The e-retailer heads into the holiday shopping season behind a 30% increase in fulfillment spending and a widening net loss. North American sales increased ...
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As it happens, Newman is retaining LJM for help in contract negotiations at a time when UPS and FedEx are not dealing directly with third-party contract negotiators. (A lawsuit filed by AFMS Logistics Management Group and pending in federal district court in California charges that UPS and FedEx collude on pricing strategies while refusing to work with third-party contract negotiators; UPS and FedEx have denied the collusion charges.)
That will force Newman to spend more time than he’d like in direct contract negotiations, but he says the additional advice he’ll receive from LJM will help him sort through the ins and outs of contracts. “These third-party consulting firms have the experience of seeing how different companies interact with UPS and FedEx, and know how the carriers calculate things. If we can save 5-10% of contract costs, it’s real dollars.”
Real dollars, indeed. Envelopes.com sends 8,000 shipments per month, made up of 20,000 individual packages. Shipping costs amount to 12-15% of total sales for the web-only retailer that changed its name in 2009 from Action Envelope. “Shipping is one of our top expenses, a major piece of the puzzle in making our business work,” Newman says.
And Newman is not in a position to offer free shipping, the way many merchants can that sell relatively pricey but small and lightweight products like apparel and jewelry. Envelopes.com deals in relatively inexpensive products that can be ordered in heavy packages. “Customers can buy 50 envelopes at less than a pound, or 10,000 envelopes at hundreds of pounds,” he notes. “It’s difficult for us to justify free shipping.”
That means Envelopes.com passes on the cost of shipping to its clients, and thus wants to keep shipping costs as low as possible to avoid driving away customers.
Other retailers have similar concerns, and are exploring a variety of options to keep down shipping costs.
Spreadshirt.com, an online retailer of print-on-demand apparel products that customers can customize with logos or other designs they upload to the retailer’s web site, has switched all of its standard ground shipping from UPS to Streamlite Inc. while keeping only its expedited shipments with UPS. The move has resulted in overall savings of about 10%, says Mark Venezia, the retailer’s vice president of global sales and marketing.
Dealing with UPS for all ground shipments was too complicated and costly, Venezia says. “The rate grid was too complex and the price increases too high, and we didn’t want to pass on the extra costs to our customers,” he says.
Streamlite, formerly known as MailExpress, operates 20 distribution facilities across the U.S. It contracts with independent carriers to pick up loads from multiple clients to consolidate shipments to a Postal Service facility for final local delivery to residential as well as commercial addresses. By consolidating shipments for multiple shippers, Streamlite and other third-party shipping services firms can get volume discounts from carriers that retailers often can’t get on their own.
In addition to letting shippers log onto a web site to track shipment status, it also provides Spreadshirt with the option of Saturday pick-ups so weekend orders don’t have to wait for Monday shipments. “It’s a small surcharge for Saturday, but it’s worth a little extra cost to get orders shipped two days earlier,” Venezia says.
BackJoy.com, a specialty retailer of orthotic products designed to improve posture and relieve back pain, is getting better rates and service by working with a2b Fulfillment Inc. instead of shipping directly through major carriers, says Bing Howenstein, president of BackJoy Orthotics LLC.
Backjoy.com now ships via a2b Fulfillment for standard ground deliveries, benefitting from the volume discounts a2b provides by consolidating shipments from multiple shippers.
“A2b helped us formulate optimal shipping strategies after carefully analyzing our package characteristics, geographical trends and our goals as a company to service our customers,” Howenstein says. For example, he adds, a2b worked with BackJoy so it could ship orders received as late as 4 p.m. BackJoy also uses a2b’s Atlanta warehouse facility to store products before they’re shipped, which provides for two- to three-day shipping to most of the Eastern U.S. via ground shipping.
Professor Ink, a niche e-retailer specializing in recycled ink and toner cartridges, works with Rehrig Penn Logistics to ship from its facilities and take advantage of volume discounts that RPL can get from carriers for handling multiple shippers. RPL also offers an unusual touch that complements Professor Ink’s marketing strategy by recycling its clients’ cartons and pallets. “Customers have a better vision of our company because they know we use recycled boxes,” Howenstein says.
Michael Beelar, sales manager for RPL, notes that using the recycled materials can add 5-10% savings to clients’ shipping costs.
For shippers who do their homework, the best shipping deals can pay off in more ways than one.
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