How to Reduce Shipping Costs
Shipping costs are generally one of the most expensive items for eCommerce stores. Often times these costs rival the actual cost of the products themselves. On average most consumers will spend $100 in a single online transaction, while the brand spends over $20 in "FREE" shipping for that single purchase.
While we've discussed Free Shipping in previous posts and ways to reduce the actual costs associated with that business model, we need to discuss the root problem. In order to effectively reduce the overall shipping costs, a company has a few options:
Downgrading to slower and cheaper shipping solutions.
Increasing their overall shipment volume to entice carriers to offer deeper discounted pricing.
Relocate and move products closer to their end customers location by utilizing strategically located 3PL fulfillment centers.
As we look at the aforementioned options, I'd like to focus on the option that makes the most sense, reducing travel time and costs. By simply moving products closer to the end consumer you not only reduce the shipping cost but also the travel time of the product. The end consumer is happy they received their items quickly while the balance sheets for the brand see a heftier profit margin.
Let's dive into the actual numbers a little deeper. Company A has a fulfillment center on the West Coast and another on the East Coast. By splitting the geographic location between these 2 fulfillments centers, a brand can save 30% on their overall shipping costs. Simply put, this strategy is not only logical but also an economical windfall for the brand. This is why it is so important to work with warehouses that have strategic partnerships with eCommerce Fulfillment centers around the country.
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