UPS and FedEx have both announced pricing changes for holiday season 2017. Typically, these two shipping providers adjust their pricing in tandem - when one announces a change to their shipping & handling rates, the other announces a similar strategy soon after. But this year, that's not the case.
Effective 11/20 through 12/24, FedEx's holiday season rates are pretty straightforward. Essentially, there will be no increased residential holiday season surcharges, except in the case of packages that are oversized (increased to $97.50 per package), unauthorized (increased to $415 per package), or that require additional handling (increased to $14 per package).
UPS on the other hand, is taking a very different approach by implementing peak season surge pricing for all packages. This pricing (+$0.27) goes into effect for Ground Residential packages from 11/19 to 12/2, stops for 2 weeks, then resumes from 12/17 to 12/23. Peak season pricing for Next-Day Air residential (+$0.81), 2nd Day Air residential (+$0.97), and 3-Day Select residential (+$0.97) will only be in effect from 12/17 to 12/23. On top of that, UPS plans to add peak surcharges to packages that exceed maximum size and weight limits.
The goal behind UPS' peak season pricing is to offset the costs of increasing their fleet's cargo capacity, opening temporary facilities, and hiring additional sorting and delivery staff. However, this strategy is not only different from FedEx - it's different from UPS' past tactics. Traditionally, UPS has handled seasonal cost overruns by negotiating the level of volume discounts with a limited number of major retail shippers. For 2017, UPS is basically passing these costs on to their clients by spreading general surge pricing across all shippers. We’ll be looking forward to hearing about the effectiveness of UPS’ pricing strategy once the holiday season ends.
Since order fulfillment is a "behind the scenes" process, newcomers to ecommerce don't usually have a strong strategy in place for efficient fulfillment processes. In this post, we'll cover some fulfillment fundamentals to help beginners avoid the costly mistakes of over-stretching or over-complicating their fulfillment operations.
Free shipping vs. fast shipping
Yes, offering free shipping is a surefire way to increase sales. However, it's not free for the seller – and the costs can add up. Fortunately, there are many strategies you can use to reduce or recoup the costs of free shipping. For example, increasing the transit time decreases the cost while still appealing to most customers. In their 2016 "Pulse of the Online Shopper" study, UPS reported that 85% of shoppers are willing to wait 5-7 days for delivery if shipping is free.
Larger orders give you better margins on shipping
Packaging and fulfillment expenses aside, it's cheaper to ship two units instead of one. The profit margin from selling an additional unit will offset the increased shipping costs that result from sending a bigger, heavier package. This is important to remember when adding new SKUs or running promotions. For example, it may be more cost effective to kit products together, rather than offering them for sale individually. When it comes to promotions, the above UPS survey also found that 52% of consumers added items to their cart to qualify for free shipping.
Too many SKUs can negatively impact fulfillment
It can be a great idea to provide flexibility for your customers by offering multiple SKUs containing variations of the same product. However, it’s important to strike a balance. While larger orders return higher margins, too much variety and volume can increase the costs and reduce the efficiency of your inventory management and order fulfillment processes. Before running a promotion, adding SKUs, or entering peak season, don't forget to account for the impact on your fulfillment operations.
Ecommerce businesses stand to benefit from implementing environmentally friendly business practices – and changing your approach to packaging is a great way to start. It can save you money, improve logistical efficiency, and drive home your brand's commitment to the environment with every single delivery. Follow these tips to start your transition into more sustainable packaging.
Choose environmentally-friendly packaging materials
Evaluate your current packaging for materials that can harm the environment - especially those that can't be recycled, take a long time to breakdown (like polystyrene foam and plastics), or that release toxins as they breakdown (like certain inks and adhesives). Can you switch these out for recyclable, eco-friendly equivalents? For example, corrugated cardboard tubes and scraps work well as dunnage and are easy to recycle. Similarly, laser printing, thermal printing, and soy-based inks are excellent alternatives to toxic inks and dyes.
Pack more efficiently
In addition to materials, your packing practices are also important. Larger-than-required packages waste filler materials and take up excess space in shipping vehicles, contributing to fuel consumption. Automated box making machines or custom-designed packaging are both eco-friendly solutions that not only save the earth, they save you money by conserving materials and reducing product damage during shipping.
Evaluate your logistics
Take a close look at how packages move from warehouse to doorstep for opportunities to reduce waste. Depending on your products and customers, there may be more you can do to combine individual orders into bulk shipments. If you notice lots of unused space in the trucks leaving your warehouse, consider co-shipping with other companies to reduce fuel costs.
Theft during the last mile of product fulfillment is a growing problem in ecommerce. According to a report by InsuranceQuotes.com, 23 million Americans had packages stolen from their doorsteps in 2015. Even worse - a DropOff study found that 94% of consumers blame the e-tailer for poor delivery, while only 42% blame the delivery provider. Not only are you losing product from theft, you're also losing repeat customers and brand reputation.
While there isn’t much you can do to directly prevent this type of “shoplifting,” there are things you can do to decrease the likelihood of theft and provide customers with a better delivery experience.
Secure delivery options
Unattended packages are the ones thieves like to target, so secure delivery options can be a major deterrent. Some common solutions are:
- Signature request
- In-store pickup (if you also operate brick-and-mortar locations)
- Delivery to a storage locker (Amazon Locker is a good example)
- Customer-supplied delivery instructions (for example, you can add a new checkout field where customers write instructions, like “Please leave package on the back porch.”)
Proactive shipping notifications
Most ecommerce sites allow customers to passively check the delivery status of an order. Taking a more proactive approach to this idea can not only make your deliveries more secure, but improve your customers’ experience. Encourage customers to sign up to receive delivery notifications via text message, email, or even app push notifications.
Work with your carriers to offer your customers the ability to select a specific delivery date and time. This can be a value-added shipping option at checkout, or you can offer it for free with a minimum order.
More and more websites are adding subscription order services for their customers. The model may benefit your current ecommerce site, or be the major feature for your next business. In either case, subscription fulfillment has some challenges that you may not come across in standard fulfillment operations. Fortunately, fulfillment providers like yours truly are uniquely prepared to tackle these challenges.
Take order volume, for example. Because of the predictable delivery cycle for orders, subscription fulfillment is subject to peaks and valleys of volume. One week, your warehouse is packing and shipping like mad to meet the subscription deadline. The next, everything is quiet as you prepare for the next subscription offering. Predicting volume from subscription to subscription can be difficult, so it's critical to have flexible warehouse space for storing inventory and sufficient labor for fulfilling orders. Because they work with multiple customers, fulfillment providers have the flexibility to scale space and labor to accommodate volume fluctuations easily.
It’s also important to get the logistical timing right for subscriptions. Subscription boxes are often promoted extensively in social media, so you’ll want to synchronize arrival dates so that subscribers in different shipping zones receive their orders at approximately the same time. This requires close communication and negotiation with carriers. Logistics is an area where Fulfillment Works excels – we help you to optimize your distribution network to reduce transportation costs and work with multiple carriers to negotiate competitive shipping rates.
Additionally, fulfillment providers are invested in warehouse management systems and data analyzing solutions. When you find the right fulfillment partner, you can leverage their resources without the overhead investment. As a result, you’ll be able to improve inventory management and process orders faster - ultimately, enabling you provide a better subscription service.