March 22, 2021 |

Are Shipping Charges Negating Your Profits?

shipping charges negate profits

In the early days of eBay popularity, the savviest sellers were manipulating listings to increase sales by offering free shipping but hiding those costs in the sale price or adding on handling charges.

Years later, Amazon became the first affiliate program and outpaced eBay’s visibility in the shopping arena. Then they changed the online shopping landscape forever with the introduction of free shipping across their platform. Today, online stores struggle to compete with Amazon’s low prices. Amazon has simply set a new standard – and given rise to higher expectations from consumers.

How can businesses be profitable while remaining competitive under these circumstances?

The free shipping option lowers profit margins and compels businesses to discover new ways to cut costs. When things are tight, businesses tend to cut their marketing expenses first; few realize that savings can be uncovered in shipping overages from the top carriers, UPS and FedEx.

Although a complicated process designed to deter action, the Guaranteed Service Refund (GSR) offered one solution to recover shipping spend. If your business paid a premium for a guaranteed delivery date, and the package was delivered late, you could file to recover the costs.

The surge of online shopping over the last year clogged up the system and disrupted transportation routes compounded the problem. As a result, the major carriers decided to forgive themselves for their poor, pandemic-inflicted service and terminated refunds for late deliveries. But there are still other paths to realize savings and growth through waste mitigation.

Where can savings be realized?

Uncovering savings begins with a review of past invoices. Many businesses simply don’t have the resources to dedicate time to comb over old paperwork. If yours is a company that can’t spare the man hours, there are consultants who perform these evaluations on consignment.

Errors are often derived from:

  • Charges for unshipped packages
  • Additional fees for Saturday when the package wasn’t shipped on a Saturday
  • Duplicated charges
  • Incorrect addresses
  • Incorrect weights
  • Incorrect rate charges

And, unfortunately, losses do occur from theft of services when employees ship items for their own personal use.

Companies also pay top dollar in accessorial fees (surcharges), which can be negotiated. These may be higher rates over the holidays season, fuel surcharges, oversize package fees and anything else they can find to tack on, accounting for up to 40% of total shipping cost. In fact, many of the extra fees and rates can be minimized with fierce negotiating skills. Although these carriers dominate the shipping industry, they still do compete with one another and are willing to offer discounts to retain your business. Note that you do not have to wait for your contract to expire before renegotiating.

When things are tight and the market won’t bear price increases, creativity is a must. A strategy to lower shipping fees will take careful analysis and planning, but many businesses see up to a 25% savings on total shipping costs as a result, making it an avenue well worth exploring.

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