You most likely (we really hope!) have a general idea of your gross profit margin. You probably even know how much it fluctuates month to month. Promotions, shipping changes, and order behavior can all influence your profitability. If you haven’t analyzed these variable fluctuations on a deeper level, we’re pretty certain that you can improve your gross profit margin. You can definitely reduce your ecommerce shipping bill.
Managing fluctuations is especially important for shops that take in thousands (or millions) of individual orders and shipments each month.
If you’re not data-driven, that’s okay. We have some simple steps to help you figure out where to cut corners on shipping so you can save your costs of goods sold (COGS).
Tips for Reducing Ecommerce Shipping Costs
If you need help with your profitability, the OrderMetrics Shopify app and WooCommerce Plugin make it really easy to identify trends that can help you increase your bottom line. We hate to watch shops flush money down the toilet and are on a mission to help reduce costs and increase profitability. In fact, we guarantee we can help improve your gross profit margin with at least 2x ROI of the cost of our software…how cool is that? Ok, sales pitch over.
Here are more ways to reduce your ecommerce shipping costs.
1) Reduce shipment weight
This may sound obvious, but ecommerce stores often overlook packaging and shipment weight, especially orders with multiple products. Reducing weight for popular shipment combinations can drastically reduce overall shipping costs.
For example, did you know USPS will automatically upgrade a shipment from ‘First Class’ to ‘Priority’ if the weight is over 16oz? USPS Priority has very similar service levels and delivery times to First Class, but costs 2-5x more! In this case, if you keep package weight under 16oz, you can realize significant savings.
With OrderMetrics, you can eliminate waste by identifying which orders fall over the limit and then do your best to reduce the weight. Fedex , UPS, and DHL use something called ‘dimensional weight’ to calculate a package’s weight. Please see each carrier’s respective guides to learn how to optimize packaging for these shipments.
2) Change or use multiple shipping carriers
All shipping carriers are not created equal and all orders deserve to be shipped via their optimal carrier. It’s common for businesses to be content with their existing shipping carrier(s) and not identify orders that could be shipped more efficiently with a different provider. Using multiple shipping carriers for the right order combinations can offer major cost savings. We recommend testing out multiple carriers for commonly ordered products and product combinations to identify the ideal partner.
For example, did you know that most Fedex Express shipments are routed through a sorting facility in Memphis, TN? This happens even if a shipment is being shipped from and to an address in California. Although these packages are guaranteed to arrive within 2 days, other methods such as Fedex Ground or USPS First Class can arrive within 1 or 2 days, depending on the shipment and delivery location, at a fraction of the cost.
Services like Shippo are a great way to automatically calculate optimal shipping carriers on the checkout page. However, these services require pre-determined packaging dimensions and weights, which cannot always be provided.
It’s important to look at post-shipment data and verify orders are being sent via their optimal carrier and shipping method. After identifying common product combinations and which shipping methods they are sent, you can make changes to what you charge the customer, change the shipping method you choose to send these orders, or make changes to product and shipment packaging. The OrderMetrics Shopify app and WooCommerce Plugin can also help.
3) Evaluate your 3rd party fulfillment center
We’ve watched many companies outsource their fulfillment and shipping operations to third party warehouses such as ShipWire and Whiplash. Fulfillment centers can be a very convenient option for ecommerce store owners, especially as business grows. Convenience does mean you’re at the mercy of the third party operations and their incentives are not always aligned with your business.
For example, they do not have much incentive to optimize packaging weights and box sizes, which increase shipping costs. Additionally, if your shipping costs are billed directly by your fulfillment partner, they may upcharge you over the true shipment costs – even if they claim to be giving you ‘bulk volume’ discounted shipping rates. If they do bill you the actual rates, there can be shipping billing errors that may not be realized on your fulfillment partner’s bill. With that said, it is up to you to make sure orders are packaged efficiently and shipments are billed properly.
Next Steps for Minimizing Ecommerce Shipping Costs
- One solution is to use OrderMetrics to discover popular order combinations and ask your fulfillment partner to reduce weight or package dimensions that would allow those orders to be sent via a lower cost shipping method.
- Another solution is to connect your store and fulfillment/shipping data to OrderMetrics and email us to benchmark your fulfillment costs against similar businesses to yours.
- Additionally, our software will help you easily find billing mistakes. If your warehouse is hesitant or makes it difficult to get this data, you could ask to be billed directly by the shipping carrier and setup your own shipping accounts.
Finally, you can always change your third party fulfillment service. We are happy to recommend fulfillment services that offer quality customer support, transparent billing, and high service levels.