Being a retailer in an increasingly eCommerce world hasn’t been easy, especially now that fulfillment costs can consume as much as 70 percent of a product’s order value. That’s what a new study by EKN Research and Radial recently uncovered, further adding that about 40 percent of retailers admit that fulfillment costs have been a major challenge.
The problem is that customers have come to expect fast, free shipping when they buy things online, which they’re doing with increased frequency year after year. As familiar retailers continue to shutter stores, the question simply becomes: how can you make it work?
Cost Versus Speed
Small- to medium-sized retailers have even more to lose and less to fall back on than giants like Macy’s and Target, so when it comes to their bricks-and-clicks formula, it can truly be a trial by fire. Too much spending on shipping and there’s no profit left, or worse, it becomes a source of money hemorrhage; too little and customers start turning away.
Working with a 3rd party logistics company can help to ease the way for you and ultimately your customers. Here’s how:
- Negotiating better rates with shippers. You’re still relatively small potatoes in the eyes of shippers like UPS, FedEx and USPS. But your 3PL ships out a lot of packages every day. That gives them more negotiating power with shippers you’ve heard of and some you probably haven’t. That can make shipping less expensive or give you the option to upgrade to faster shipping for the same price you were paying for ground ship when you were on your own.
- Buying shipping materials in bulk. Boxes, cushioning materials and packing tape may not seem like big expenses, but when you multiply that across all your shipments, it can really add up. This is another case where being bigger is much better. Not only can your 3PL buy lots of boxes and save a bundle per item, they can afford to keep lots of different sized boxes around so your packages are as small as possible to save you on volumetric shipping costs, too.
- Using data to optimize shipments. Most of the time we don’t really think about how long it takes to get from southern California to, say, Maine, but when you’re shipping packages to customers, this is important information to have. All those miles mean more time in transit, and also more cost to you. A good 3PL will have multiple warehouse locations or a warehouse located in a centralized spot so your shipments never have to go very far. They can also use their software to reroute shipments that could be moving more efficiently when they see a problem in progress.
You can remain profitable and meet your customer expectations, but you’ll have to get creative. Reaching out and making some friends in the 3rd party logistics world is the answer for many small- to medium-sized retailers, others may find that they can do enough on their own by implementing more efficient warehousing and distribution practices that mimic what bigger facilities are using. Either way, lowering costs and improving customer experience should be the goal.