By now we are well aware of the price increases from FedEx, the USPS, and all the rest. We do understand prices going up. Inflation, especially when the economy is expanding, is to be expected. But did you know that the shipping carriers have been increasing their rates at about 250% over the cost of inflation! That’s right, inflation for the past three years has been 2.1%, 2.1%, and 1.9% respectively, while the average rate increase for shipping and postal carriers has been around 4.9% each year!
It’s a tough break for any business, but for ecommerce, the industry that relies on shipping more than any other, shipping rates can really take a hit on your profitability.
Of course, you didn’t get where you are by whining about the inevitable, though. Entrepreneurs like you see a challenge and put their energy into overcoming it, rather than trying to figure out who to blame. In that spirit, let’s ask the question: What can be done about increasing shipping costs, and how can we actually save money on shipping in 2019?
There are, in fact, a number of things you can do. For the growing ecommerce business, we have selected three things you can do right now to cut out extra shipping costs, and increase your profit margins immediately.
Many of the rate increases imposed in 2019 are actually surcharges. And that matters because there are sometimes simple things you can do to avoid them altogether, saving you not only the increase, but the charge itself.
Two of the most common charges are:
a. Residential Surcharge. When delivering to a residential address, carriers often add a considerable surcharge to your shipping. The charge is understandable, as residential neighborhoods are harder to maneuver with large trucks, there is a greater chance of theft, leading to an expensive and lengthy follow up, there is no lift-gate available, and they are simply harder to find. Oh, and don’t forget Fido nipping at the poor driver’s feet. To avoid the charge, encourage your customers to take delivery at work. Adding the option in your e-commerce store’s shipping page can encourage customers to take you up on that option. Also, Address verification can help. Instead of assuming it is a residential address, an updated database of addresses can make the difference between receiving this surcharge or not.
b. Address Correction Surcharge. The Address Correction Surcharge is actually quite common, and another example of one that can be avoided. When carriers attempt to deliver packages and the address is wrong, or even a little off, they need to work harder to make that delivery. And harder work equals extra fees. Something as negligible as a missing apartment number or an omitted suffix, such as Drive or Street, can cost you big bucks. It is important to make sure your customer fills out their addresses correctly, and your software recognizes the easy things like no zip code, etc. But since that can’t accomplish everything, check with your fulfillment center to see if they have address verification software installed and in use. Fulfillrite actually does have an excellent and updated address verification system in place, and the best part is that there is no extra charge for its use!
We’ve mentioned this a few times, but it is becoming more important than ever, so here’s a quick re-cap: Carriers who have traditionally charged for parcels based on weight have, in recent years, shifted to a new calculation which incorporates the size of the packages as well. Each carrier has their own calculation, and – surprise – they keep changing and adjusting these calculations every year, and even sometimes several times a year. The important thing to know is that a lightweight item in a large box or other shipping supply will cost you. It is prudent to go through your inventory and shipping supply lists to see which items ship in what size cartons. Are there unusual sizes? Irregularly shaped packages? Over-sized cartons? Try to eliminate those as best as you can. It is always tempting to use what you have for shipping, but the hidden costs of that decision can end up making that temptation just not worth it in the end.
This is a big one. As ecommmerce business owners, you know how important it is to offer to accept returns. Without the physical interaction with the product, the store, and the salespeople, customers need assurances that they are not being duped in any way. They want to know that although they are buying something off their screen, it will work for them in real life, and if not, they will be able to return the merchandise without hassles.
On the other hand, returns are really expensive! Aside from the time and effort you are investing into each sale, there are acquisition costs per transaction, credit card fees, fulfillment fees, and shipping costs. Now factor in return postage, restocking, more fulfillment fees, and in many cases sending out the “correct” item for free. E-commerce owners report that one of the most costly and least rewarding aspects of running their online store is returns.
What to do?
Firstly, make sure you are doing everything you can to sell and deliver the right items. For non-apparel sales, the majority of returns are blamed on customers receiving the wrong items. So, use a great fulfillment partner (like Fulfillrite!) who take extreme measures to ensure that there are no errors in the product type, sku, and quantity ordered. One size or style off, and you may have a really expensive return to deal with. The other thing of course, is communication. Make sure your descriptions on your website are super clear. Invest in some great photography and post multiple photos of your products with each product listing. And, as always, be honest about what the customer is getting. Taking these extra measures will not only engender trust and a loyal following, it will diminish those really costly returns.
So there you have it. Look for surcharges that you might not have to pay, tidy up your packaging options, and do what you can to reduce the opportunity for customers to want to return your merchandise. Three great tips to reduce your shipping costs in 2109, enhance your profits, and grow your business! As always, a great fulfillment partner like Fulfillrite will be on the lookout for saving you money in your business, reducing extra charges, and making sure shipping always works for you. Contact us now to get started!