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Retailers and distribution-oriented companies are feeling the squeeze on profits.
Fluctuations in energy and commodity prices and ongoing labor shortages are putting pressure on margins due to rising operating costs. The Federal Reserve has raised interest rates 11 times since March 2022, and many e-commerce businesses are facing operational challenges as inflation remains outside the government’s 2% target. Notably, a majority (52%) of small business owners cite inflation costs as their biggest challenge, creating balance sheet problems and causing businesses to look for innovative ways to protect profits. It has become.
Related: What new entrepreneurs need to know as inflation rises
Pressure on profit margins intensifies
Stubbornly high inflation has given price-sensitive consumers pause, slowed the growth of e-commerce, and caused business owners to take a hard look at their bottom lines. In fact, six of the past eight quarters (including the last three )’s e-commerce sales growth rate is in the slow single digits. That’s cause for concern for retailers.
But despite slowing e-commerce growth, the 2023 holiday forecast looks healthy, with U.S. containerized goods imports in October at their highest level since the pandemic boom. Deloitte predicts that U.S. e-commerce sales will increase 10.3% to 12.8% year over year during the 2023-2024 holiday season, with potential sales of $278 billion to $284 billion this season. Masu. This is good news, right?
Shipping costs put pressure on profits
News of a rush of orders is jarring for retailers, but holiday shoppers will expect quick delivery of their purchases. Unfortunately, most people won’t want to pay for this service. In order to meet customer expectations, the majority of retailers (72.2%) now offer some form of free shipping, but this is a costly burden that greatly reduces profits.
And for e-commerce vendors who have expanded to sell across multiple channels (Amazon, Walmart, eBay, etc.), margins are even tighter. For example, consider an e-commerce vendor who previously earned $10 per order. With channels costing $2 and free shipping swallowing $4, finding a way to recoup some of that margin has become a top priority.
Related: Why “free” shipping isn’t actually free (and why the prices are higher)
Savings hidden in plain sight
Retailers are acutely aware of high shipping costs, both logistically and profitably (typical rate increases are expected to average 5.9% in 2024), but most retailers We are not aware of the risks and hidden costs of relying on shipping carriers. Carriers to get the job done. Earlier this year, the threat of a strike by UPS created unpredictability for the industry and exposed the risks that the single-carrier shipping model poses to delivery reliability and affordability.
However, few e-commerce retailers have adopted a multi-carrier shipping strategy combined with technology-enabled price shopping to reduce costs while ensuring consistent delivery performance.the study Based on September 2023 shipment volumes for 1,600 merchants, merchants who used rate shopping saved an average of $4.39 per shipment. This can lead to an average reduction in shipping costs of up to 34%. Another compelling finding is that approximately 45% of sellers surveyed were candidates to save on shipping costs by adding another carrier.
The decision not to adopt rate shopping (the ability to automatically compare and select the best available shipping rates in real-time) is primarily due to the complexity of rating structures and the tedious and labor-intensive comparison of carrier services. This is due to the recognition that it is a difficult task. By the end of the day he has 100 orders and the carrier doesn’t have time to manually check prices in each carrier’s system to find the cheapest rate.
Additionally, many retailers are unaware that rate shopping can reduce shipping costs by up to 30%, and offer “bulk discounts” by offering all or most of your shipments to one carrier. We are happy to receive it and the savings far exceed it. Discounted rates that can be provided by a single carrier.
So how can you simplify and accelerate rate shopping, reduce shipping costs, and build back margin for your e-commerce business?
Increase profits with automatic rate shopping
In today’s consumer-driven world, the need to compete with super-fast shipping and free shipping is real.
By implementing shipping software with automatic rate shopping, you can instantly compare rates and services from multiple carriers. Usually, the best shipping carriers are 2-5. This allows you to choose the best carrier for your business and control shipping costs.
For each transaction, the software communicates with the carrier API to retrieve rates, compares shipping rates and delivery times from multiple carriers, and instantly selects the cheapest or quickest option (or whatever criteria you set). Masu. No heavy lifting on your part.
related: What does “free shipping” actually mean to retailers?
Shipping as a competitive differentiator
The lowest price is not necessarily the goal. Automatic rate shopping allows you to build business rules for both performance and cost, and handle exceptions based on business-specific parameters. For example, the technology allows you to leverage regional and local infrastructure to optimize deliveries and apply business rules to leverage the strengths and weaknesses of carriers in your network.
Imagine you are shipping a package from Charlotte, North Carolina to San Francisco, California. Carrier It might be worth the price increase. Additionally, the benefit of auto-rate shopping is that you can set up business rules to automatically recognize this exception and act on it, improving the customer experience.
Or there may be a small carrier that specializes in shipping to the West Coast, which is typically overlooked by shippers who rely on a single carrier. Automated rate shopping allows you to build business rules that leverage the cost competitiveness and delivery capabilities of local carriers in specific regions.
final thoughts
The pressure to balance customer expectations and profitability is intense. E-commerce businesses that spend more money than necessary on shipping or waste time manually searching for the cheapest shipping option are setting themselves up for failure.
By leveraging automated rate shopping and business rules, you can build competition into your shipping process, diversifying and strengthening your carrier network to enhance your operations. A multi-carrier approach not only protects your business from crises such as carrier strikes, but also improves the day-to-day customer experience while reducing shipping costs and protecting margins.
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