Fulfillment costs are climbing- here’s what you can do

By Oleg Mikhailenko
Published in Solutions
August 22, 2022
4 min read
Fulfillment costs are climbing- here’s what you can do

It’s no secret that inflation is at an all-time high. Due to the Covid-19 pandemic,the war in Ukraine, and the degradation of the global supply chain, prices have shot up at record rates for services in all stages of the fulfillment process. And even before these simultaneous disasters, shipping rates were already steadily increasing. What’s a merchant to do? Domestic and international shippers alike are almost guaranteed to feel the squeeze where it really counts- their bottom line. We can’t magically return prices to pre-pandemic levels, but we can offer a few tips and tricks to make sure you have enough wiggle room to ship out and still remain profitable. Read on to see what we’ve been doing to keep profits high and costs low.

Contract negotiation

Which is cheaper, FedEx or UPS? Is UPS cheaper than USPS? With some slight variations between one service or another, the three major courier companies are fairly even in price. Depending on the day, a customer off the street might walk into a storefront of any of the three brands and walk out with a pretty decent deal. Sellers like you, on the other hand, have an additional trick up their sleeve. If you move a certain amount of product, you may be able to qualify for a special discount by signing a shipping contract with one of the big three. This means that in exchange for routing your business through your preferred carrier, you get a few percent knocked off the price. This can seriously add up over time, and as you grow, you have even more leverage to renegotiate.

Choosing economy ground shipping

What’s ground shipping? Put simply, it just means sending out shipments using trains and trucks as opposed to flying them on a plane or sailing them over water. It can take a bit longer than other forms of delivery because of the simple fact that driving something somewhere takes longer than sending it by plane. What you lose in speed, you make up for in price. It’s simply far less expensive to ship with trucks than any other choice save perhaps water freight. Economy, on the other hand, simply means the least expensive method is used. It could be using trucks. It could be with planes. There’s simply no strict definition. If you’re getting your packages sent for the lowest possible rate, you’re choosing the economy offering whether it’s delivered in trucks or put on a boat, making it an excellent choice for cheap freight shipping. UPS, USPS, and FedEx ground shipping rates alike are far lower than their air shipping counterparts.

Eliminate unnecessary add-ons

Everyone likes to know where their package is, but in many cases FedEx tracking and UPS tracking alike represent a few extra dollars tacked onto the end of the price that you don’t necessarily need to pay. If you float it to your customers as a temporary solution in light of current stark price increases- and stick to that- such a momentary measure of austerity is likely to go over fine. Do your best to use inexpensive forms of dunnage where possible, such as recycled paper. What’s more, take full advantage of any free shipping materials you may be able to get either as part of your shipping contract or just by walking in the storefront. Offering free shipping supplies such as boxes, mailers, and envelopes is just common business sense on the part of the courier- cardboard is cheap and it doesn’t make sense to alienate potential customers by charging an arm and a leg for what really amounts to some thick paper. Many courier services also offer free shipping labels, negating another potential source of cost for your business. All you have to do is pay the price of delivery and the label is provided free of charge.

Consider freight

If you’re sending items in bulk, cheap freight shipping costs a fraction of the price as first class mail and can be insured for only a fraction of the cost. This means that if anything is damaged or lost in transit, you have recourse to be reimbursed. Freight shipments can operate with fewer boxes than you might think, as well, thanks to the use of LTL (or less than truckload) shipments. You may still have to pay a small amount to a traditional courier service for those last-mile home deliveries, but you can eliminate cross-zone shipping fees by utilizing a freight service.

Minimize shipping zones

The jury is in- an inefficient choice of 3PL provider can lead to hundreds of thousands of dollars in additional costs tacked onto your bottom line, leading to a situation where your business can struggle to scale. In this post-Amazon world where speedy, cost-effective shipping is not only a nice-to-have but rather the expected norm, long shipping distances not only translate to delays, but to extra costs.

Reducing shipping zones isn’t as difficult a task as you might expect. First of all, if you’re handling everything yourself through the in-house fulfillment model, you can already get more people on the ground by outsourcing your fulfillment operations. Although you maximize control by picking, packing, and shipping everything, boxes can quickly overwhelm your living quarters and have you struggling to keep up. What’s more, unless you live in an extremely central and well-connected locale, you’re far more likely to encounter situations where you have no choice but to ship to the costly and far-flung zones 6-8. The simple act of reaching out to a 3PL can go a long way towards reducing these unnecessary costs.

In conclusion

We live in difficult times, but running your business doesn’t have to break the bank. P2Pseller offers an open, democratized marketplace chock full of experienced partners who can help you grow your business bigger and better than ever before. Register a free account with us today to browse our offerings without any need for commitment on your end. Zero stress, zero phone calls, zero hidden fees, and all prices up front. We’re ecstatic for you to join the ecommerce revolution and to build a business that’s truly awesome.


Tags

#inflation#shipping#fulfillment#costsaving#tips
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Oleg Mikhailenko

Co-Founder, CEO P2Pseller

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