Shipping costs are a huge pain. Whether you’re a small or large retailer, no doubt you’ve felt the sting of shipping costs. In an age where free shipping is extremely common and expected, reducing your shipping costs will help you make more profit and possibly grow your sales.
Here are 3 ways you can reduce your shipping costs for eCommerce orders.
You might not be able to make them an offer they cannot refuse… but here are 7 ideas for negotiating your rates.
Review and Research
Before you go into a negotiation battle with a carrier, become familiar with your shipping bill history. Here you can see where the extra fees are coming from and how they can be cut back. See which fees appear most frequently and aim to negotiate those areas.
Regardless of who your current carrier is, you should contact all the competitors and request a quote—not just the big-name ones, but also the regional-shipping services. Whether you are want to switch carriers or not, having the knowledge of what others are charging will offer a strategic negotiating advantage.
Call your current carrier
Call your carrier directly and speak with a representative, a manager or someone with the authority to approve key decisions regarding shipping rates. Avoid emails, because it’s a difficult platform to conduct a successful negotiation.
Straight up ask for a lower shipping rate than the one advertised. Ask for discounts on accessorial fees, out-of-the-way deliveries, dim divisor, fuel surcharges and any other extra fees implemented. Chances are, they won’t give in without a little resistance, but if you don’t ask, you’ll never know.
Another negotiating tactic is contracts. If you’re ok with locking yourself in for yearly or multi year contracts, there is room to negotiate that way as well.
Mention the carriers
Don’t be shy about naming the carrier that have proposed a lower rate. This will put the onus on your current carrier. If they want to keep your business they will have to match the proposal or at least give you some sort of consolation.
The more volume your store ships, the better rates you are going to get. Projecting shipping volume growth can entice big-name carriers to lower their rate for you. Once they recognize that you are aiming to increase the shipping volume, UPS and FedEx may offer you a three-month grace period for growth. This will allow you to have a lower rate instantly. But be sure that you’ve calculated properly, because the only way to keep your low rate is to meet the shipping volume that was promised.
Convince suppliers to use your shipping account number
Having inbound shipping in addition to outbound will boost your volume and give you more leverage when you are speaking with the carrier representative. Many eCommerce businesses will choose to reimburse manufacturers and distributors when they have bulk products shipped to them, but by doing so they open themselves up for potential extra fees.
Jumping ship for cheaper shipping
You might have an offer from another carrier, or you might not. Either way you should stick to the game plan, which is to lower your current rate. Don’t be afraid to be aggressive; the worst-case scenario is that the representative will say no. Always push the limit a little bit more and keep them on their toes. If they suggest that the best they can do is offer 20% ask for 50%, odds are that you might not get it, but 30% may be a worthwhile compromise.
Your business is valuable to carriers and they are willing to work with you, especially if you are aiming to grow and have international prospects. What they don’t want is to lose you to a competitor due to some petty negotiation. By making it sound like you might leave, say, UPS for FedEx it puts a bit of pressure on UPS to keep you.
You should be shopping around for different rates if you aren’t already doing this. It doesn’t make sense to go with the same carrier every time as some carriers are better for certain items.
As an example lets compare USPS, FedEx and UPS. Each have an area that is their specialty.
USPS – Is great if you are shipping parcels under 2 pounds. Their rates are quite low.
UPS – If you are shipping higher volumes of product then the rates are good and you can also negotiate with them. They also claim they are extremely reliable when it comes to tracking and delivery times.
FedEx – FedEx is cheaper than UPS and USPS for packages exceeding 3 pounds. If you sign up for an account, you get an additional 15% off shipping up front.
A common mistake merchants also make is overpaying for shipping because they chose the wrong delivery service. For example, a seller needs to get a package delivered in 2 days, so they chose to pay for 2-day air parcel delivery, which costs much more due to a higher premium and fuel surcharge. With a little research they could’ve found that FedEx has a guaranteed two day delivery service using standard ground service. With a little shopping around, merchants can drastically reduce costs over time.
Fulfillment services that warehouse, package, and ship orders for you, can save you time and money. Services like Shipwire can warehouse, pick, package and ship your packages for you, intelligently calculating the best possible rate to get your products to the customer. This can save you a ton of time and headache, and even save you money in he long run.
Services such as ShipStation don’t warehouse your products for you, but they make the fulfillment process easier by giving you a central place to get pick lists, compare shipping rates for each package, print shipping labels, and automate certain things to reduce errors.
Software like ShipStation and Shipwire don’t always save you money on the actual rates (sometimes they do), but they can save you a ton of time, which you can reinvest into managing your online store, marketing and… going for a bike ride or taking a nap.
There are many different ways to cut costs on shipping depending on whether you business is small or large.
How have you reduced shipping costs?
Let us know how you’ve reduced shipping costs for your online retail business in the comments below!