A Beginner’s Guide to Shipping Profitability

By Diana Zheng

There are many areas in a business that need strategizing. For instance, in today’s booming ecommerce industry, advertising campaigns and store optimization strategies are among the priorities for sellers like you. You know that the right strategies can determine the success of your business.

Among all the game plans you create, there is an area that is sometimes overlooked because of all the tasks needed to make your product and brand known—that is your shipping strategy.

This article will discuss the different areas you should know to ensure that you provide the best and most convenient shipping means to your customers, while also ensuring profitability. We’ll talk about the following:

  • Shipping profitability definition
  • Shipping costs to consider
  • Different shipping strategies
  • Shipping company negotiation and partnership
  • Tips to increase your profit

Shipping Profitability Definition

When you sell products to individuals located too far away to pick the product up, you’ll need to ship. Shipping adds costs to your business operations, so you have to plan how you will remain profitable despite the additional expenses.

Shipping profitability ensures that your business continues to earn and grow with the shipping method you choose. Shipping profitability is achieved by striking a balance between your customers’ demands and your business’s financial capacity.

Shipping Costs to Consider

Prime among the tasks you need to accomplish to be on top of your shipping profitability is visibility on all your expenses. Knowing them will enable you to strategize the areas to optimize to lessen your costs, or how you can minimize your expenditures.

1. Packing materials

The best way to save product packaging costs is to buy in bulk. Investing in customized boxes and envelopes is also an excellent way to save, as you won’t need to fit in your shipment into larger packaging.

2. Shipment weight and dimension

It would be best to keep your package to the lowest measurements to get the lowest cost. Shipping in bulk and putting products together in one box instead of separate ones, is also more efficient because you only need to pay one fee.

3. Delivery location

Are you shipping locally or internationally? Research zoning and how it increases your costs. Know how to work around this to lessen expenses.

4. Delivery speed

Standard shipping is the way to go to achieve a cheaper shipping rate.

5. Other surcharges

Other surcharges you need to note are shipping rates for peak months, handling fees, document correction fees, and signature fees. While the others are non-negotiable, you can easily work on shipping before the big holidays with proper planning.

6. Insurance

Going for third-party insurance is oftentimes better because they are cheaper than signing up for insurance offered by shipping companies.

After knowing the basic shipping costs you will incur, next is to strategize on the best shipping strategy beneficial to both your business and your customers.

Different Shipping Strategies

There are three basic shipping strategies used by owners for their business. Each has its advantages and disadvantages.

Calculated Shipping

Some advantages of calculated shipping are:

  • Customers can get an exact quote of costs based on shipment weight and dimension, and their chosen shipping option.
  • As a seller, you can provide transparency to your customers.

Disadvantages:

  • You’ll need to invest in software for your eCommerce store that customers can access for exact computation.
  • Customers, especially international ones, might hesitate to purchase your products when they see that they will handle the shipping costs.

Fixed Shipping Rate/Flat Rate

Some advantages of flat rate shipping are:

  • Customers will not have a hard time computing how much they need to pay. Regardless of the shipment’s weight, dimensions, and destination, there is a flat fee.
  • You can also skip the hassle of measuring your shipments to get a rate.

Disadvantages:

  • As a seller, you may be disadvantaged in situations when the delivery location is too far, especially for international shipping. There may be a higher shipping cost than the offered fixed shipping rate.
  • Other hidden shipping costs charged upon delivery may shock and upset your clients.

Free Shipping

Some advantages of free shipping are:

  • Customers love free shipping as they only need to purchase, and the seller handles everything else.
  • As a seller, your conversion rate will increase by offering this shipping method.

Disadvantages:

  • If you choose the strategy of increasing the price of your product to cover for the “free” shipping, sales may dip.
  • If you handle the shipping fees to offer free shipping, it means less profit for your business.

Knowing the advantages and disadvantages of these different shipping strategies will help you decide which one to use. Also, you can formulate ways to work on the disadvantages for it to be more favourable for your business.

Shipping Company Negotiation and Partnership

Another area that will help you increase your profit with your choice of shipping is having the right partner. If you know that you are a valuable customer because of all the shipping you require, do not hesitate to negotiate with shipping companies.

Here are some negotiation techniques you can use:

1. Research beforehand and see all the offers from different companies. You can use this knowledge when negotiating.

2. If you are eyeing a partnership with a specific shipping company, dig deeper into their rates and compare the value you bring to their company with your shipments. You can meet halfway for a discounted shipping rate, or they can offer additional perks to you.

3. You can also request a proposal from different shipping companies after informing them of the regular shipment you will make if you partner with them. Pick the company that has the best proposal.

Don’t skip the negotiation, especially if you are shipping regularly and in large volumes. This step will help you save shipping costs and increase your profitability.

Tips to Increase Your Profit

Here are other tips to ensure your business’s profitability.

Product value: Create an irresistible product. Provide value to your customers so that no matter what shipping method you use, your buyers will not mind. Even if you pass the shipping costs onto your clients, they’ll still be fixed on the value your product offers.

Powerful campaigns: Include your shipping method in your campaigns, especially if it is free shipping. It can improve your business online performance and sales.

Regular shipping cost audits: You can do this on your own or rely on professional auditors. What’s important is that you check your shipping costs and see if there are still adjustments you can make to minimize your expenses further.

Summary

In a nutshell, there are three things you need to do to ensure that your shipping solutions will make your business profitable:

  1. Have visibility of all your shipping costs.
  2. Strategize on how you can gain profit with your chosen shipping strategy.
  3. Partner with a shipping company that will satisfy all your shipping needs but still offer a fair or even cheaper rate than others.

Did this article help you in any way? Please share your feedback in the comments below, we’d love to hear it!

Author Bio
Diana Zheng leads the growth marketing initiatives at Stallion Express. As a personal trainer turned digital marketer, Diana is obsessed with equipping online sellers with everything they need to scale their online businesses.

✔ You may also be interested in reading:
5 Crucial Steps to Optimize Your Online Customer Path to Profitability
How Much Does it Cost to Start an Online Business in Canada?

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