Groupon says its focus is on the bottom line, rather than top-line growth.
(Page 3 of 3)
And now it will take an even closer look at how it can cut costs so it can offer free shipping more often. For instance, Stonewall will consider purchasing some products in larger quantities but less often in order to pay for fewer inbound shipments to its warehouse. It has also required stricter inventory preparation procedures from suppliers, such as placing product-identifying bar codes on each item instead of just on large multiple-item cartons, which provides for more efficient warehousing as products can be scanned individually and tracked more efficiently, Roy says.
By maintaining information such as shipping destination zones and the size and dimensions of packages, retailers can also better negotiate contracts with carriers and take additional steps that, overall, can cut 20% to 30% off shipping costs, says Tim Sailor, founder and principal of shipping consultants Navigo Consulting Group.
"Carriers can make it difficult for people to understand their true shipping costs," he says, noting that the overall costs tied to surcharges for things like rural delivery destinations and fuel costs have been increasing faster than general shipping rates. Good data, he says, "lets you figure out where your shipping dollars are going."
When a retailer knows, for example, that it ships a lot of products to low-volume areas where a carrier may charge extra, the retailer can present that volume information to its carrier to demand a lower rate. A retailer could also check whether regional carriers—such as OnTrack in California and other western states and Eastern Connection in the northeastern U.S.—serve its high-traffic areas at shipping rates that beat those of national carriers.
Lift from Facebook
Although small-parcel (under 150 pounds) delivery is dominated by UPS, FedEx Corp. and the U.S. Postal Service, each of these companies as well as smaller players have been expanding the ways they work with retailers. UPS and FedEx, as well as other companies like Streamlite Inc. and Newgistics Inc., offer shipping programs that cooperate with the U.S. Postal Service to take advantage of its ability to provide relatively low cost pickup and delivery for all U.S. residential addresses. In addition, shipping management programs, such as Kewill Flagship from Kewill Inc., can help retailers choose among the best shipping options from multiple carriers to stay within targeted costs and transit times.
Free shipping can also get a boost from relatively new-age developments. At Stonewall Kitchen, Roy has found Facebook a productive venue for spreading the word about free-shipping deals—and, in turn, winning more friends on the social network.
"We'll make posts on Facebook saying, 'Come Like Stonewall Kitchen. Get a free-shipping code,'" Roy says. "It helps us to get more friends on Facebook, as customers forward the promotion to their friends."
As retailers head into the all-important fourth quarter, free-shipping offers will undoubtedly win them more friends when they need them most.
Low shipping costs make free shipping possible
While free shipping is proving an important promotional tool for many retailers, for BeachMint, it's a must, says director of operations Mike Gammarino.
BeachMint, a young and growing members-only online retailer, specializes in selling quickly changing inventory associated with celebrities. Its JewelMint.com sells copies of jewelry worn by stars like actor Kate Bosworth, and its StyleMint.com features outfits that shoppers can customize based on styles of Hollywood stars Mary-Kate and Ashley Olsen. Every item on both sites sells for $29.99, and all shipping, including returns, is free regardless of order value, Gammarino says.
BeachMint's customers must make one $29.99 purchase each month to participate as members (if they don't make a purchase or opt out of membership within the first five days of a month, BeachMint charges their credit card for a $29.99 credit good for a later purchase). At $29.99, however, the retailer doesn't have much room to cover shipping costs. "We can't afford more than $3 in shipping costs for a $30 order," Gammarino says.
The retailer, which processes hundreds of orders a day and is planning to launch a number of additional sites, checked with several logistics companies to see which could provide the lowest shipping costs and make it easier for it to afford free shipping. It settled on Streamlite, which provided a first-class shipping rate averaging less than $2 per package. "They offered rates 20% less than the Postal Service," Gammarino says.
Streamlite, which operates 20 warehouses around the U.S., uses a variety of carriers to ship its retailer clients' orders to a Postal Service facility nearest the end-customer; it relies on the Postal Service for the final delivery. But unlike the Postal Service, Gammarino says, it also offers online tracking of shipments throughout the delivery process, enabling BeachMint to provide a higher level of service to its customers.
"We're an experience company," he says, but to keep its members coming back every month, that experience must include free shipping. "It's worth it to us," Gammarino says. "We don't want our members to buy just one piece of jewelry and then disappear."