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For sellers, take note of these 12 tips on how to reduce your shipping costs— from effective negotiation with carriers to coordinating with suppliers.
According to some studies, there is approximately 73 percent of online shoppers demand fast delivery of their orders at very cheap rates. As a seller, establishing a good relationship with your customer is an absolute goal, thus, it may tempt you to offer shipping rates that are comfortable to them just so you can earn their trust. However, its consequence would undesirably affect your profit margin. As a workaround to this, you might need some pointers on reducing your shipping costs instead.
So, here we have gathered these 12 tips for you as a seller where we explain how you can possibly reduce your shipping cost and be able to handle it well. Through this, you may be able to offer low rates to your customers and still positively manage the profit of your business.
How Are Shipping Costs Calculated?
The first step to determining how shipping costs are calculated and trimmed down is to initially identify the total amount you spend on the fees of package shipping to your customers.
There are numerous factors in distinguishing the amount you spend on package shipping. Listed below are 4 of the most important ones that you may need to note as you prepare for shipment.
Factor #1: Package Dimensions
There is this common pricing technique to all major carriers called dimensional weight (DIM weight) wherein they compute the rate amount for each package to ship. Generally, this technique will identify the shipping cost by examining the package size. To calculate, this technique multiplies the length, width, and height of the package and then divides the number by a standard DIM divisor.
Factor #2: Package Weight
In this factor, the weight of the package will be the basis of the shipping cost. The carrier will use the DIM weight technique to compute the shipping cost if the number is higher than the DIM. This means that you will be able to determine your shipping cost to either be expensive or cheap depending on its total mass.
Factor #3: Shipping Destination
The destination of the package is one of the factors which determines the cost of the shipment in which is computed by acquiring the package’s pick-up point and the recipient’s whereabouts. These locations, in the U.S., are identified as zones and range between Zone1 to Zone 8. Meaning to say, the cost will depend on how high the shipping zone will be.
Factor #4: Value of Package Contents
Finally, one of the most important factors to determine your shipping cost is the value of the package content. These high-value products or packages mostly needed insurance for the protection of valuables. Needless to say, insurance may add more cost to your shipments, however, at least they were protected.
There are a few more factors that could determine your shipping costs such as the time of delivery and some unexpected occurrence of shipping problems.
How to Reduce Shipping Costs
After we have settled the main factors which determine the shipping cost of your packages, this time we will be presenting the 12 pointers for sellers in reducing the shipping costs. Since the expenses of these costs are quite a heavy matter for online sellers, learning some strategies could possibly help them in one way or another.
Tip #1: Pick Reliable Shipping Companies
Reputable shipping companies would evidently help you in lowering your shipping costs. That’s why there’s Easyship where they promise to go the extra mile to propose smart shipping solutions. At Easyship, other than having retailer access to 250 shipping solutions with up to 70 percent discounts off shipping rates, they also link their courier accounts and utilize their respective pre-negotiated shipping rates. Through this, you and your customers could enjoy saving up from the most cost-effective shipping methods like Easyship.
Tip #2: Negotiate with Suppliers
It has been apparent that with the right liaising with your suppliers, you may possibly reduce your costs in shipping. One good example is having your suppliers to ship you your products by using your own FedEx account number. This way, the higher your shipping volume gets, the cheaper the rates will be for you. This will also help you disregard additional charges for each of your packages.
Tip #3: Settle an Agreement with Various Carriers
Each shipping company has an exclusive pricing schedule with the volume of shipments as a most common basis. That is why Easyship helps you to access 250 shipping solutions, so you may negotiate with various carriers especially if you often ship packages which could lead you to settle an agreement of reducing rates and decide on which one fits the best for your business.
Tip #4: Utilize the Offer of Free Packaging
The majority of carriers offer free boxes and packaging to their clients. Making use of these freebies could greatly help you reduce your shipping costs. Moreover, this strategy also aids in your savings of up to 20 percent. You could avoid spending money on the packaging which eliminates the likelihood of being charged with additional dimensional fees in an instance that your packages go beyond the size regulations.
Tip #5: Avail Third-Party Insurance
Remember to take note of this important tip in availing insurance for your shipments: make sure to avail of third-party insurance for they charge you about $0.55 for every $100 of insured goods. Some large carriers could charge merchants for about $0.90 per $100. You will notice these big charging differences in the long run as you quickly save up whenever you ship large volumes of expensive products.
Tip #6: Use Regional Carriers
Usage of regional carriers instead of the major carriers such as UPS and FedEx would extensively lower your shipping costs over time. Nonetheless, you should remember that regional carriers’ delivery networks are limited for they only run within a small specific area of their designation. If your packages are inside their region, then this tip will be beneficial for you. For instance, from the West, there are the OnTrac, Spee-Dee in Midwest, and LoneStar in Texas.
Tip #7: Avoid Working with Too Many Carriers
In eCommerce, it is vital that you stick to this one carrier once you figured it is the best option for your business. Although as a beginner, you might need to test out multiple carriers first, over time, this will result in declining your bargaining power because you would have to ship low volumes of packages for each carrier. Engage yourself in a couple of carriers. In this way, you will be able to maximize your bargaining power.
Tip #8: Be Familiar with Your Shipping Destination
Familiarizing yourself with the destination of your shipping packages will make it easy for you to identify how to lower your shipping costs. Most especially if in this certain region you have a constant customer, then you may be able to execute strategies on negotiating charges with a regional carrier.
Tip #9: Study the Shipping Fees
For your information, there may be dozens and dozens of applicable charges to each of your shipments. For instance, there are the so-called fuel surcharges, Saturday delivery fees, and signature fees which could possibly make you lose your money if you fail to factor them well. Therefore, you have to make sure that if a certain shipping charge is shouldered by the customer then add it on their bill so you wouldn’t be obliged to bear these fees.
Tip #10: Identify Your Package Sizes
You have to always make sure that you have identified your package sizes well before shipping them out. Our shipping cost calculator sources important aspects such as the package weight, destination, and size. That is the reason why it is necessary for you to utilize your shipment sizes well or else you may have to spend money on unwanted charges.
Tip #11: Test Out Hybrid Services
Although hybrid services such as FedEx SmartPost and UPS SurePost have their common disadvantages such as restrictive weight, volume, and size policies, it is still likely for sellers to gain favorable discounts of shipping packages by up to half its total price.
Tip #12: Pay Your Fees Online
As for the final tip that we have for you, as a seller, take note that making online payments can possibly help you save money. There are a lot of perks in paying online such as free or discounted shipping supplies, free pick-up services, delivery confirmation, and more. For instance, there is Express Mail for you where you can save up to 60 percent; or Priority Mail where you can save up to 16 percent.
See to It That You Have Minimized Your Shipping Costs
The success of your online business will also depend on how you properly manage to minimize the cost of your expenses. See to it that you have accurately monitored your shipping costs movement, so at the end of the fiscal year, you would not have to worry about the occurrence of setbacks in your profit margin.
Create a plan that works for you
There is no exception when it comes to the rise of shipping rates for every online business. However, some of them may be more qualified to claim discounts on shipping costs than you do.
On a lighter note, it is up to you to be inventive so you could have the chance to reduce your costs into shipping your packages. Execute even one of the tips we have listed above on your business and run it for a month, then notice the changes it does in your shipping costs. It is guaranteed that if any of it has managed to reduce your expenses, then you have chosen the best strategy for your eCommerce business.
You may also test all of the 12 tips from the list to fully maximize your approach in saving money from the reduction of your shipping costs. And one of them is by implementing Odoo in your eCommerce business.
For more information on how to maximize your shipping costs through Odoo, contact our support today for more information.