Reduce Shipping Costs with Hybrid Services

Consumers increasingly expect free delivery for ecommerce purchases. However, as fuel prices continue to differ considerably and the market is mired by doubt, shipping is still among the toughest costs to for etailers to handle. Free shipping hurts profit margins.

Additionally, both large U.S.-based parcel transport organizations — FedEx and UPS — can be relied on to increase their prices annually, sometimes even creatively. This happened in 2011 when the two carriers inflated speed increases by altering the dimensional weight variable in their favor — that increased costs by raising the billable weights for several packages. They’re blaming fuel costs and international political uncertainly to justify these increases, while also achieving record profits.

Meanwhile, the U.S. Postal Service is continuously increasing prices as it attempts to crawl out from massive debt — a projected loss of $13 billion in 2012. In actuality, parcel shipping rate increases over the past several years have dwarfed increases in the Consumer Price Index. The USPS recently announced plans to proceed with the consolidation of 140 mail processing centres, beginning with 48 in July. This implies slower delivery of first class mail, in addition to less overall processing capacity.

Input’Hybrid’ Shipping

So how can ecommerce merchants reverse these negative margin trends? Aggressively managing shipping costs can significantly impact financial results and result in sustainable cost reduction. For many, adopting”hybrid” parcel offers that combine services from the major for-profit shippers with those of the USPS is the best thing to do. With these products, etailers continue to hand run off packages to the for-profit package shippers, who transfer them through their routine ground distribution networks. However as opposed to making the final delivery, the shipments are injected into the USPS system to create”final mile” delivery.

 

FedEx SmartPost uses the USPS for”final mile” delivery, to each U.S. address.

 

As an example, online retailers, catalogers, fulfillment houses, and direct marketers are using FedEx SmartPost whenever they require a cost-effective way of shipping lower-weight bundles to residential clients. The FedEx SmartPost service can attain every U.S. speech — such as post office boxes and military APO, FPO and DPO destinations — by using the USPS for delivery. Additionally, it reaches Alaska, Hawaii and all U.S. lands.

 

UPS Mail Innovations offers cheaper shipping for domestic and international orders.

 

UPS offers similar services known as SurePost and Mail Innovations. And unlike the standard ground parcel transport marketplace, competition is much more vibrant with new carriers like Streamlite and DHL Global Mail providing great service at less expensive prices. Moreover, there are regional carriers — such as OnTrac and Lone Star Overnight — which can significantly lower your shipping costs in certain areas of the U.S.

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New carriers like Streamlite are providing competition to established companies.

 

The majority of these services provide full tracking and tracing capability at a much lower cost than your conventional floor parcel products with UPS and FedEx. Some may require an additional day or two to send to the end client, but a lot of them can satisfy the identical delivery windows as FedEx and UPS. In the case of rural areas, delivery times may be drastically impacted. You’ll have to look at continuing to ship these packages under the typical ground mode.

The largest advantage to hybrid services is they eliminate a few of the very costly surcharges related to regular ground shipments, such as delivery area surcharges and residential surcharges. When these costs are reduced, the amount you pay for fuel surcharges will also be drastically reduced. This can shave up to 50 percent off cargo costs on a specific shipment.

Do Not Accept’No’

Recently I’ve heard from companies that have said that UPS or FedEx refused to provide them pricing for these hybrid solutions. In nearly all the circumstances it had been the incumbent carrier who refused to present those choices. Do not accept”no” for an answer. This is only the first line of defense in trying to make you stay with their higher-margin products. Seek out competitive bids from different carriers. Or even better, ask them for a copy of their published guidelines for these products. You are going to get a different response from the carrier that doesn’t enjoy your business.

Summary

Etailers will need to ask their UPS or FedEx account executives — as well as explore other carriers — for all these services. Simply request a lower cost service which leverages the USPS, but nevertheless maintains high service levels and customer satisfaction. Etailers don’t need huge volumes to qualify. Your account executive should be able to work with you to set this up. And always remember it is your choice. You have options.