Practical Ecommerce

7 ways to lose less money on shipping

Shipping sucks.

It’s expensive, time consuming, fraught with peril, expensive, undervalued by your customers, and did I mention that it’s getting more expensive by the day? You can thank Amazon for why your customers think it should always be free. And you can thank thieves, fraudsters, and the credit card companies for why it’s fraught with peril.

So, how can we lose less money on shipping? For starters, come to grips with the fact that shipping will never be a profit center for a consumer-facing online retailer. Dance a jig if you break even, but be happy if you can simply cover the cost of postage, never mind the cost of your employees and shipping supplies.

Secondly, you must understand how the shipping company makes money so you can match the right package with the right carrier. And finally, be smart.

#1: Determine your shipping profile and negotiate accordingly

Different shipping companies make money in different areas. The USPS is not currently well positioned to move large parcels. However, it is quite efficient at letters, flats, and small packages under five pounds. The post office is also great at delivering to residential areas, especially the so-called “final mile.”

UPS and FedEx, on the other hand, are quite efficient at moving large packages and performing expedited deliveries. They perform the long haul (from the origin to a processing center close to the destination) extremely efficiently. Delivering to businesses is another one of their strong suits. But they are not efficient at residential delivery on their own.

You must analyze your shipping profile to determine if you’re a high profit margin or low profit margin customer with each carrier. If you’re overnighting a lot of relatively small packages, you are an ideal customer for UPS and FedEx. If you’re shipping a lot of padded envelopes and flats, you’re perfect for the post office. If many of your packages are fairly bulky, but aren’t particularly heavy, and are destined for residential areas, you’re actually a bit of a nightmare for every carrier.

Postal carriers deliver in small trucks. Therefore, large boxes are difficult for them to handle and they will price accordingly. UPS and FedEx can handle larger boxes in their bigger trucks, but since they aren’t delivering to every residential house on a daily basis, their trucks are delivering at a far slower rate than the USPS. Their residential surcharge fees reflect this time -cost.

#2: Use a postal consolidator when possible

Because UPS and FedEx are extremely efficient at moving packages 95 percent of the way to their final destination, and the post office is already delivering to every residence on a daily basis, they have teamed up. You’re probably aware of the “hybrid” services UPS SurePost and FedEx SmartPost. FedEx and UPS will pick up your package, zone skip to the destination post office, and allow the postal carrier to complete the delivery.

At my store, most of our packages weigh less than five pounds. Most of the boxes are small, too. Therefore, I can get great rates from postal consolidators, such as DHL Global Mail. They perform the bulk of the delivery (picking it up from me and injecting it into the postal system at the destination’s local post office) and allow the post office to complete the process.

By using a postal consolidator, I achieve rates far cheaper than I could directly from the post office.

#3: Quote your customers accurately

If you offer real-time shipping quotes to your customers, make sure they’re accurate. Many stores use outdated processes, stale rates, or don’t fully understand their rates. UPS and FedEx are notorious for add-on charges (a.k.a. “accessorials”) that aren’t always reflected in their rate card or even their rate quote APIs. Some big killers are the fuel surcharge, residential delivery surcharge, and address correction fees.

To quote your customer correctly, ensure you have the correct weight for your package, the correct box size for your package (more on this later), a validated address for the shipment, and assume it’s going to a residence or validate whether its a commercial address via a third-party tool.

#4: Know the box size, know the box size, know the box size

If you’re basing your shipping fees purely on the weight of the items in your shopping cart, you’re going to get screwed — especially if you ship a lot of expedited packages or bulky, lightweight items.

UPS uses the greater of dimensional weight and actual weight on any expedited method as well as on ground shipments if the package is larger than three cubic feet. If you don’t know what dimensional weight is, read this article. Dimensional weight charges can be a cost killer.

Many ecommerce systems don’t include box-solving software. If that’s the case for you, I’d switch to another piece of software. Depending on your volume, you could be losing thousands of dollars a week due to dimensional charges. So, make sure you’ve including the size of every item you sell in your database and using sophisticated software to determine the size of the box you’ll be using with each shipment. Software providers such as SolvingMaze.com can help with this problem.

#5: Ship it right the first time

Pack your boxes appropriately so that your orders arrive in pristine condition. Not only does it look terrible to your customers if their product isn’t properly protected, but it kills your bottom line to reship items for free.

#6: Use as few types of packing material as possible

Don’t use four types of air pillows, three types of paper, and Styrofoam peanuts. Instead, try to limit yourself to two types of packing material. Pick one material for wrapping and protecting products and one material for void fill. This makes it quicker (and cheaper from a labor perspective) to pack each box. It also allows you to buy these materials in extreme bulk to save cash.

#7: Buy your shipping supplies locally

Massive online shops such as Uline are fantastic from a selection and service standpoint. However, they are rarely the cheapest price when it comes to the majority of the shipping supply commodities you’ll need: boxes, packing tape, and packing materials.

You will need to purchase in bulk, but if you’ve carefully selected a half-dozen box sizes, you can stock up for 6 or 12 months at a time (hey, a box never goes bad) and enjoy substantial price savings.

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Comments ( 3 )

  1. Dianne July 3, 2014 Reply

    Great article and very informative. Thank you! I’m new at selling online so “how to” articles like this are really helpful. This shipping ebook has helped me figure out shipping too. http://www.shipworks.com/ecommerce-shipping-101/

  2. Simon July 3, 2014 Reply

    Hi Jamie, some great tips if I could also add to the list:

    a) If you have multiple stores or distribution centers use an ecommerce platform that can perform least cost routing or “SHIP from store” logic this way the shipping method will designate the cheapest alternative.

    b) Set up shipping rules to maximise the sale

    Example 1: within this zip code assign courier A

    Example 2 : For this product assign courier A

    Example 3: For this product going to this post code then display the cheaper of courier A and B

    Example 4: For this product only send with this courier

    Example 5: After this time do not show same day delivery

    Example 6: If order is more than $99 then reduce / free shipping

    c) Within your check out also try and add different pick up and collection options. In shipping software like Temando you can set up zones based on zip codes. Offering collection points is a handy way to maximise the sale and reduce the shipping for your potential buyers.

    Simon

  3. Brenda July 7, 2014 Reply

    An excellent article, Jamie! A lot of worthy details to take a look into. . . but just wanted to mention that for small online retailers, most of the hybrid methods of shipping are not available. A certain monetary threshold needs to be met to take advantage of them. (And in using the USPS for the final delivery of the parcel, tracking becomes impossible). Thanks again!

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