When you're a small retailer competing against huge companies like Amazon, it's not easy to get shipping costs right. It's usually impossible for a small firm to offer free delivery like your competition does, as you'll cut into your profits. However, high shipping costs can put consumers off. Previous research from Forrester has shown the biggest reason why customers abandon online purchases at the checkout is because the postage fees are too high.
Here are some tips on how you can cut down your postage and packaging costs, so you can reduce the amount of non-converting customers.
Stop offering things for free
Freebies cost money. Of course they can help entice customers in, but that doesn't always guarantee you more sales. Offering free postage can hugely eat into your profits, especially if you have to ship big or heavy items. Instead it's better to offer reasonably priced postage. It can be difficult to judge what's reasonable, but many retailers choose to charge postage based on the weight or size of the item the customer is buying.
If you can afford to, you might just want to offer free delivery on purchases over a certain amount. Not only will this please your customers, it might also make them more willing to spend more. After all, if they're thinking of purchasing something at £40, but see you offer free postage on transactions over £50, it's quite likely they'll decide to spend an extra tenner, even though it would be cheaper for them to just pay the delivery cost.
Don't offer free returns either. According to the Wall Street Journal around a third of all items bought online are returned, so offering this service for free can have a huge impact on your profits. However, just like with postage charges, you are taking a risk. A number of your customers might take some solace in the fact they know they can return their purchase for free in case it doesn't fit or isn't what they expected. On the other hand, many buyers might not even consider to check whether it's free to return an item, because they're buying impulsively or are more concerned about postage costs.
If you are concerned you'll upset your current customers by taking the free returns offer away, why not give them free returns to bricks-and-mortar stores. Naturally this only works if your businesses has a decent number of stores, but offering this will cost you nothing and could be enough to keep everyone happy. Past research from A.T. Kearney shows 83 per cent of UK consumers prefer to return items in-store anyway, regardless of how they originally purchased it.
Cut down on parcel weight, size and packaging
The heavier the package, the more it's going to cost to send. It seems obvious but many companies are spending far too much money on packaging they don't need. Remember that unless you're sending something breakable, you don't need to pad every single box you send out with bubble wrap or packaging peanuts. Even when you're sending something fragile the key is to pack it in tightly, so that it doesn't move within the box. Therefore you shouldn't need to use five layers of bubble wrap, as long as the item doesn't slide around when the box is moved.
As you already know, box size has an impact on packaging costs too, so it's unwise to use bigger boxes than necessary. If you use less packaging materials, you might be able to reduce the size of the box. For very small items it might be possible to avoid using boxes altogether - send the items in padded envelopes instead.
Packaging is expensive and there's nothing wrong with reusing old boxes and bubble wrap. Not only is it good for the environment, it will save you a considerable amount of money a year. If you don't have too many parcels sent to your office, talk to your local supermarket or any other businesses near you that might be inundated with boxes. It's likely that they'll be all too happy to give you some. Only pick ones in a good condition though - remember that your customer might not be happy receiving something in a scruffy box.
Strike a deal with a courier
Small businesses are sought after by courier companies, as it's a guaranteed amount of business a month. Use this to your advantage. Shop around and see who offers the best prices, then try and reduce that price even further by seeing if you can get a special deal. It's often easier to negotiate if you can state the average amount of orders you have a month. The higher the figure, the more keen a courier will be to make a deal with you.
Remember that couriers will usually offer a discount when you send packages together too.
When trying to save money on anything, the best thing to do is to sit down and work out exactly how much you're spending on postage and packaging. Seeing exactly where you're money is going will make it easier to cut down on costs. Not every method works for everyone either. If you work in an industry where all your competitors are offering free postage, you might decide that you'll lose out on too many sales if you don't do the same. In this case, you'll have to cut costs in other ways; but with a little bit of hard work and invention, it is possible.