Whether you ship products yourself, or have a third party fulfillment house ship orders for you, here are some suggestions to help you maximize your profits and margins:
Negotiate Flat-Rate Shipping
Whenever possible, try to negotiate “flat-rate shipping,” with either your shipping partners, or the fulfillment center. The way this works, is that you would agree on a per pound rate, which would allow you to avoid the complexities of zone, residential fees, changing fuel surcharges, delivery area surcharges etc. Most importantly, it will provide you with total flexibility If negotiating for flat rates, be sure to ask how the person you are negotiating with, arrived at the number they are proposing. If the answer is based on retail rates, rather than your actual shipping history, you should be sure to have the number quoted is based on a zone that is closer, rather than farther from the origin.
Advertise Next Day Delivery
Don’t be afraid to advertise Next Day delivery for your products. Especially if you have a product that is in high demand. Just make sure that you negotiated for a discount on this service. Often customers will be willing to pay a few dollars more, to make sure that they have their order more quickly. If you have negotiated a “Flat-Rate” on next day air, you can make a fairly large margin here. This especially holds true to light weight packages.
Use USPS First Class/Priority Mail with Delivery Confirmation
If your merchant is flexible, and does not require signatures, and your typical package is light weight, consider using USPS First Class / Priority Mail with delivery confirmation. This is the most inexpensive method available for getting your product to your customers. Typically First Class is cost effective up to 1 pound and Priority Mail is cost effective up to 10 pounds. Use this knowledge to leverage costs to your advantage.
General Rules of Thumb for Shipping Method Determination
If the package weight is less than 14 oz, use first class.
If the package is 15 oz to 10 pounds, use priority mail.
If the package weight exceeds 10 pounds, use a ground service, such as UPS or FedEx.
Be mindful of packaging. If you use too much, it can push you into the next weight bracket.
Damaged Packages Should be Returned or Have Pictures Taken
UPS and Fedex both offer $100 of free insurance. However, the claims process can be painful, so make sure that if there is damage to the package, you request the customer take pictures of the packaging, or returns it to you.
Negotiate
Carriers and fulfillment companies want to ship “bricks.” Small, heavy items that travel express. If your items are heavy and time critical, you have great leverage for negotiating.
How does a fulfillment company make me money?
When you consider all of the costs involved in maintaining your own warehouse and staff, as well as the new options a fulfillment house may be able to provide you, you will be able to justify the fact that you will have indirect control over the order fulfillment process.
Options such as fixed costs, and flat-rate shipping, will help you to roll these expenses into your cost model. If you weigh the costs of employees, benefits, insurance, taxes, unemployment, facilities and more to the fixed cost model provided by an order fulfillment provider, you should quickly see that making the switch is justified. You can often save 20-50% over your existing expenses when you compare the costs of outsourcing, and the costs of processing your own orders in house. You can also leverage the great discounts Xpert fulfillment has to work for you! Discounts which are based on our total volume orders, so even if you only ship a little you save a lot!
The inverse is true as well. If you are running a company all by yourself, or with the help of friends and family, and your costs are down, but you are spending all of your time shipping out orders, purchasing packaging supplies, and reviewing your shipping records you may find it hard to properly market your product. Now, imagine if you took all the people that are working these remedial tasks, and turned them into your marketing / sales team. Send them to trade shows, have them make sales calls, have them negotiate better rates for the products you are selling, and more. It allows you to focus on growing your business.
If you have a product that is selling great, you may have struggled with the decision to purchase / manufacture higher volumes of the product. With fixed costs, you will be able to purchase at higher volumes, which means a better price from your suppliers. Also, if you sell a common product, the fulfillment company may be willing to act as a consolidated purchaser for you. If they have other clients that sell the same items as you, they may be able to cooperatively purchase larger volumes, so that you receive a larger discount. We can also use our network of contacts to help grow the wholesale side of your business too!
One of the often overlooked benefits of outsourcing is that it makes your profit sheet more favorable. Because you typically only pay for the services that you use with a fulfillment company, your expenses will drop. This will help to lower your fixed assets, and improve your business equity. But, most importantly, it frees up cash for use in areas where there is potential for a higher return on investment..
Xpert Fulfillment is also able to help you directly with marketing. There are a number of options that are at your disposal. For example, we are able to place promotional materials inside your orders, we can brand your box with your logo, you can consult our team of marketing experts and more.