Most eCommerce retailers say that shipping plays a considerable role in customer acquisition, consumer loyalty, and purchase quantities. Research shows that over 70% of consumers expect fast and affordable delivery. Forty-four percent (44%) are willing to wait only two days for their packages, and 72% of online shoppers list free shipping as their driving reason for making a purchase. As these demands continue to surge, most online retailers are looking at how to reduce shipping costs to compete with big eCommerce marketplaces like Amazon.
Offering free shipping is a great strategy that produces significant results. But, eCommerce shipping entails costs and takes a massive chunk of a retailer’s profit margins most of the time. Without deliberate implementation and research on reducing shipping costs, offering free deliveries can negatively impact an online store’s bottom line.
Fortunately, there are ways to cut and reduce shipping costs and pass on the discount to consumers.
Top Factors that Influence the Cost of a Package
Several factors influence the total cost of shipping a single order. The first step on how to reduce shipping costs involves identifying variables you can change to make it more affordable:
- Parcel Dimensions
Most major carriers determine the cost of a package by measuring its dimensions. You get the dimensional weight or DIM by multiplying the parcel’s length, width, and height then dividing the total number to a DIM divisor. The concept is quite simple – the bigger the package, the more expensive shipping costs would be.
- Package Weight
The package weight is an alternative form of measurement most carriers use in place of the parcel dimensions. If a parcel’s total weight is heavier than its dimensional weight, then a provider uses the total weight to calculate the shipping costs as with all the factors listed; the heavier the package, the higher the shipping fee.
- Place of Origin and Destination
Aside from the package dimensions, the place of origin and its shipping destination also factor in shipping costs. Different countries have different zoning guidelines. Simply put, the farther away the destination is from the origin, the more a retailer can expect to pay for the shipping.
In the United States, shipping destinations are divided into eight zones – from Zone 1 to Zone 8. The higher the shipping zone, the more expensive the delivery fee is.
- Total Parcel Value
The product value can also be a way to reduce shipping costs. Most retailers choose to insure their packages, especially if the product’s price is high. Insurance is an added expense that can quickly hike up shipping costs. Insuring high-value items is necessary to cover the cost of loss through theft or damage during transit.
How to Reduce Shipping Costs
Logistics expenses, shipping fees included, represents 34% of a retailer’s operational costs. Fifty percent (50%) of that goes to transportation expenses – again including delivery of packages. That’s why reducing shipping and transportation expenses is a must, as it can positively impact a company’s bottom line.
Here are some simple ways on how to reduce shipping costs without putting customer service quality on the line:
- Reduce Shipping Distances
High shipping costs are due to the sheer distance between the product’s origin and its intended destination. The further away the source is from the destination, the more expensive shipping fees are. To reduce shipping distances, retailers can partner with third-party logistics providers that offer multiple fulfillment centers.
- Coordinate with Reputable Shipping Companies
Shipping companies often have discounted rates for eCommerce companies that intend to ship parcels in bulk. eCommerce stores should take advantage of carriers’ discounts, and freebies carriers offer for their loyal clientele.
It is vital to remember that discounts should not be the only deciding factor when choosing a carrier. If the offer is too good to be true, then it probably is.
- Consider Reducing Packaging
Packaging can play a crucial role in representing what an eCommerce brand stands for. After all, there are very few avenues companies have to showcase their branding and ethos without a brick-and-mortar location. While the packaging is important to branding, a bulky, heavy, and oversized parcel is bound to be more expensive to ship than an otherwise simply packed package.
Maintaining a brand image doesn’t necessarily entail tons of branded packing materials. Fine-tune and keep only what is essential.
- Prepay Deliveries
FedEx and UPS offer discounts of up to 20% for retailers that choose to prepay their shipping costs. Aside from being a money-saver, this tip is also a great way to optimize the shipping process. It works best for companies that sell products with the same weight and dimensions.
How to Offer Free Shipping
When it comes to sweetening product deals, free shipping offers are some of the best ways to pique new customers’ interest and reward returning shoppers. It can be challenging to navigate between offering free shipping and making a profit.
Nevertheless, it is challenging, but not impossible. One easy way to offer free shipping is by incorporating the cost of delivery into the product’s price. At its core, people are more likely to buy an expensive product that includes free shipping than a more affordable option tacked with shipping fees. Incorporating the cost of shipping to the price of the product is all about framing the buying experience. This tip can push customers to think twice about the purchase.
Likewise, offering free shipping for a minimum spend draws customers to buy and urges them to purchase more products to get the reward.
When it comes to eCommerce, shipping and handling are unavoidable costs. An effective logistics strategy needs to find a healthy middle between how to reduce shipping costs and how to provide the same level of customer service.
It can be challenging to strike that balance, especially for new players in the eCommerce industry. Thankfully, you don’t have to lose your mind on shipping costs and logistics. We at ZhenHub are happy to help! Our tried-and-tested line of tech-based logistics solutions can support your company at every stage of its success. Request a quote today, and let us help you scale!