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Facing Higher Rates? 3 Ways to Offset the Increases

Shipping is one of the biggest expenses for online retailers, and annual rate increases can wreak havoc on a budget. Over the past several years, rates have increased steadily, especially for popular lightweight parcels. For 2018, shippers will experience an average increase of about 7%, though this varies tremendously with package weight, size, and quantity.

Meanwhile, consumers are demanding free shipping that’s faster than ever.

If you’re an online retailer, how can you insulate your budget from these increases?

Think about the total cost of shipping.

As a retailer, you know all too well that free shipping is far from free. But have you truly examined your total cost of shipping? Shipping is more than just the rates you pay. Rather, consider the ripple effect of on-time productivity. If a package is late or doesn’t arrive:

  • You’ll need additional customer service representatives to handle customer complaints. These salaries can far outweigh a modest difference in shipping rates.
  • Customers may demand an immediate reship, which costs you in processing, shipping, and the product itself.
  • It may have been missorted or damaged (especially if your shipper requires several touches). This may require reshipment.
  • Your reputation as a dependable ecommerce provider will suffer damage. This might include losing customers.

Ultimately, if you’re looking at a rate of $3.25 to ship an item versus $3.18, that seven cents saved may end up costing you far more in the long run.

Consider your packaging.

A seemingly minor change in packaging can have a major impact on your shipping rates. For example:

  • Switching from a box and packing material to a Jiffy mailer can shave ounces from every item you ship, enabling you to get a lower rate. Plus, a padded envelope often costs less to purchase and handle than boxes that require assembly.
  • All carriers use dimensional weight (also called volumetric weight) rather than actual weight to determine shipping rates. For example, an oversized 2-lb box will incur a higher shipping rate than a standard sized box of the same weight. Reducing dimensional weight can save costs.

If you haven’t carefully reviewed your packaging, you may find better options that save you money and provide a better experience for your customers.

Re-evaluate your shipping partner(s)

Rising rates can present a smart opportunity to examine your relationship with carriers and determine if you’re getting the best value for your shipping dollars. Even if you conducted a thorough RFP process in the past, as your needs change, so might your best shipping partner. Consider:

  • Look at your current transit reports to determine what proportion of your shipments are delayed – and compare it with your customer service call volumes.
  • How many touches does your shipping partner make for each shipment? Fewer touches can mean a better on-time delivery rate with less damage.
  • If you anticipate significant growth in 2018, can your shipping partner scale to handle the increased volume?
  • Do you have a shipping vendor or a true shipping partner? A partner can help you determine optimal packaging and technologies to improve your on-time deliveries and keep your end customers satisfied.
  • Are you using multiple carriers? Consolidating your shipments with a single carrier can offer quantity discounts.

OSM can help your bottom line

Annual rate increases don’t have to eat into your profit margins. Rather, use this year’s increases as an opportunity to re-evaluate how and what you’re shipping – and how a different shipping partner can help.

At OSM, we partner with the USPS to provide reliable solutions that help you improve your on-time productivity and customer satisfaction – while saving you money. In fact, 98% of our shipments arrive within 1-5 days, and we can reduce customer service calls by up to 40%. Contact us to discuss your shipping needs and request a quote.