Retail e-commerce has grown significantly over the last decade, and while, like most of the economy, revenues through the online retail channel have dipped during 2009, the decrease is far lower than most other channels, at just .4%. There is good news here - consumers are still buying online. And their purchases still need to be shipped.
The recession, however, is causing many consumers to change their spending behavior and find ways to stretch their hard-earned money. As evidenced by reports of the dramatic drops in overnight and express shipping, consumers are showing signs of patience and better timing. They are less willing to pay a premium for faster delivery of their purchases.
Consumers are setting a good example for shippers. As the recession continues and revenues wane, many are looking for ways to reduce operational expenses and cut fat from their budgets in an attempt to deliver acceptable profits. By taking a deeper look into your shipping program, you may uncover just such opportunities. There are often hidden or unplanned costs associated with your program that can drive up your overall expenses and drag profitability down in the short- and long-run. While you might first think of rates as the target for reduction, rates are just the tip of the iceberg when examining the cost-generating facets of your shipping program.
Below are some things to consider when reviewing your current situation and when evaluating potential new carrier options.
1) Delivery area surcharge. Many carriers charge a fee for delivery outside of their defined delivery area. Shipments to residential addresses, for example, may incur a sizeable fee on top of the base rate if the ZIP code falls outside of the carrier's service area.
Let's look at a quick example: On 10,000 1.3 lb. shipments a month, let's say the average base rate for all zones is $6. The average delivery area surcharge is $3 and half of all shipments fall outside the delivery area. What would be $60,000 monthly shipping expense has become $75,000 - a 25% increase over base - as a result of the delivery area surcharge. That's no small fee, in particular in this economy.
You might consider comparing your shipping profile to your carriers' defined delivery area to determine how much you can expect to pay for service to the "outliers." Consider that there are carriers that do not charge a delivery area surcharge, and also consider that the USPS delivers to 146 million addresses six days a week and they don't charge extra for going to Atlanta, Georgia or Nome, Alaska. Do your research to ensure you understand fully your carriers' service area and associated fee structure.
2) Package weight. Weight is an important factor to look at when seeking out areas of potential savings and hidden costs. Do an analysis of your shipments to understand the weight classes and volume sent in each class. Some carriers' pricing starts at a pound and goes up from there. If you are sending parcels that weigh less than a pound through a carrier with pricing that starts at a pound, you are over-spending - potentially by a lot.
3) Delivery performance. While consumers are practicing patience now more than they have in the last few years, they still expect delivery consistent with the shipping method they selected. When delivery is late, or worse - their package doesn't arrive at all - there are multiple costs to consider.
a. Customer service - more upset customers make more calls into your service center and Customer Service reps spend more time tracking down misrouted or undelivered packages driving up operations costs. When shipments arrive within the window of time the customer expects, customer service calls (and costs) often go down.
b. Reshipments - Upgraded service on reshipping lost-in-transit orders increases your shipping expense but also eats into your profitability through expenses like returns processing, wasted packaging and product restocking (provided the original shipment even comes back and can be restocked). When delivery performance is high, reshipments and the costs associated with them tend to be low.
c. Customer satisfaction. At the end of the day, your customers make or break you. Satisfied customers play a critical role in your success - when they are happy, they are likely to purchase again (online and off) and are likely to refer others to you. Yet, in this economy, it's tempting to focus on the lowest price carrier option. Warning!! It is very costly to sacrifice performance for price. When their packages don't arrive consistent with expectations, satisfaction can plummet like the economy.
4) Tracking and reporting. It's easy to assume that all carriers are equal when it comes to tracking and reporting tools available to both the shipper and the end-consumer. Not true. When evaluating your current situation, consider the visibility into all points of the supply chain, piece-level accountability and accuracy of reporting included with your invoices. Reconciling invoices is time-consuming and costly when the data is inaccurate.
Hidden costs drive up not only the cost of your shipping program, but also overall operations. Consider taking a look at the iceberg from under the water. You may be surprised at the costs associated with it and the opportunities you have to improve your overall shipping economics.
Bob Moss is President and CEO of MailExpress Inc., the nation's leading provider of performance mail solutions for corporate customers nationwide. An Atlanta-based company, MailExpress (www.mailexpressinc.com) has quickly become the preferred mail solution for companies who mail large volumes of light parcels and non-letter-size mail. MailExpress leverages their industry expertise to provide first-class speed, online tracking, real-time analytics and customized reporting, all in a very cost-effective solution for its customers - leaders in pharmaceuticals, financial services, e-tail, digital print and marketing services. MailExpress is the only company in the industry dedicated exclusively to performance mail services, allowing MailExpress to focus solely on developing best-of-class shipment solutions. For more information, contact 800.920.5494 or visit www.mailexpressinc.com.
The recession, however, is causing many consumers to change their spending behavior and find ways to stretch their hard-earned money. As evidenced by reports of the dramatic drops in overnight and express shipping, consumers are showing signs of patience and better timing. They are less willing to pay a premium for faster delivery of their purchases.
Consumers are setting a good example for shippers. As the recession continues and revenues wane, many are looking for ways to reduce operational expenses and cut fat from their budgets in an attempt to deliver acceptable profits. By taking a deeper look into your shipping program, you may uncover just such opportunities. There are often hidden or unplanned costs associated with your program that can drive up your overall expenses and drag profitability down in the short- and long-run. While you might first think of rates as the target for reduction, rates are just the tip of the iceberg when examining the cost-generating facets of your shipping program.
Below are some things to consider when reviewing your current situation and when evaluating potential new carrier options.
1) Delivery area surcharge. Many carriers charge a fee for delivery outside of their defined delivery area. Shipments to residential addresses, for example, may incur a sizeable fee on top of the base rate if the ZIP code falls outside of the carrier's service area.
Let's look at a quick example: On 10,000 1.3 lb. shipments a month, let's say the average base rate for all zones is $6. The average delivery area surcharge is $3 and half of all shipments fall outside the delivery area. What would be $60,000 monthly shipping expense has become $75,000 - a 25% increase over base - as a result of the delivery area surcharge. That's no small fee, in particular in this economy.
You might consider comparing your shipping profile to your carriers' defined delivery area to determine how much you can expect to pay for service to the "outliers." Consider that there are carriers that do not charge a delivery area surcharge, and also consider that the USPS delivers to 146 million addresses six days a week and they don't charge extra for going to Atlanta, Georgia or Nome, Alaska. Do your research to ensure you understand fully your carriers' service area and associated fee structure.
2) Package weight. Weight is an important factor to look at when seeking out areas of potential savings and hidden costs. Do an analysis of your shipments to understand the weight classes and volume sent in each class. Some carriers' pricing starts at a pound and goes up from there. If you are sending parcels that weigh less than a pound through a carrier with pricing that starts at a pound, you are over-spending - potentially by a lot.
3) Delivery performance. While consumers are practicing patience now more than they have in the last few years, they still expect delivery consistent with the shipping method they selected. When delivery is late, or worse - their package doesn't arrive at all - there are multiple costs to consider.
a. Customer service - more upset customers make more calls into your service center and Customer Service reps spend more time tracking down misrouted or undelivered packages driving up operations costs. When shipments arrive within the window of time the customer expects, customer service calls (and costs) often go down.
b. Reshipments - Upgraded service on reshipping lost-in-transit orders increases your shipping expense but also eats into your profitability through expenses like returns processing, wasted packaging and product restocking (provided the original shipment even comes back and can be restocked). When delivery performance is high, reshipments and the costs associated with them tend to be low.
c. Customer satisfaction. At the end of the day, your customers make or break you. Satisfied customers play a critical role in your success - when they are happy, they are likely to purchase again (online and off) and are likely to refer others to you. Yet, in this economy, it's tempting to focus on the lowest price carrier option. Warning!! It is very costly to sacrifice performance for price. When their packages don't arrive consistent with expectations, satisfaction can plummet like the economy.
4) Tracking and reporting. It's easy to assume that all carriers are equal when it comes to tracking and reporting tools available to both the shipper and the end-consumer. Not true. When evaluating your current situation, consider the visibility into all points of the supply chain, piece-level accountability and accuracy of reporting included with your invoices. Reconciling invoices is time-consuming and costly when the data is inaccurate.
Hidden costs drive up not only the cost of your shipping program, but also overall operations. Consider taking a look at the iceberg from under the water. You may be surprised at the costs associated with it and the opportunities you have to improve your overall shipping economics.
Bob Moss is President and CEO of MailExpress Inc., the nation's leading provider of performance mail solutions for corporate customers nationwide. An Atlanta-based company, MailExpress (www.mailexpressinc.com) has quickly become the preferred mail solution for companies who mail large volumes of light parcels and non-letter-size mail. MailExpress leverages their industry expertise to provide first-class speed, online tracking, real-time analytics and customized reporting, all in a very cost-effective solution for its customers - leaders in pharmaceuticals, financial services, e-tail, digital print and marketing services. MailExpress is the only company in the industry dedicated exclusively to performance mail services, allowing MailExpress to focus solely on developing best-of-class shipment solutions. For more information, contact 800.920.5494 or visit www.mailexpressinc.com.
