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10 Most Effective Methods To Reduce Shipping Costs For Online Businesses In 2022
eCommerce sales have dramatically increased as technology advances and customer experiences become more personalised. However, most organisations face the dilemma of whether to reduce shipping costs to remain profitable or to provide high-quality shipping services to customers. Shipping costs are a substantial expense for every company, but you may risk providing a poor customer experience while trying to save money. Continue reading to learn how to efficiently reduce shipping expenses without sacrificing service quality, customer experience, or operational efficiency. What are Shipping Costs? In the broadest sense, shipping costs are the total rates of getting the order delivered to the customer. When looking at door-to-door delivery from the manufacturing unit to the customer’s location, multiple prices are involved. The total shipping cost can be divided into 2 types - shipping and handling. This entire process will have the following associated costs: Warehouse storage costsPacking materials costsPicking and packing costsLabour costsLoading costsFuel costsTransportation costsPostage costsSurcharges and customs costsDelivery labour costs Top 10 Factors to Consider While Calculating Shipping Costs Now that we understand the various price components involved in shipping costs, we will take a look at other factors that impact how much a package will cost to be delivered. They are listed below: Weight of Package The package's actual weight is a significant factor in increasing shipping costs. A heavy package/delivery item will require more space and energy to deliver to the customer's location. The packaged weight translates to higher shipping costs while delivering heavy packages. Dimensions of Package Apart from weight, the dimensions of the package also influence shipping costs. The larger the order, the more space is required in the delivery fleet for a seamless experience. Distance to Delivery Locations The distance between the package pickup and delivery location is another major factor that determines the shipping cost. Delivery fleets divide delivery locations into zones depending on delivery speed, type of package (domestic or international), mode of delivery (sea, land or air), the feasibility of delivery, etc. The further the delivery address, the higher the costs associated with it will be. Fuel Fluctuations Changes in fuel prices contribute drastically to the associated shipping charges. Higher fuel costs automatically increase the cost of shipping orders. When fuel prices are stable and manageable, it also lowers transportation charges and is able to decrease shipping costs. Delivery Speed The time it takes to deliver an order affects the shipping cost. Many delivery fleets have standard timelines to deliver packages across various distances. Opting for same-day delivery or overnight shipping increases the costs associated with delivery. Type of Delivery Location It is cheaper for delivery personnel to drop packages off at a commercial site or office building than to go to individual houses. It is cheaper to ship orders to apartment complexes than to individual houses, since apartments receive multiple orders on the same day, balancing out the costs. There may also be additional fees for deliveries to hospitals, military areas and out-of-the-way locations like rural addresses that may take longer to fulfil the delivery. Weather Conditions A factor that many businesses don't consider is the weather's impact on delivery. Bad weather at the warehouse or fulfilment center location, while in transit and even at the delivery location can cause delays. Weather conditions can also adversely impact ports, container ships, air cargo, and trucking services. Shipping Insurance Keeping in mind that shipments can be damaged, or delivered to the wrong address or could have delivery-related delays so it is vital to protect and insure your orders. Especially when shipping an expensive order, it is indispensable to use shipping insurance. This helps to recover any costs involved in replacements. Most package carriers charge a percentage of the product value as shipping insurance. Customs and Duties International shipping charges can vary based on delivery location. Different countries have customs and other obligations that need to be cleared for smooth delivery. Multiple Orders If a customer has placed multiple orders, shipping and packaging costs can increase. Sometimes, some orders have n increased delivery timeline because they are perishable. In this case, additional shipping costs will be involved to make multiple deliveries to the exact location on different days. Numerous orders should be packed and shipped together to save time and money whenever possible and decrease shipping costs. Keeping all these factors in mind, companies can decide which type of cost structure to choose when it comes to shipping: Flat Rate Shipping Vs Standard Shipping. 10 Best Ways to Reduce Shipping Costs The key to excellent order fulfillment involves good planning, sticking to timelines and ensuring that overhead costs are not too high. Striking a balance can help increase the profits of a business and improve customer satisfaction. Here are ten ways to reduce shipping costs: Make Packages Lighter While product weights remain the same, ensure to use minimal packaging material to reduce the overall weight of the package. Use more lightweight, efficient materials like air pillows to protect items. You can also use light boxes to pack. For durable products that won't cause spillage, try switching to plastic bags with branding rather than bulky boxes to reduce shipping costs. Use Smaller Boxes Make sure that the box used for packing items is slightly larger than the actual product so that minimal packing fillers are needed to keep it secure and will ultimately reduce shipping costs. The bigger the box, the more space it will take in the delivery vehicle, leading to more expensive shipping costs. Keep DIM Weights in Check Smaller boxes can keep DIM weights in check while packing your order which will help reduce shipping costs. Carriers calculate the DIM weight by considering the package dimensions. There are chances that the DIM weight can be higher, even for lightweight items, solely because of the box's size. It is good to create custom packaging that will keep the products snug and free from movement by using the purchased item's original packaging as well. Shipping products in their own packaging can prevent the need for an additional box to ship to the customer, which will also decrease shipping costs. Club Orders Wherever Possible It is much cheaper to ship a single box that is bigger and heavier than multiple small boxes with single items. Bundling orders is possible when the same customer orders various products; this can help reduce shipping costs. You can also provide discounts on order volumes to increase customer delight. Have a Network of Multiple Shipping Partners Having various shipping aggregators to negotiate with will help get better rates and will reduce shipping costs. Shipping companies decrease shipping costs if the business has consistent order volumes. This provides an excellent opportunity to negotiate with multiple providers based on prices offered by competitors. Use Packaging Provided by Carrier Partners Since shipping costs are affected by package dimensions, it's better to use packaging materials offered by the carriers themselves. This will eliminate associated dimensional fees and reduce shipping costs, overall. Opt for Third-Party Insurance Shipping insurance is higher when taken directly from the carrier partner. Also, consider shipping insurance for fragile and high-value items. You may not need to insure every single package. Third-party insurance providers are cheaper than native carrier partners, helping businesses decrease shipping costs by almost 50%. Use Prepaid Shipping Prepaid shipping can help sellers reduce shipping costs by atleast 20%. You can opt for prepaid shipping and buy shipping labels from carriers in advance. This is ideal for businesses with consistent orders of the same package size and weight. Look for Hybrid Solutions If you can manage same-day order processing, it is best to choose a hybrid model for order fulfilment. It can help to reduce shipping costs. eCommerce Shipping companies partner with carriers who can have it picked up from a business location and get it to customers quicker with last-mile delivery. However, keep in mind that orders need to be processed as soon as possible after a customer places the order to meet delivery expectations. There may also be other factors to consider with this hybrid approach, such as specifications of weight, dimensions, order volume, etc. Reduce Shipping Distance Keeping inventory at locations closer to areas of high demand will help decrease shipping costs drastically. The closer the products are to delivery locations, the less money and time businesses need to spend in getting their orders to customers. Having a third-party fulfillment partner will optimize the delivery experience and reduce shipping costs. Conclusion: Does Outsourcing Fulfillment to a 3PL Partner Like WareIQ Help to Reduce Shipping Costs? The best way to decrease shipping costs, reduce order processing times and improve customer satisfaction is to outsource fulfillment operations. Here is how a 3PL fulfillment services provider like WareIQ can help businesses maximize profits and reduce shipping costs: Flexible Warehouse Space WareIQ allows businesses to pay only for the warehouse space that is actively used without the businesses having to invest anything in warehouse management. Packaging Optimization Having experts manage fulfillment ensures that products are packed with suitable materials that provide damage-free delivery and avoid an increase in the DIM weight. Provision of Discounts Having a fulfillment partner helps reduce shipping costs as they buy packaging materials in bulk and can help reduce overall fulfillment costs. Inventory Management With access to fulfillment centers, businesses can easily manage optimal stock levels and scale the business without high capital investments With a centralised platform for core fulfillment, eCommerce shipping operations and post-shipping apps, WareIQ manages the entire range of complex operations in the eCommerce fulfillment process. Inbound functions like scanning and quality check, 100% accurate pick and pack, and inventory management across all channels provides a delightful experience and zero to minimal supply chain leakages. Customers of WareIQ enjoy significant cost savings and a broader reach with no minimum order quantity (MOQ) limit. Sign Up Now with WareIQ to take advantage of our superior fulfillment tech platform & accelerate the growth of your online business. Reduce Shipping Costs FAQs What costs are involved in sea cargo?For delivery by ocean cargo, businesses will have to consider ocean freight, various surcharges incurred for peak season, low sulphur, emergency risk, etc. and other factors like currency adjustment, bunker adjustment, etc. What costs need to be considered when shipping across international orders?If packages have to be shipped by land and need to cross international borders, various costs involved will include documentation, customs for port, road and rail, customs brokerage, delivery order fee, wharfage, cartage, chassis usage, etc. To reduce shipping costs, is self-fulfilment or third-party fulfillment better?When businesses themselves ship orders, the costs will always be higher. With 3PL partners fulfilling orders, companies get transparent pricing, better inventory management, faster delivery, and better opportunities to scale the business. How can WareIQ help your business to reduce shipping costs?WareIQ offers multiple services across the fulfillment spectrum and offers the choice of every major shipping courier service in the country, to always provide the cheapest rates and most competitive services to its users.
May 21, 2022