become knowledgeable about this information, or outsource its management to firms that specialize in these areas. Nearly every shipper I have met is overpaying for freight: they’re not monitoring shipments to make sure that all charges are accurate, paying for shipments that don’t arrive in the guaranteed delivery time, not routing shipments using the correct products or service levels, or simply paying more than they should based on the rates they have negotiated. The more retailers understand their unique shipping profiles and can coherently discuss them, the more likely they are to pay less.
Eliminate double shipping. These days many retailers are sourcing products from overseas, especially Asia. Rather than importing to your distribution center, explore shipping directly from your overseas manufacturer to your customer. If you import goods to your warehouse, you’ll have to re-ship them to the end customer.
I have a customer that was importing goods from China via either ocean or air freight into Long Beach, Calif. From there the goods were being transported by railcar or truck to a warehouse in Atlanta, Ga. The company's largest customer was in Southern California. Once the goods arrived in Atlanta, a significant portion was sent back to California. We set up a small warehouse for them near the California border in Mexico — reducing labor and warehouse costs even more — and they now segregate the west coast volume before shipping eastbound. Even if you can’t ship directly to your customers for quality-control concerns, packaging issues, or other reasons, explore renting a small warehouse in close proximity to your larger customers. This doesn’t just apply to international suppliers; drop shipping from your domestic vendors can also help to eliminate double shipping.