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The Big Cost of Fast & Free Shipping in Logistics

The Big Cost of Fast & Free Shipping in Logistics

by | Dec 1, 2016 | Blog, Logistics, Strategy, Supply Chain

Consumer expectations of expedited, free shipping come at a cost to e-commerce businesses — but is it worth it?

The race to deliver orders at an ever-increasing pace — free of charge — is raising the stakes for shippers and retailers. Everything from the size of packaging to the selection of the right carrier has to be examined to prevent e-commerce ventures from becoming financially unviable.

While Amazon, the uncontested super power of e-commerce, has been known to rack up big losses to gain market share, smaller players are battling to meet consumer expectations of two-day, next-day, or even same-day delivery. The Amazon effect also means consumers are less willing to pay anything at all for shipping.

As free shipping is becoming a prerequisite for building customer loyalty, retailers know that charging even a minimal amount to deliver the product can break the deal. If the cost of shipping is perceived to be excessive, 63% of consumers surveyed by Jupiter Media Metrix will cancel the purchase.

In addition, consumers have grown accustomed to adding on smaller items to qualify for free shipping. But those items — one-ounce face creams, eye shadow, ear plugs — frequently arrive at their destination at significant cost. Jupiter found, for example, 45% of companies lose money on shipping.

Shippers also pay the price as small items do not necessarily come packaged in small boxes, consuming valuable space at a time when U.S. trucking tonnage is at record highs. FedEx and UPS both made headlines early last year when they, despite low fuel prices, raised shipping rates, partly as a result of dimensional weight pricing.

Now standard industry practice, dimensional weight pricing is estimated to have increased parcel shipping costs by as much as 20%, an additional expense ultimately passed on to consumers as well as small business owners. And with e-commerce forecast to grow from $392 billion this year to $491 billion in 2018, according to eMarketer Projections, demand will remain high at the same time as the shortage of drivers appears to have no real solution.

Pressure is likely to mount further as Amazon seems to be preparing to launch its own global package-delivery service that could rival those of competitors such as UPS and FedEx. With space on pallets a hot commodity, Amazon kicked off the year by adding thousands of trailers to its fleet, which is transported by third-party carriers. The online giant also hopes to build its own U.S. cargo operations to guard itself against delivery delays that affected some shoppers this past holiday season.

So what is the small business owner with a burgeoning e-commerce business to do?

Since it may be nearly impossible to rival the speed of Amazon Prime, focusing on keeping shipping costs to a minimum should pay off, advise several experts interviewed by Entrepreneur.

Steve Strauss, author and founder of www.smallbiz.com, a small-business consulting site, recommends businesses offer at least one express service and one standard service. “In this competitive environment where there’s very little customer loyalty, things like shipping matters. Look at it this way: If you don’t have a store location, you’re saving on rent and employees. Eat the shipping. It’s a small cost to you, and customers will respond,” he said.

What do you think is the key to staying competitive in the e-commerce space?

This post originally appeared on EBN online.

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Focus on Your Customers, Not Your Competition

Focus on Your Customers, Not Your Competition

by | Jun 22, 2016 | Blog, Logistics, Strategy, Supply Chain

amazon

Source: Amazon

Today’s customers expect value, quality, and speed. Focusing on how your can deliver on those promises is what will win you business.

Remember that great advice: focus on yourself, not on what others are doing. According to an article in Harvard Business Review, the greatest challenge your company faces today is not keeping up with your competitors, but keeping up with your customers’ expectations.

This is not to discount the importance of watching business trends and monitoring the competition. But, your primary focus should be on what your customers need and expect and if you are providing it.

What do customers expect?

In today’s digital age, your customers’ expectations wash away traditional boundaries. According to a report in The Economist Group, customers compare and contrast their digital experiences across all industries, even those that offer totally different products or services.

Do you stand out above the crowd? Ask yourself this:

  • Do you offer value, quality, and speed? Customers used to be willing to trade off one to get the other. Those days are gone. Today’s customer dictates that they want it all: lowest price, good quality, and fast delivery.
  • Do you offer what the “big guy” does in terms of product, service, and ease, but with the care of a small business people trust? The size of your business does not matter in a digital marketplace. But, you must offer the scope, scale, and influence associated with being big, while maintaining the creativity and personal service characteristic of smaller businesses.
  • Do you focus on helping customers to meet their objectives and needs? Do you share a purpose? According to an article in Harvard Business Review, what you provide ideally is not something you are going to do to them, or for them, but with them. It’s a journey you take together.
  • Do you offer an intuitive sales funnel? Customers expect you to be where they are, deliver what they want, when they want it, and how they want it. If they are shopping your site, leave, and come back later, they want to pick up where they left off. They demand intuitive ease and ultimate convenience while they shop.
  • Do you offer personalized customer experiences? Remember what happened every time Norm entered that television bar called Cheers? Your customers want you to know their name when they return, as well as their unique individual preferences, and they also want you to make relevant recommendations for products or services they may like.
  • Do your social media interactions inform and help customers? Your posts should not deliver a sales pitch. Social media content should be educational, entertaining, or support the needs and interests of your audience.

There are new rules businesses must follow today in creating the ideal digital journey for their customers. Focus your attention on exceeding customer expectations and answering to their unique needs, not on your competition.

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