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Watching the Bottom Line: Strategies to Manage Shipping Costs

Watching the Bottom Line: Strategies to Manage Shipping Costs

One cost that is always discussed in my e-commerce networking groups is shipping. Both e-commerce and retail businesses face challenges managing shipping costs. But they must manage these costs to remain profitable and competitive without compromising customer satisfaction. Here’s a list of strategies you can explore of managing shipping costs is on your to-do list.

Evaluate Shipping Options

Research shipping carriers and services. In addition to FedEx, UPS, and the US Postal Service, you can explore their competitors like DHL, and other shipping solutions like ShipBob, ShipStation, and ShipPirates. Compare rates, pick-up and drop-off options, their shipping regions, ability to track, and return options. You’ll also want to look at reviews about their on-time delivery rates. And if you need to or plan to ship internationally, investigate their options and processes related to shipping abroad. Create a spreadsheet or comparison chart so you can evaluation what options will fit your business needs and be the most cost-efficient.

Negotiate Shipping Rates

Some carriers are open to negotiating their rate if you have high volumes of shipping. Try to negotiate shipping rates, especially if you have significant high shipping volumes. Don’t hesitate to use your shipping analytics as leverage when negotiating for lower pricing or volume discounts.

Proper Packaging

Shipments can require packing of various sizes and shipping cost can vary based on the dimensions of your packages. Make sure that you have a variety of packaging options in stock for small, medium, and larger orders. Look into bubble wrapped envelopes for books, journals, and similar products that need to be shipped. Train your employees to use the most efficient packaging options for shipping orders to help save costs.

Integration with E-Commerce Platforms

Explore whether your website or e-commerce platform offers integration with shipping providers. If so, you may be able to obtain group rates or cheaper shipping cost using those shipping companies. In addition, using shipping providers connected to your platform allows you to automate order processing by generating shipping labels and providing customers with tracking information when orders are placed and fulfilled.

Address Validation Tools

Implement address verification tools whenever available. This helps prevent costly shipping errors and returns due to incorrect addresses.

Compare Rates Based on Delivery Date

Add some cushion in your shipping policy. This will allow you to compare your available shipping options and rates based on delivery date. For example, if your shipping policy offers 7-10 business day shipping, you may be able to choose ground shipping (which is often cheapest) and still get your customer orders delivered on time. If your shipping policy is 5-7 business days, ground shipping will not be an option for you, unless you are shipping to a local address.

Offer Customers Shipping Options

Some businesses explore a few shipping options such as flat rate shipping for standard shipping, additional fees for expedited shipping, integrating USPS shipping cost calculator into their website and allowing the system to calculate shipping costs which are added to the cost of your customer’s orders, and adding shipping costs to the price of their products which allows them to promote “free shipping” as a sales tactic. Other companies offer free shipping for orders above a designated dollar amount, like free shipping for orders of $100 or more. In these cases, although shipping is free, customers are being encouraged to make higher purchase amounts and therefore, revenue is increased.

Cost Audits

Regularly audit your shipping policy and costs to identify area where you can improve efficiency and save money. Check to see if there are new shipping providers that you can research or new shipping processes to explore. Review customer feedback for insight on their level of satisfaction with your shipping services. Consider incorporating customer feedback into any changes you want to make.

In summary, shipping cost management plays an important role in the financial success of retail and e-commerce businesses. By exploring these strategies, you find ways to reduce your shipping expenses while providing your customers with a positive and satisfying shopping experience.


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