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Recession on the horizon: Do you know how to cut shipping costs during times like these?
The highly competitive ecommerce landscape means small and mid-sized pure play merchants need to always be as cost effective as possible. So what happens when inflation makes every business cost spiral out of control, and consumers start tightening their proverbial belts?
07/14/2022
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Shipping is one area that D2C brands can win big or lose significantly if not examined continually, including times of economic downturns.

In this article, we're looking at:
  • Why shipping costs have gone up for everyone
  • The ramifications when online-only brands increase shipping costs
  • Three ways to ease shipping costs without making customers pay the price
  • Why the BOPA (buy online, pickup anywhere) solution is particularly efficient
The rise of shipping costs, for the merchant and consumer alike
Every year, transportation carriers evaluate their pricing and make adjustments. Therefore, 2022 began with increases across the board. Major carriers increased their rates an average 5.9%, the largest increase in eight years.

Then, the price of fuel crept up … and lept by late spring. We won't get into the reasons for the surge at the gas pump, but there's a confluence of issues to blame.

Rising oil prices triggered an increase in fuel surcharges in April for parcel deliveries. Those rates have continued to go up.

All of this makes for costly increases to any online store. D2C merchants are faced with trying to counteract inflation-induced increases and skyrocketing energy prices.

In a lot of cases, the burden is passed straight to the consumer. A June 2022 survey shows 31% of online sellers have raised shipping and handling fees in response to rising prices for gas and goods.
How higher shipping fees impact an online-only business
Let's examine higher shipping fees through the perspective of a shopper.

Below is an example from a real D2C shop. We want to be a good ecommerce steward, so we're not naming this merchant and blurred out identifying information. (In our experience, similar shipping fee examples are relatively easy to find, especially if you're not browsing a major retailer's site.)
We added a $20 tumbler to the shopping cart and hit the checkout button to find that shipping amounts to $8.95. That equates to nearly half the cost of the product itself.

The calculation was for the standard 5-7 business days. If you want to receive it Priority, within 3-4 days, it jumps to $14.95. Worse, it will cost you $24.95 — more than the price of the tumbler — to expedite and receive in 2 days.

There are shoppers who don't mind adding items to meet a minimum threshold for free shipping. Well, in this particular case, they'd be $130 away from that qualification. Are they really going to spend six times more than originally planned?

And for those shoppers not enticed by that minimum spend tactic, is an $8.95 shipping fee worth a $20 item? Some won't mind, as they reason it's the price for the perfect find. Others will balk at the principle, and say "no thanks."

In any of these hypothetical cases, there will be a number of people who don't go through with the purchase. If we follow Baymard Institute research results, it would be 69.82% — the average cart abandonment rate.

That's a lot of lost sales. The main reason for not checking out, per 48% of shoppers, is because of high shipping costs and fees. Research supports that lower shipping fees correlate with higher checkout rates.

If cart abandonment is traditionally high, now mix in woes about the economy. The addition of just a couple bucks to shipping costs could deter budget-conscious shoppers. Consider that two-thirds of Americans say price spikes for goods and services is forcing them to dip into their savings.

It's a good time for all D2C businesses to take a look at their shipping strategies.
3 ways to minimize shipping costs
Since no one knows when (and if) shipping rates will go down, there are three things that ecommerce stores can do to help alleviate the pain:

  • Assess packaging. Are your envelopes and boxes larger than they need to be, or are you adding more packaging materials than necessary? Cut down to what you need. Sending less waste into the world is a nice byproduct, too.

  • Negotiate the best shipping rates possible. This tactic is most feasible for larger ecommerce shippers with a higher delivery volume. But even they are finding it difficult to negotiate cheaper deals because of market conditions. Instead, they're fighting to place a limit to rate increases.

  • Adopt BOPA (buy online, pickup anywhere). Via.Delivery's service offers a secure, alternative delivery option that saves money for small- and mid-sized merchants in particular, plus their customers. It's typically cheaper to deliver packages to a designated pickup location like a grocery store or pharmacy than ship to a residence. And you can skip negotiations, as favorable rates are incorporated.
How BOPA reduces shipping costs
BOPA is picking up steam, and for good reason. Per Via.Delivery client data:

  • Ecommerce stores save an average $3.54 per BOPA delivery versus a residential delivery
  • 75% of the ecommerce store merchants saved more than $5 by choosing the BOPA pickup option over home delivery
Here's why it can result in substantial cost savings over time.

Major carriers tack on an extra charge when delivering a package to a residence versus a commercial building. This surcharge covers the final leg of the journey, commonly known as the last mile.

It's the most time-consuming part of shipping, and therefore most expensive. Last-mile delivery costs account for 53% of the total shipping cost. For example, UPS' residential surcharge for ground service is $4.85.

There's no residential surcharge with the BOPA solution since packages are dropped at commercial pickup locations.

Via.Delivery customer Finding.Wine is a good case study illustrating the benefits. Shipping wine to a private residence is usually an expensive ordeal. First, there's the surcharge. Then, there's a $7.15 "adult signature" fee to accompany the regulation that an adult 21 or older must sign before any package with alcohol is dropped off.

With BOPA, there's no signature fee because it's already built in — customers show their ID when retrieving a parcel. That, plus no residential surcharge, means a Finding.Wine customer spends up to 40% less on 4-5 day ground shipping versus standard home delivery.
There's another bonus for delivering alcohol via BOPA: the merchant doesn't need to worry if the customer is home to complete the signoff. No more risk for incurring multiple delivery attempts.
Conclusion
In strong economic times, consumers might not care about saving $3 to $5 on shipping if it's conveniently delivered to their doorstep. But we're living amid a different playbook, and shoppers are becoming more conscious by the day as to where their money is going.

It's a wise move for D2C brands to also hold a magnifying glass to their expenses. Examining shipping strategies is a key area and BOPA can be a big difference-maker in securing the cheapest shipping rates over the long term.