As e-commerce increases – especially in light of the COVID-19 pandemic – and choice in retailers continues to grow, keeping costs in check while striving to meet customers’ exacting expectations can be difficult to manage. Shipping costs can make a world of difference for both retailers looking to increase profits and customers deciding whether to buy a product. Retailers want to keep shipping and packaging costs as low as possible to save money. Customers, on the other hand, want safe packaging of goods and fast delivery times, but excessive shipping costs regularly lead to abandoned or cancelled purchases.
To keep customers happy and profits high, cost-effective shipping strategies are essential for e-commerce businesses. These five simple tactics can help reduce shipping costs and thereby increase customer loyalty and ROI.
1. Choose Cost-Efficient Packaging
The devil is in the details: retailers should always keep in mind that the expense of cardboard, package filler material and parcel stickers factor into shipping costs. Basically, the larger the package, the higher the cost of the entire shipping process. For example, many carriers calculate rates according to the size of the shipment in order to prevent retailers from sending small items in large packages. Plus, an appropriately sized cardboard box reduces the need for excess filling material. This cost-saving practice also increases sustainability and filling material can be replaced with recyclable alternatives. This way, online retailers can conserve material, save money and protect the environment.
2. Identify the Right Shipping Method
Whether by land, air or sea, depending on what’s being shipped, where it’s going and how fast it needs to arrive, the answer will vary.
When selecting the most cost-effective shipping service, a retailer’s choice must align with the needs of their customers and to their own commitment to maintaining customer service and profitability. Depending on the destination as well as the size, type and quantity of goods shipped, it is worth conducting a thorough cost-benefit analysis in order to save costs in the long term. For example, shipping by land is often recommended for non-urgent deliveries, whereas timely international deliveries may use a combination of shipping methods. While air may be more expensive, its cost can be offset by the benefit of happy customers and a more affordable land-based last-mile delivery option.
3. Consolidate Packages
Consolidation is a simple strategic leg-up for retailers – particularly for businesses shipping across regions or even internationally. Specifically, the common practice of break/bulk shipping means all shipments to a country are labeled and sent as one combined shipment to an in-country carrier depot. The parcels then go through customs as a single transaction and are later broken up into the original, individual shipments for domestic distribution. This simple but effective consolidation method is especially useful when large quantities of parcels are sent multiple times to the same address or to different recipients in the same area.
Similarly, retailers can also make domestic shipping more efficient by taking advantage of carrier services like zone skipping, which occurs when multiple customers’ orders are consolidated for the first leg of the delivery journey and then inserted into a parcel carrier network for the last-mile delivery.
These consolidation methods can help businesses meet tight delivery windows and lower the per package price for shipping. When applying these methods to an e-commerce shipping strategy, having multiple trusted global carrier services to efficiently redistribute and deliver parcels is crucial.
4. Leverage Predictive Analytics
For a 360-degree view of all shipping processes, predictive analytics are a must; and, if done right, they can help reduce shipping costs. Businesses must understand and add the proper data points into their data structures to maximize predictive analytics capabilities around cost savings, considering variables like distance, delivery speed, density and package size.
Appropriate technology such as a Transportation Management System (TMS) for parcel shipping can collect and analyze data throughout the shipping cycle, including shipping costs, destinations, various carriers and, of course, customer data. Once analyzed and streamlined, this data can reveal savings opportunities depending on destination, carrier or shipping method. In addition, shippers can automatically compare carrier invoices with the expected transportation costs, either authorizing payment or identifying discrepancies so that accounting can be updated accordingly.
Leveraging predictive analytics empowers businesses to build a data vision and create an optimal distribution model for the future that accounts for changes in their business’s shipping profile.
5. Plan for Returns
As e-commerce returns volume skyrockets alongside the continued growth of online shopping, many retailers have identified ways to counter the growth of returns and reduce costs from an operational perspective.
For example, the fashion industry often struggles with high return volume, since customers often send back products that are the wrong size or color and then reorder the correct product. The additional costs for the return and the new shipment can rise to astronomical heights. Online retailers should therefore provide their customers with as much information as possible for products. Consulting tools such as size charts or virtual samples can help a great deal.
Whatever the industry, businesses must develop a proactive approach to returns with the ability to effectively execute e-commerce shipping and returns with greater precision and transparency. With established returns policies in place, retailers can better align internal resources and operations to efficiently manage returns and scale during peak seasons.
Effective e-commerce shipping is a matter of paying attention to detail. Like a complex machine, it’s important to make sure each component is in working order and well-connected to contribute to the overall output. Businesses that successfully address the intricacies of selecting the right packaging, identifying a logical shipping method, consolidating orders, using predictive analytics data, and planning for returns put themselves miles (and dollars) ahead of competitors.
