Are You Managing Your Freight Costs Efficiently?

Mike DeFabis
Outside of the IDS Fulfillment Center

When dealing with logistics, you need to be sure that you have planned everything down to the finite details when launching a new online business. When decisions are being made, it’s easy to forget to consider the impact on the business as it relates to logistics. Since ecommerce is on the rise, the use of ecommerce logistics and freight by manufacturers and distributors businesses often want to jump on the bandwagon and launch quickly so they can stay as competitive as possible while offering customers new options. If you already ship freight in less-than-truckload or small package, then when you put your products online for direct purchase there is a very important aspect you must consider before you go live. How are you going to determine freight costs? Let’s look into some ecommerce freight shipping strategies and determine how you can manage your freight costs effieciently. 

Rates and Abandoned Carts: When figuring out your ecommerce shipping strategy, the biggest challenge is determining a solution that cuts into your margins as little as possible while continuing to remain appealing to your customers. You’re going to want to get this right. It has been determined that shipping and handling fees are the number one factor in customers abandoning their online shopping cart. So, how can you fix that problem? In order to set shipping costs in ecommerce freight shipping, you need to research the fees and costs involved in North America (or wherever else you want to ship) and then determine the various shipping costs to select to option of what you will charge at checkout. If you already ship freight, you know what it costs to ship to these various areas, but you need to work with your logistics provider or carrier to determine the upcoming initiative. When doing this, they will arm you with great knowledge of what you can expect rate wise. Next, you need to choose the right technology to execute the options you choose. What you choose is the make or break part of achieving your goals. There are a lot of options available, but you have to find what’s right for you.

Offer Free Shipping: Giving the option of free shipping for domestic orders can be a sure-fire way to get your customer’s attentions, but depending on you margins, it has the potential to cut into your profits. With that in mind, displaying “Free Shipping” on your website can be a significant advantage over competitors who don’t offer that perk. Offering free shipping will require you to absorb the cost or slightly increase prices to cover it. Another option is offering free shipping with a minimum order amount or number of items. This can drive up your average order value and help you gain profit dollars to apply the cost against. A lot of determining whether or not to offer free shipping or implementing a minimum threshold comes down to your margins and what niche you operate in. If you offer luxury one-of-a-kind items, adding an extra percentage for shipping and handling into the cost of your products probably isn’t going to be a big issue. But, if you’re in a highly competitive market within both free shipping and lowest prices are the norm, marking up your products to cover shipping costs may not be ideal. This is where you need to consider other options.

Have Customers Pay What You Pay: Most shopping carts make it possible to set up real-time ecommerce shipping rates – meaning your customers would pay what you pay to ship your products. There are some discrepancies that can happen, but in many cases you can end up breaking even between the shipping charges you collect and what you ultimately pay to ship the freight. Using a real-time shipping rate can help you gain a lot of trust with your customers. It shows that you aren’t inflating your shipping fees or raising you prices to cover the charges. This doesn’t have the same power free shipping does but it’s an easy way to make sure you’re not draining shipping costs and your customers are getting the best deal possible. This option also works for heavy oversized items that you cannot or do not want to allow to ship out under free shipping promotions. If it is heavy, bulky or large, less-than-truckload is a good options. However, not many options offer an end-to-end LTL ecommerce freight shipping calculator.

Offer Flat Rates: Another option when determining ecommerce freight costs is to offer a flat rate for every package or flat rates for weight ranges and order totals. This method of charging for shipping requires preparation as you need to figure out your average cost of shipping the freight. This practice is something you should be doing anyway to be sure you don’t drastically undercharge or overcharge your customers. Once you hit the right cost, you’ll more than likely be over – or under – the actual shipping cost by a bit, but it should even out at the end of the day. When using flat rate shipping, there is an important point about the nature of flat rate ecommerce shipping: figuring out what works for you, and if you need to base it off of order totals or weight ranges will require testing. However, every business is different and only through tests can you figure out what works best for your company.

In order to make the most strategic decision possible, you’ll need to figure out the statistics on your products and the best ways to ship them to your customers. If you have an ecommerce store and know you will have to ship via less-than-truckload when a customer checks out, due to the nature of your product, or you are considering opening up the market to online customers, contact IDS and set up a consultation with one of our professionals.

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