In one survey of 2,500 U.S. consumers, it was discovered that more than anything, consumers who are shopping online want quick delivery — at affordable rates. In fact, they discovered that 64.3% of respondents ranked cost as the most important factor related to shipping, followed by speed. What’s more? 93% percent of consumers are more likely to buy more products if their shipping is free. It can be tempting to offer your customers the lowest available shipping rates, but doing so may slow delivery times and negatively impact your profit margins. The solution? Reducing shipping costs! All of this is simpler if you can pay less to ship your products.
About Shipping CostsOne of the best ways to reduce your shipping costs is to know exactly what factors into the total cost. This can help direct-to-consumer (DTC) brands understand all the fees that go into shipping goods to pinpoint which ones can be reduced. Just what all do DTC brands pay for when it comes to shipping?
- Boxes and labels
- Warehousing an item
- Labor to process and pack orders
- Actual shipping rates
- Additional shipping fees
Examine Last-Mile Delivery CostsSpeaking of last-mile delivery, this is one the simplest ways to reduce shipping costs. Some experts estimate that last-mile delivery takes up 28% of the total delivery cost. But it’s not only the part of shipping that costs the most — it also takes the most time. The problem with last-mile delivery is that it is inefficient; it often involves multiple stops with low drop sizes in both rural and urban environments. DTC brands can reduce their last-mile delivery costs with the help of a fulfillment service or 3PL partner, who can help with last-mile costs by:
- Utilizing local micro-fulfillment centers and other warehousing options
- Route optimization software
- A warehouse management software system to address workflow optimization, freight optimization, inventory reduction, billing and processing, and more
Look for Hidden Shipping FeesYou’ve carefully calculated the ideal shipping rates for your products, allowing for all kinds of factors. But have you looked at all of your shipping costs? When some direct-to-consumer brands estimate what it will cost to ship their goods with a certain provider, they aren’t always given the whole story. Some shipping agreements may have tricky language that can set you up for double-digit fee increases and other hidden costs. When this happens, you may not be figuring your shipping costs correctly, and you may be eating some of your profits. A fulfillment service or third-party logistics (3PL) provider can help you avoid these pricey hidden shipping costs.
Think Outside the Box: Offer Free Shipping to Boost ProfitsSometimes the key to offsetting shipping costs isn’t to worry so much about shipping costs; it’s about boosting the number of sales you’re able to make. Free shipping can help you accomplish this. What does this mean? Practical eCommerce walks us through it: Say you sell Dr. Martens 1490 vegan leather boots for $159.99, but your store buys them wholesale for $96 per pair. That means that if you had no other costs associated with the sale, you would earn $63.99 per pair. When you sell ten pairs of shoes, your store would earn $639.90 in profit. But what if you offer free shipping? Sure, it may cost you an average of $15 to ship each pair of boots, lowering your profit per pair to $48.99 or $489.90 in profit for 10 pairs of boots. We know, though, that free shipping is an excellent marketing tactic. This means that if offering free shipping helped your online store sell 5 more pairs of boots, even when you’re paying for shipping, your profits would be higher — $735.85 for 15 pairs of boots. Selling 15 pairs of boots at a $48.99 profit would actually earn your store more than if you passed on the cost of shipping to your customers. And if free shipping helped you double your sales to 20 pairs total? You would crush your previous profits, earning $979.80 — even when paying for shipping. To know whether or not your eCommerce business can afford to offer free shipping, take a look at how it could impact your overall sales.
The Simplest Solution? Work with an Order Fulfillment ServiceWhen you hire a third-party logistics provider or another order fulfillment service, you don’t have to develop your warehousing and shipping methods from the ground up. Perhaps one of the most impactful ways you can reduce your shipping costs is to work with a 3PL partner. Because of their established industry connections, your 3PL can negotiate better shipping and warehouse costs to keep your expenses as low as possible. They’ll help lower costs for every step of fulfillment, including:
- Shipping rates
- Inventory tracking