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Support Services: Up! Up! And Away!

1 Dec, 2012 By: Ayal Latz Response

How to survive the annual shipping cost increases.

Shipping rates are going up — again. FedEx was first of the major freight carriers announcing 2013 price increases, a net 3.9-percent jump when taking into account a reduction in fuel charges. DHL mirrored that increase for its U.S. international rate. And the U.S. Postal Service (USPS) has announced a 4-percent overall increase that came along with lots of positive changes in its programs. (At press time, UPS had not released its numbers for 2013)

The bottom line for marketers is that these “average” price increases really don’t come close to telling the entire story as it relates to your business. These percentage increases can be misleading because they only represent carriers’ overall average increases. Specific rate changes by service type, zone, weight and package size vary wildly as the carriers respond to market demand, target market share goals and play a cat-and-mouse game with the strategies that our industry has enacted to lower shipping costs.

Knowledge Is Power

What can marketers do? Avoid inertia. Absorbing these rates impacts your margins negatively, decreasing available marketing resources. Another response is to raise prices and/or shipping and handling — but that could affect sales negatively.

Protesting to your carrier won’t get you very far. However, you can make a few changes to protect yourself and manage costs. Deal with these rate increases by understanding the market, the available programs and being willing to act. Following are some strategies to guide you through these changes:

  • Work with your fulfillment partner. They know the ins and outs of the carriers’ pricing. They work with many different carriers and programs so they see many different solutions. Often the knowledge and experience they have with another program will be portable to your situation. That saves you a lot of time and effort.
  • Your fulfillment partner understands many different programs and can make recommendations tailored to your specific needs and requirements. Together, you can understand the advantages and disadvantages of trade-offs between costs, speed of delivery, traceability and image/customer perception.
  • Your fulfillment partner negotiates better than published rates. Most often these are far lower than what the typical marketer can achieve. Leverage their volume for discounted rates and programs not readily available to lower volume shippers.
  • Analyze your shipping patterns. Can you ship closer? If a high proportion of orders are shipped to one market area, then ship from there. With a national mix, your fulfillment partner can provide optimum solutions.
  • What type of shipping services are your customers requesting? And more important, what services are they willing to pay for? This will help guide you to the type of program you should use, as well as the best geographical location to ship from.
  • Review your packaging. Packaging contributes to weight, a key driver in shipping costs. What in your product, packaging and packing materials adds to weight? Can you put your packaging on a diet? Ongoing innovations in materials lead to lighter and stronger packaging options. Product redesign may be difficult in the short term, but packaging and packing materials offer great ways to save.
  • What is dimensional weight? This is complicated, but carriers can price packages by weight or by size — whichever benefits them. Last year, the rate increases included a new, lower divisor to calculate dimensional weight, which benefits them, not shippers. Reduce both your product and package size when possible.
  • Consumer direct and retail shipments require different packaging. Consider channel-specific packaging. With consumer direct, getting package weight and size correct is critical. In retail, packaging has an additional objective. ■

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