How to get the best shipping price might be the most common question plaguing all e-commerce companies. According to the Wall Street Journal, total spending on shipping costs was a record of $1.5 trillion in 2017. This was before the massive spike in e-commerce sales in 2020. Now the question is, how do you know when you've paid too much for shipping?
Though logistics costs include supplies, administration, warehouse rent, customer service, labor costs, and inventory-on-hand costs, the main costs are from transportation (aka shipping). According to eDesk, 50.3% of logistical expenses come directly from transportation. The next highest fee comes from inventory on hand. Considering that most companies, excluding dropshippers, must deal with stock on hand, we're going to leave that part to the other professionals. We are here to talk about shipping costs. It is crucial to understand your bottom line. Not sure how to price your products for profit? Check out this article.
How to Reduce Shipping Costs
Get Commercial Pricing
Not every carrier offers commercial pricing, but it's important to ask your carrier representative. When you work with multiple carriers, they tend to offer special pricing when shipping many parcels.
Work with a 3PL
A 3PL or distribution center is a great way to reduce shipping costs. Though you naturally will lose out on profits when you do not run your run warehousing, you have the opportunity to reduce shipping costs when you ship from multiple locations reducing your expenses on long-distance shipping. You can't always control the package's weight or size, but you can control where the box is shipping. Want to learn more about the difference between self-fulfillment versus a 3PL click here.
Use Multiple Carriers
Companies tend to stick with one carrier, but a multi-carrier fulfillment system allows your business to price shop. Do not limit yourself to price shopping online at large carriers. Local and small carriers are a great way to reduce pricing.
Hire a Shipping Solution
Hi, hello, and welcome to DesktopShipper! We specialize in order management and rate shops for our clients to ensure they are getting the best shipping price -- Every. Single. Time. With DesktopShipper, you are getting more than just cheaper shipping; you're getting a better way to ship, helping you save money and grow your business. Though we're biased, we think this is the best of all the options. Want to sign up for a demo today? Click here!
In 2019, companies, on average, spent 11% of their sales on logistics costs. Keep in mind that smaller companies generally spend more money on logistics costs, so the best practice is to budget based on a percentage instead of budgeting based on a dollar amount. Additionally, companies spend less on logistics costs depending on the dollar-per-pound product value regardless of size. Shipping can be expensive, but by utilizing all resources available and sticking to a budget, there are effective ways to reduce these costs.