As the success of e-commerce flourishes in light of declining brick-and-mortar retail stores, many companies may be looking at ways they can incorporate strategic cost management into their e-commerce business. Shipping costs play a significant role in the operations of the company, and thus, finding ways to keep its associated costs down will be a high priority.

As a retail business, shipping costs can eat away at your profitability. As customers demand quick deliveries, the pressure on businesses to cater to consumer expectations can put a strain on operations and expenses. Passing shipping costs directly onto the customer can be a significant threat to securing the sale, with many customers abandoning their cart if the delivery costs are more than what they believe is a fair price (fundamentally, customers love products with free or low-cost delivery). The challenges that e-commerce sites face with shipping costs are vast, especially when you consider that shipping can equate to around a quarter of an e-commerce company’s costs.

While free shipping may seem like best practice in the e-commerce world (with large players like Amazon offering services like Prime), there may be companies out there who simply can’t offer such a competitive deal on shipping. However, there are still ways that you can help to reduce shipping costs to keep your customers happy.

Consider a Range of Carriers

The most important step in reducing shipping costs is research. The number of retailers who fail to conduct thorough marketplace analysis and end up limiting their customers to a handful of shipping providers is astonishing. With a wealth of regional, national and international carriers operating by ground and air, its vital that businesses understand the most cost-effective options for their business, especially now as trade becomes a complicated matter due to political changes.

Using one carrier for both local and international deliveries can result in paying more, as local and global carriers offer different cost packages. Operating through a range of carriers can ensure that you get the best rate for each area that you sell products in. It also may not make sense for your business to pay for one, flat shipping rate from one carrier for every product you offer. Carriers tend to offer a range of rates for varying products dependent on their characteristics, such as product price, height and weight, and fragility and build.

Price Points Should Take Shipping Costs into Consideration

Many companies may price their product considering the production costs and competitor analysis yet may neglect the shipping costs they incur. As customers expect low or free delivery service as aforementioned, this can see companies losing out on money. Understanding the entire pricing structure of carrier services will ensure you can tailor your product price to maximize profitability.

The price of shipping will be determined by a number of factors (dependent on carrier), and these product characteristics must also be considered when pricing a product for sale, especially if you are planning on offering low-cost shipping costs to customers.

The price of shipping a product can sometimes be based upon the space it will occupy in the shipping vehicle (its dimensional weight), rather than how heavy it is. This means that some businesses may be losing out on money by shipping lightweight products in larger packaging. These considerations should be made when pricing the item to ensure you do not lose money on shipping.

Returns Policies

30% of all online orders are returned. This is typically an overlooked area but vital in order to reduce “basket abandonment” as consumers more and more will purchase multiple items in order to send one or more back e.g. clothing in different sizes or colors. Free and seamless returns procedures are a real advantage and there are low cost returns portals available that enable the retailer to provide simple and hassle-free returns services to the consumer.

Custom Packaging Solutions

Successful e-commerce businesses will usually send the same item in high volumes; therefore, it makes economic sense to outsource packaging production because this will save money in shipping further down the line. Custom packaging will be a cost-effective option as it will be made to fit the product, removing any excess or unnecessary packaging that would incur extra costs.

Packaging considerations made in custom packaging solutions include using the smallest possible package for each shipment, the type of material used and the consideration of box shapes to ensure a more cost-effective dimensional weight.

In order to grow and remain competitive in the marketplace, e-commerce companies must find ways to reduce their shipping costs and increase their profit margins. Your e-commerce company simply cannot afford for shipping and returns to be afterthoughts.