How can you decrease retail shipping costs?
Thursday, April 19, 2018

How Can You Decrease Retail Shipping Costs?

Today’s retailers have more options than ever before to help contain and reduce shipping costs. Growth in online sales grabs all the headlines these days. It is true, and you have to be there. Modern merchants absolutely MUST have a robust ecommerce solution and strategy. It means extra sales, or at least NOT losing your sales to the competitor that has a slicker, easier, or in some-way better ecommerce site. But, growing online sales also bumps up your shipping costs. More orders end up with expensive last-mile delivery fees. What to do to turn this around? How do you grow online sales, but shrink shipping costs?

Enter BOPIS 

To decrease retail shipping costs, Buy Online, Pickup In-Store is the ultimate solution

BOPIS stands for buy online pickup in-store. Ultimately, this is a great way to reduce a retailer’s shipping costs. It means customers still buy online, but they pickup their own goods. That means no shipping costs for you. It gives shoppers the option to either have orders delivered (usually at your cost), or lets them to pick it up for themselves at your store. Most merchants guide customers to pickup in their store, but it could be just as easily be from an in-store locker, postal outlet, partner location, or variety of other options. It gives them choice, and reduces your cost. What’s not to love? If that weren’t enough, consumers often purchase more goods when they come into the store to collect their items.


Retail Order Consolidation Brief


Multi-Unit Order Costs

Another challenge in the retail industry today is the multi-unit shipping problem. It happens when a customer orders a few items online. That’s great! And many retailers are trying to ship online orders from their stores. It lets them put inventory out in the field where it will be seen, and where it is closer to customers. Great idea, because customers buy goods in stores not warehouses. Here’s the catch. Almost all of retails current OMS systems (outside of OrderDynamics), are NOT equipped to do this efficiently.

Retailers are pleased when their Items Per Order (IPO) metrics rise. It is a good thing. It means customers are buying more goods from them. But, it also exacerbates the problem that most retailers have with their ship-from-store program. Most order management systems will ship from the closest store to the customer. Makes sense, as this will be the lowest delivery charge. It ships all the goods it can from that location. Any unfulfilled parts of the order are then sent to the next best location. This continues until the full order is shipped. It means the customer ends up receiving multiple boxes. So the retailers’ shipments-to-order (STO) ratios start climbing.

Rising STO ratios are a bad thing. It means your costs to fulfill an order rise, due to shipping and packaging expenses.

Order Consolidation not only improves customer satisfaction, it saves last-mile shipment costs

Many orders will include stock items that no nearby locations can fulfill in its entirety. Months ago, I blogged about this exact situation. My wife’s order of seven pair of socks and two lipstick balms showed up over the course of three days, in three large boxes. Not only was it absurd, it became completely comical. That third shipment included a large box filled with plenty of packing foam peanuts, protecting one single pair of socks – that really did not need protection. Overkill, environmentally wasteful, and a tremendous cost burden on the retailer. It cost them more to ship our order to us than the value of the entire order. How dumb is that? How many such orders do you want to field?

Order Consolidation

What can be done? More retailers need to look to advanced order management technology to fix the problem. Specifically, systems need to include order consolidation as part the order routing algorithm. Rules that allow the system to split orders or keep orders together, are not new. All DOM (distributed order management) technologies need to have these abilities at a bare minimum. If your vendor does not have them, look for another solution. But, beyond these order consolidation because this is going to become a growing concern.

What you want is the ability to route orders to the store location nearest the customer. The systems need to prioritize the distance from the customer and balance that with the spot with the inventory to fulfill the order. The smart part is that it then also brings in stock from other nearby stores. It includes popup shops, small format locations, and so on. This way the whole order is consolidated into one single location. It ships to the customer in one single box. That means one single delivery charge – not three, four or more.

Not only does save the cost of multiple last-mile shipments, it also improves customer satisfaction. Order consolidation will help significantly decrease retail shipping costs.

Shipping Rate Brokering What could optimize shipping rates, on every single order mean for your bottom line?

Another advanced order management method that can significantly reduce a retail chain’s costs is the shipping rate brokering function. In this case the DOM (distributed order management system) finds every carrier that can meet the shipment timing criteria. It then dynamically gets a price quote for every package to be shipped. The system then chooses the lowest cost carrier that can guarantee delivery within the time constraint. In effect, you get optimized shipping rates, on every single order.

Ask your order management vendor about their shipping rate brokering capability. Although there are independent vendors offering this service, it comes at additional costs. An advanced order management system will include SRB directly in the out-of-the-box solution. Each step brings you closer to your goal:  to decrease retail shipping costs.



Charles Dimov - Director Marketing OrderDynamicsCharles Dimov is Vice President of Marketing at OrderDynamics. Charles has 21+ years experience in Marketing, Sales and Management across various IT and Technology businesses. Previous roles include Chief of Staff, Director Product Marketing, and Director Sales. Charles has held roles in brand name firms like IBM, Ericsson, HP, ADP, and OrderDynamics.





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