How to Reduce Shipping Costs for eCommerce Businesses

 
In many cases, shipping charges become one of the primary reasons for cart abandonment. Once the consumers see the shipping charge, they perceive it as additional to the product price and immediately start searching for similar products with free shipping. Shipping costs can be a huge pain for an eCommerce merchant, irrespective of the business size. Indian consumers today are so accustomed to free shipping that cutting shipping costs will surely help you increase your sales and grow your eCommerce business.
 

 
The cost an eCommerce merchant bears to deliver an order to the customers is generally termed the shipping cost. Various prices get involved during the whole logistics process, starting with the product getting picked from the manufacturing unit till it reaches the customer’s location.
 
The total shipping cost is segmented broadly into two types which are shipping and handling. Between these two types, there are multiple individual costs associated with the whole process that includes:

• Warehouse storage costs
• Packing materials costs
• Picking and packing costs
• Labor costs
• Loading costs
• Fuel costs
• Transportation costs
• Postage costs
• Surcharges and customs costs
• Delivery labor costs

 
Optimizing cost is a crucial element for any business. Sometimes you need to optimize costs due to a shift in consumer behavior and preferences. After all, consumers today are more demanding with increased expectations of better and more convenient shopping experiences and orders delivered at reasonable prices. So, the onus lies on the eCommerce merchants to improve their operational efficiency, especially the logistics operations, to optimize costs to an acceptable level for the consumers.
 
Usually, there are three key elements to consider when you try to reduce shipping costs, which include the following:
 
Package Weight. The shipping cost depends mainly on the package’s weight. It might help to make changes to the packaging materials or in the infill that can bring about substantial cost savings.
 
Delivery Distance. It is obvious that the less distance you need to cover to deliver a product, the lower your shipping cost. However, that doesn’t happen often. So, the distance matters when shipping the order, which is why some D2C sellers arrange for hyperlocal deliveries.
 
Identify & Segment Products that Need Express Shipping. In case of a delay in any delivery due to any issue, you might need to opt for express shipping. So, you need to have a process to set aside express shipping for urgent inventory and standard shipping for everything else.
 

 
Successful order fulfillment is not a “cakewalk.” It requires efficient planning to maintain the timelines without making overhead costs too high. You need to balance these elements to ensure customer satisfaction and business revenue. So, here are some helpful tips to reduce shipping costs:
 
Packaging. It is gaining in popularity even in Tier 1 and 2 cities as its easy to operate. Nowadays, almost 30%.
 
Dimension of Package. Customers nowadays want a personalized shopping experience from the brands they purchase.
 
Shipping Distance. Though difficult to believe, till today, many eCommerce merchants lose.
 
Multiple Courier Partners. Sustainability is a significant factor influencing the purchase decisions of consumers currently. People are becoming more conscious of environment-friendly practices and are willing to pay.
 
Bundle Shipping. Most eCommerce brands use Artificial Intelligence (AI) to improve operational and business efficiency, nowadays.
 
Third-Party Insurance. Leveraging subscription models to increase retention rates and revenue is becoming increasingly popular among eCommerce merchants.
 
Outsource Logistics. Leveraging Augmented Reality (AR) and video are emerging as game-changers for eCommerce and e-retail businesses.
 

Use Cost-Friendly Packaging. As we have stated before, there is absolutely no need to go overboard and use extravagant materials while packaging if you are not selling any luxury items. At the same time, however, that does not give businesses a free pass to use flimsy, low-quality, or unattractive packaging. There needs to be a fine balance between quality and cost, and one should not compromise on quality issues just to save a few bucks. Another way you can save money is by getting supplies at a discount from USPS, UPS, FedEx, etc. Buying packaging materials in bulk can also keep costs low.
 
Reduce Package Dimensions. In most cases, the package size and dimensions contribute a large amount to the overall shipping costs. Large items are naturally more expensive to transport. Some businesses make the mistake of using sizeable outer packaging even for otherwise smaller products. This drives up costs exponentially. To reduce the burden, it is advisable to use smaller boxes that are custom-made to fit your products, as well as to reuse and recycle old shipping materials. Not only is it sustainable and eco-friendly, it also eases the load on your pocket!
 
Reduce Shipping Distance. Shipping products over long distances costs a lot of money, so it would be helpful to optimise properly- set up fulfilment centres all throughout your regular delivery areas, expand your shipping network, and set up ties across different delivery zones, and anything you can to reduce the cost of transportation. While warehousing alone might not be as expensive as transport, it can still add up to a large amount when taken in total.
 
Diversify Your Courier Partners. Another point to add on to the above is that while many delivery partners provide extensive nationwide coverage, not all of them do. Some are hyperlocal carriers who operate in a particular region, while others offer some specialised services that you might need. In order to take full advantage of all facilities and services offered by various carriers, it is important to negotiate with them and ensure diversity among them- such that even if one of them performs poorly, others are immediately available to provide backup. This eliminates a lot of unnecessary hassle and headache with regard to shipping and also brings down costs significantly.
 
Bundled Shipping. A neat little cognitive bias trick that many e-commerce platforms use to drive sales up is to bundle the shipping costs in with the price of the product. Many customers would add a product into their cart and go to check out only to back off after seeing the extra delivery charges added on to the final amount. To mitigate this problem, some businesses started the practice of bundled shipping- a significant margin of the shipping costs is added to the price of the product itself. So instead of a toothbrush costing 100 rupees with a delivery charge of 20 rupees, the price of the entire product would be 120 rupees. Such practices are somewhat controversial, but their effects are undeniable, and they have even helped some failing businesses to regain ground and expand operations.
 
Outsource Operations. When or if the pressure gets too much and the costs get too high to handle, some businesses turn to the final option- outsourcing. Oftentimes, there are several highly rated third-party logistics platforms and aggregators that would be all too happy to take the load off your hands. They make use of technology and API to automate most operations and maintain transparent records of everything that goes on within the company. Of course, it is necessary to negotiate with them and ensure that you are really getting a good deal, deriving the right value from their services, and cutting down on shipping costs.
 
Purchase Insurance From Third Parties. While no one is denying that shipping insurance is of the utmost and vital importance, especially when it comes to fragile, expensive, or luxury items. However, it is also hard to ignore the fact that next to product packaging, it is perhaps the most expensive component of shipping costs. Fortunately, there are some ways through which you can slightly cut down on insurance costs. If you absolutely have to, it is advisable to buy insurance from third-party platforms and not from your dedicated carriers. Third-party insurance companies are drastically cheaper, sometimes costing about half as much as carrier insurance. Thus, you could end up with significant savings.
 

 
To sum it up, following the eCommerce depends on keeping your customers happy. So, learn of the latest trends and prepare to delight your customers.
 

 
Founded in 2018 and headquartered in Los Angeles, California, XPDEL recently launched its expert fulfillment services in India. We provide our eCommerce clients with a Fulfillment Technology Platform to make it effortless for them to improve their speed to market. Led by industry veterans with more than a decade of experience, we are also steering our path to success in the Indian market. Our offerings cater to a wide range of customer experience-based fulfillment and logistics solutions for eCommerce, powered by industry-leading technology platforms.