“Shipping” is more than just an added cost at the end of the checkout process. Speed, cost, communication, logistics – all of these and more combine to form the shipping experience your business is known for. If you can improve on these areas, you can turn your shipping options into a competitive differentiator that attracts more customers. In order to make effective improvements, be sure to consider the following:
Total Cost to Customers
It’s no secret that ecommerce customers love free shipping. However, it's important to remember that the reason customers love free shipping is because it's a discount. If customers can find the same product with a cheaper total cost elsewhere, it no longer matters whether or not the shipping is free. When using shipping discounts as a selling point, make sure that customers aren’t just absorbing the shipping costs through inflated product pricing or other charges.
Outbound vs. Inbound
If you are having trouble finding an effective way to provide your customers with discounted shipping, consider the benefits of reducing the cost of returns instead. Many customers decide to commit to a purchase based on the seller’s return policy. If the return’s policy is customer-friendly, customers are more likely to purchase from a seller – but not necessarily more likely to return their orders.
The order fulfillment process is mostly invisible to customers. But if you do your due diligence here, it can make a big impact on customer service. For example, don’t limit yourself to only one carrier. By negotiating with multiple carriers (or working with a 3PL who can negotiate on your behalf), both you and your customers can save a lot of money on shipping.
Well-organized data tracking is not only important for sales and marketing - it's also critical for understanding your fulfillment capabilities. Fulfillment providers track a variety of metrics to help you ensure product availability, accurate shipping times, and operational efficiency. Below, we define some important metrics and explain why you should be reviewing with your 3PL provider on a regular basis.
Transportation Time & Cost
Shipping times and costs directly factor into your customer experience. Monitoring the average time-in-transit and transportation cost per package enables you to spot opportunities for improvement.
Units Fulfilled Per Hour
The number of units your fulfillment team can process per hour helps determine your throughput. Once you know what your capabilities are, you can proactively provide resources to your fulfillment team during product promotions or peak sales periods.
Average Units Per Order
The average number of product units required to fulfill an order is good information to have, from an operational standpoint. For example, a business averaging one unit per order can usually operate with fewer employees in the fulfillment department than a business that averages 10 units per order. You can use this information to ensure you have the right amount of staff for the holidays, or other peak seasons.
Average Lines Per Order
Lines represent the variations available for each of your product units. As an example, if a t-shirt is a product unit, then each color and size is a different line for that unit. Similar to the units per order metric, tracking the average lines per order is useful for operational planning – a higher average could indicate the need for more warehouse space (to ensure there is enough stock for each line) and more employees to pick, pack, and ship each order.
The cost of shipping is one of the biggest competitive differentiators in ecommerce. Customers will readily abandon a cart or buy from a competitor if it means they will save money on shipping. But if you want to reduce shipping charges for your customers without taking a hit to the profit margins of every order, you need to examine your shipping pipeline for ways to improve efficiency and/or eliminate unnecessary expenses. Fortunately, there are many strategies you can consider, such as:
Negotiate with your carriers
The best step you can take toward reducing your shipping costs over the long-term is to negotiate with your shipping or 3PL providers. Review your previous shipping bills to find the major cost driving factors, and research the prices from competitors to get a better understanding of average shipping costs. At Fulfillment Works, we pass 100% of our shipping discounts on to our clients, which allows them to give better shipping rates to their customers.
You can drive down your packaging costs by eliminating unnecessary dimensional space and excess dunnage. Examine your typical order sizes and order packaging assortments that suit them. Depending on your needs, custom packaging and kitting may be the best solution.
Remember to collect shipping refunds
Many shipping companies offer on-time shipping assurance as standard. As part of this benefit, you may be entitled to refunds on any deliveries that are delayed. If this kind of assurance is included in the agreement you have with your carrier, don’t forget to periodically review your shipping records and claim your refunds.