April 7, 2020

6 Points Every Online Store Owner Must Consider

The world of shipping has changed dramatically in the last 5 years. The explosion of successful online stores has forced the national carriers to get more creative and cost effective....

The world of shipping has changed dramatically in the last 5 years.  The explosion of successful online stores has forced the national carriers to get more creative and cost effective. It has also given rise to smaller national and regional carriers to help carry the load. Here are 6 eCommerce shipping tips every online store owner must consider when strategizing.

  1. Location! Location! Location! - If this is true in real estate why wouldn’t it be true in an eCommerce shipping business? Have you ever wondered how Amazon can service the whole country in 2 days and offer free shipping?  20+ fulfillment centers strategically located across the country, that’s how. The location of the product when it is purchased and then shipped is the secret.  Being centrally located to where your customer is located is a key factor in the price and speed of shipping.  Traditionally the majority of the US population lives on the coast.  Having a fulfillment center within 2 days shipping of the population hot spots will not only reduce your overall costs but it will enhance the customer experience.
  2. Utilizing a multi-carrier setup - Implementing a national carrier setup with a regional carrier add-in and/or ground services can match transit times of Expedited/Priority service if setup correctly. Utilizing regional carriers or ground service to zip codes that historically have exceptional transit times will not only save time but also save money.  The only way to accomplish this is to have a multi-carrier setup with specific rules.  These rules should only allow shipments to use desired zip code destinations per the transit request. Adjust your rules per zip code for optimal affect depending on risk tolerance.  In-order for this strategy to be effective you must know the historical transit times per zip code.  Keep in mind there are limits to the delivery areas of most regional carriers.  Ground service is ground service so there is a certain % of packages that will be slower than desired.  Plan for this, know the data.  The payoff can be worth the risk.
  3. Not one carrier is made alike – I love my fitted “one size fits all” hat that stretches with the size of my head before and after a good haircut. Unfortunately for the national carriers out there the “one size fits all” mantra does not work when it comes to shipping for online retailers. FedEx and UPS don’t like to ship small light weight and USPS and DHL don’t like to ship heavy and large.  Selecting the right carriers for the weight, dimension and destination is the key to saving money on shipping.  Using the multi-carrier setup to take advantage where a carrier does well and not use that carrier where they aren’t so good can be the difference between being profitable or not.  There are a wide variety of services available across carriers, each with characteristics that may make it more cost-effective or more costly.  Depending on the carrier you could have extra fees to consider during shipping.  They can include but are not limited to fuel, residential, delivery area, rural area, oversized and many more.  These fees will catch you by surprise if you’re not paying attention.
  4. Consider workshare – For high volume, low margin shippers the most popular shipping methods are the ones that cost the least. “Workshare” is a term used in the shipping space for packages that travel with a national carrier to the destination city and then are handed off to the USPS mail for final mile delivery. The two carriers share in the work to get the package from fulfillment center to destination thus the term “Workshare”.  These services are very effective and have transit times that rival USPS Parcel Select and First Class, UPS Ground and FedEx Ground but at a discount.  For the discounts on tariff you do have to consider there may be a small % of the packages that may experience longer delays, costly returns and decreased tracking visibility.  The overall experience is all based on the end consumers expectations.  If they are expecting 2nd day air this is not a good option but if they are expecting free economy shipping this is the ship method you are looking for.
  5. Size Matters – In today’s shipping world three items determine price: weight, dimensions and destination. Let’s examine the 2 you can control.
  6. Weight –When considering how to ship your product it is very important you know your weights (down to the exact ounce).  Not all carriers are made the same.  Certain carriers like certain weights and will reward you for shipping packages that fit their desired weight profile.  The opposite is also true.  Using a carrier that isn’t friendly with your weight profile can end up costing you 20% to 50% more in shipping costs on weight alone.
  7. Dimensions – As of 2019 all carriers now factor in dimensions to determine the costs of shipping. Depending on the carrier your dimensional calculations could be subject to a DIMENSIONAL FACTOR calculation (Length x Width x Height / Dimensional Factor) or the cubic foot calculation (Length x Width x Height / 1728).  The total charged weight will either be the dimensional weight or the actual weight, whichever is greater.  Packages under 1 pound actual weight typically avoid dimensional weight calculations.  Be very careful to select packaging that will keep you under 1 pound or that typically avoid dimensional calculation like poly-mail bags or envelopes.  Shipping items in boxes that are too big, will end up costing you if the dimensional weight exceeds the actual weight.  Never use and over sized box.  Shipping air isn’t cheap.
  8. Partnering with a Consolidator, Aggregator or 3PL – The quickest way to get the pricing you need and deserve from your shipping carrier is to partner with a company that consolidates volume to negotiate better pricing with the national or regional carriers. Your monthly spend with the big national carriers can fluctuate your prices month in and month out.  Having a 3PL partner can reduce that price fluctuation similar to the way the insurance world works. Partnerships like this can also open the door to having a multi-carrier setup without the pain and hassle of setting up an account with multiple national carriers. For more information, learn how FirstMile's international fulfillment solutions can work for you!