As an online seller, you will no doubt be doing all you can to cut back on unnecessary business costs and increase your bottom line. One element worth looking at is to reduce shipping costs for your eCommerce business.
Here’s the thing.
Charging your customers too much for their delivery risks missed sales opportunities, while failing to charge enough can cut into your business profits.
Now, while there’s no denying that this is becoming a problem for online retailers, there are options for overcoming this and saving money on your shipping costs and business expenses.
Simply by securing the cheapest shipping costs on the market.
As obvious as it may seem, many of the tips on how to do so are often overlooked, despite the fact they can save you money and even improve your business processes.
With that in mind, we discuss seven ways to help you reduce shipping costs for your business.
1. Negotiate your shipping rates
2. Compare courier services and shop around for prices
3. Use multiple delivery services
4. Use a shipping aggregator for cost-savings
5. Claim shipping refunds
6. Use a fulfilment service
7. Look beyond price
One of the easiest ways to make savings on your delivery costs is by outright asking for them.
In fact, in most cases the rates advertised by shipping providers (including the likes of FedEx, Yodel and UPS) aren’t set in stone and can actually be negotiated by sellers.
There are, of course, a few things to bear in mind, regardless of whether you’re negotiating with your existing provider or looking for a new shipping service.
Firstly, you will likely get a better response by picking up the phone and speaking directly with a representative or someone else with authority, as opposed to negotiating via email.
Secondly, some providers will be even more responsive with negotiations if you agree to lock yourself into a yearly or multi-year contract.
It’s also worth familiarizing yourself with your current shipping expenses, reviewing if and where any extra fees are coming from and negotiating these with your carrier.
Finally, always start by doing your research and getting some quotes from a number of other providers, as this will give you more credibility.
Many online sellers don’t actually think to compare courier prices, despite there being plenty of courier comparison sites out there. ParcelHero, Parcel2Go and ParcelMonkey, to name a few.
While you can look on the individual courier sites (DHL, Royal Mail, DPD, Collect+, Yodel) and use their own shipping calculators to get an idea of prices, shipping comparison sites can compare all of these services in one place, saving you time.
If you sell products of different weights and sizes, you could actually reduce shipping costs and save yourself money, simply by using more than one courier service.
While there are benefits to using the same provider for all of your parcels, the most obvious being a potential reduction in postage costs due to bulk shipping, it won’t always be the cheapest option.
Here’s the thing.
Different providers will be more cost-effective for certain parcel types, i.e. those with specific weights and dimensions. As such, they may be able to offer better rates for these types of products, compared to other services.
In other words, if you sell a range of different products, it could be an effective way to drive down delivery costs.
Let’s assume you sell homeware for instance. For your larger furniture orders, it may work out cheaper to use a courier service such as DPD, whereas for smaller and lighter items it may be more cost-effective to use Royal Mail or Hermes.
For a comparison of courier prices and to see which service is cheaper based on your business needs, have a read of this article.
Obviously, however, it's going to be complex and time-consuming to work out which orders are assigned to which shipping providers when it comes to streamlining your order fulfillment.
That's why it makes good sense to invest in advanced inventory management software with shipping capabilities, as these types of systems are able to automatically work out these calculations for you - saving you countless hours.
Shipping aggregators such as Parcel Station, Temando and Parcel2Go tend to be overlooked, despite the fact they can offer huge savings and help reduce shipping costs.
But what is a shipping aggregator and how exactly can they reduce shipping costs?
Shipping aggregators work by understanding your shipping needs and selecting the right carrier at the best price for your parcels.
But that’s not all.
As they use the leading couriers on a regular basis, they can actually obtain reduced rates and pass these rates onto their customers, saving you further costs.
Similarly, you can consider the use of a bespoke parcel and carrier management solution such as Parcelhub or GFS. With these services, you are not only able to leverage their buying power and gain competitive rates on carriers, but you can also benefit from their logistics support and customer service.
Another way to save money on your delivery costs is by claiming a refund from your shipping provider.
Now, let us start by saying that this isn’t an ideal situation, nor is it a tactic you should be relying on to cut back on costs, but in the event that your shipping provider fails to meet their guarantee, you could be entitled to a refund.
This is because many will offer money-back guarantees if they deliver the item later than promised (or later than they’ve been paid for).
FedEx and UPS, for example, both offer this guarantee and Parcelforce offers a full refund for failing to meet their express9, express10 and expressAM guarantees, as well as 50% for its next working day service and 25% for their 48-hour service.
Again, this is by no means an ideal scenario, largely because late deliveries jeopardize customer satisfaction – and in turn your reputation – but it’s certainly something to be aware of if you find yourself in this situation.
If you’re thinking that the process of claiming a refund is more hassle than it’s worth, there are various services out there, including 71Ibs, RefundTiger and Refund Retriever, who will handle the entire process – screening packages and filing refunds on your behalf – all for a percentage of the refund.
Another way to reduce shipping costs is by using a fulfillment service that stores, packages and ships your orders on your behalf, eliminating the hassle incurred with delivery.
In fact, many fulfillment services will even handle customer inquiries related to the fulfillment.
Now, while these services do come at a cost and won’t always be the cheapest option for certain product types, it can save you a huge amount of time – and time is money.
But which fulfillment service should you use?
Perhaps the most well-known provider is Fulfillment by Amazon (FBA), who contrary to the name, will also store and fulfill goods that have been sold outside of the Amazon marketplace.
FBA isn’t the only option though – consider researching services such as DK Fulfillment, James and James eCommerce Fulfillment and myWarehouse.
The cheapest courier service won’t always be the best option for your business and it won’t always provide you with the biggest savings.
Think about it this way.
If a provider has bad reviews and consistently high late delivery rates, they could end up costing you more in terms of handling returns and disappointed customers.
For this reason, it’s crucial that you’re researching your potential providers.
So, there we have it – seven tips to help reduce shipping costs and become more profitable.
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