'What is the cheapest way to send a package?'
E-commerce retailers should always be asking themselves this question to avoid leaving valuable dollars on the table - especially during the holiday season.
Shipping consistently ranks as one of the biggest operational costs for businesses during the holidays, thanks to the added burden of peak season surcharges and consumer desire for rapid home delivery. So, what can brands do to keep their holiday shipping costs under control?
While it isn't possible to eliminate all shipping cost increases, there are steps that brands can take to minimize holiday shipping rates. Let’s dive into our top eight tips for more affordable holiday shipping in 2023.
1. Encourage customers to ship early
There are a lot of advantages to early shipping during peak season. It lowers the odds of late deliveries due to missed cut-off dates, provides more time for customers to make exchanges, and saves your business valuable dollars by using economy shipping services. But to drive buyer urgency, you need to give customers an incentive to commit.
This could include free shipping promotions, extra loyalty points, or gifts with purchase in exchange for placing orders before a certain date. This will not only satisfy cost-conscious consumers, but also ensure that parcels will arrive in plenty of time for gifting.
2. Take note of holiday shipping deadlines
Parcel carriers use holiday shipping deadlines as a way to manage shipper expectations and minimize shipping delays during peak season. Cut-off dates for holiday shipping will vary, depending on the postal carrier and service level selected.
Slower ground shipping methods will typically see the earliest cut-off dates during peak season, while express and priority mail deadlines are later due to the faster delivery speed. For example, FedEx Ground Economy has a deadline of December 13th, while FedEx Home Delivery is not until December 22nd.
It's the responsibility of online sellers to inform their customers about holiday shipping deadlines, so they don't miss out on receiving parcels in time for the holidays.
If you're relying on standard shipping during the holidays, bear in mind that holiday shipping deadlines will come around a lot sooner than for expedited shipping services.
As shipping deadlines get closer, it's a good idea to add a banner to the home page of your website or post a social media update to let those last-minute shoppers know that there are ‘X days to guarantee packages before Christmas Eve!”
3. Be aware of peak season surcharges
As the holiday season approaches, retailers must prepare for peak season surcharges increasing their shipping costs. These temporary surcharges, also known as "demand surcharges," are applied by carriers to offset increased costs during periods of high demand. Shippers, especially those with high volumes, will face increased costs based on criteria such as residential delivery, package weight, and additional handling.
To manage surcharges effectively, businesses need to strike a careful balance between package volume and carrier selection, as well as understand the difference between demand and accessorial charges. Partnering with a 3PL provider helps brands navigate complex surcharge structures and optimize shipping strategies during the holiday season. Note that demand surcharges are subject to change, so make sure to keep checking carrier websites for the latest information.
4. Access free packaging via flat-rate shipping
Using flat-rate shipping offers brands a lot of advantages during the holiday season. As well as being exempt from most demand surcharges, many flat-rate options also include packaging as part of the shipping rate. This offers an easy way to standardize your shipping costs during peak season, while also offering customers very predictable delivery speeds depending on the shipping zone.
However, flat-rate shipping does have its caveats. It’s typically a more expensive option for short-haul deliveries, and may not be suitable for shipping oversized items that don’t fit within regular package dimensions. It’s important to investigate whether it is suitable for your products before committing to this particular shipping method.
5. Re-calculate your free shipping threshold
Offering free shipping during the holiday season is one of the best ways to attract shoppers and boost sales. But footing the bill to ship every order is a significant hit to your profit margins.
Free shipping thresholds set a minimum order value on shipments to encourage higher order values, ensuring that free shipping is only awarded when your business can make a reasonable profit from a sale.
If you're already using a free shipping threshold at your online store, it's important to re-calculate this for the holiday rush. Thanks to higher shipping costs during peak season, the shipping threshold you currently have in place may not be enough to offset these higher seasonal costs. It's important to crunch the numbers and review sales data in the lead-up to the holiday season to determine what is whether your threshold needs adjusting.
6. Practice cartonization
Managing dimensional (DIM) weight is crucial to keep your shipping costs down at any time of year, but especially during the holiday season.
DIM weight refers to the main pricing method used by postal carriers to calculate base shipping rates. It’s based on how much space a package takes up in transit. For this reason, lightweight and large packages can be charged a higher shipping rate than smaller, heavier packages. Moreover, because oversized packages tend not to fit within automated sortation systems, many shipping carriers will levy steep additional handling fees on packages with a high DIM weight.
To avoid additional fees piling up, brands need to ensure that their packaging materials aren't adding unnecessary bulk to packages. You may also need to look at splitting up multi-item orders, as two small packages could be a cheaper way to ship than a single large package.
7. Offer BOPIS and curbside pick-up at store locations
Home delivery is the most expensive delivery option in e-commerce, simply because it's the least efficient for carriers to execute. This gets worse during the holiday shopping season when small parcel volumes surge and demand surcharges kick in to cover those higher operating costs.
Fortunately, Online-to-Offline (O2O) retail offerings such as Buy Online, Pick-Up In-Store (BOPIS), and curbside pick-up offer customers the best of both worlds during the holidays. Orders for store-based pick-up can be fulfilled in a much shorter timeframe than even same-day delivery options – and without requiring a trip to the post office. Because BOPIS orders can be fulfilled much faster, this is a great option to promote to customers as an alternative to home delivery as holiday shipping deadlines draw closer.
8. Outsource order fulfillment to access wholesale rates
Increasing order volumes during the holiday season are a real boon to e-commerce brands. However, managing seasonal demand via an in-house fulfillment operation is rarely cost-effective. Rising holiday fulfillment costs combined with a lack of economy of scale can result in delays to fulfillment and even fewer sales, thanks to slow delivery times or shipping delays.
Working with an e-commerce fulfillment provider like Ryder enables brands to access wholesale rates by leveraging their 3PL’s shipping volumes. By keeping shipping rates affordable, you can reinvest more into your operation and achieve a more streamlined shipping strategy year-round.