One of the biggest expenses in e-commerce logistics is shipping, and it’s not getting cheaper any time soon.
In an industry where profit margins are often pretty tight to begin with, even the tiniest adjustment that yields savings on the shipping of your orders can make a monumental difference in your favor. How can your business mitigate shipping expenses in 2023 by saving money?
You need to rethink your packaging strategy
Think in terms of size and weight. Both the weight and volume of a package add to its final cost. The more space a package takes up, the higher the final cost. There are some carriers that offer discounts for packages that don’t exceed a certain weight threshold. Don’t overdo it with unnecessary inserts or filler materials like kraft paper and bubble wrap.
Your products may come in a variety of different sizes and shapes, so placing them in the wrong size package can result in additional expenses. If an order is packed in a box or bag that’s too large, not only are you overspending or missing out on materials, but your carriers will also charge you for the unnecessary volumetric weight. Additionally, you are more likely to have damaged items, which can increase the cost of return logistics and replacement.
You can avoid this by using size as one of the criteria your fulfillment team uses to organize orders. After all, no one wants to be in the expensive air shipping business.
Variables are removed
Often, businesses prefer flat-rate shipping, in which a package can be any weight up to a certain limit and the rate won’t change; the price is based on box size.
Whether this strategy is effective depends on the number and value of items per order as well as your inventory variety. Similarly to companies shipping items of different shapes and sizes that should have right-sized packaging per order, companies with relatively homogeneous goods could benefit from flat-rate shipping. It’s a bit of a shortcut, but one that can offer excellent value, especially when it comes to domestic delivery.
Carriers should be renegotiated
Think again about your ability to negotiate with carriers. Especially if your company is a new customer, it may not be easy; however, companies with established fulfillment partners are often able to negotiate more favorable terms or pre-negotiated rate discounts because of their longstanding relationships built on consistent high volume business. It is always possible to negotiate your contracts again.
Keeping track of your carrier partner’s performance is vital for successful business operations. By utilizing transportation logistics software, companies are able to assess data and hold carriers responsible in the event that they fail to abide by the terms of their agreements. Not only does this give you a better platform on which to renegotiate contracts, but it also helps you manage your business more efficiently.
There is no one-size-fits-all solution to the sometimes-harsh reality of shipping expenses, but a little bit of trial and error can position your business to be more profitable. Getting to know the options that are available to you and paying attention to what works best for you and your customers will not only lead to savings, but also to growth.