Shippit Joint-CEO Rob Hango-Zada discusses what cost control measures retailers can apply to their operations without compromising quality.
In the current economic climate, retailers are looking for ways to save that won’t negatively impact the quality of their operations. It’s not just supply chain costs; minimum wage has risen, rent and utilities have increased, and the cost of doing business is rising across the board, placing many retailers under enormous financial pressure.
We asked Shippit’s Joint-CEO Rob Hango-Zada for his suggestions for retailers looking to navigate this climate and control costs while doing so.
What suggestions do you have for retailers looking to reduce operating costs?
Shipping is the third biggest cost to a business so controlling shipping costs and delivery experience is important
Multicarrier is a cost-saving lever to pull, and many carriers have improved their services since the pandemic, if you haven’t re-evaluated your carrier mix recently, now is the best time to do it. You could be saving as much as 20% on your freight costs and upholding the same level of service as a result of a switch to multi-carrier.
Businesses are unaware of how much shipping is costing them. Identify how much you’re spending, and understand your shipping data. Leverage your shipping data to make informed decisions on carriers, lanes and route optimisation performance
Surcharges, particularly for bulky or regional deliveries, are a hidden source of cost that many retailers aren’t equipped to deal with. It makes sense to look at where you are shipping to, what you are shipping and whether it makes sense to continue to offer this at a loss. Live quoting at checkout and imposing costs on customers for odd-sized or infrequently delivered to suburbs is a good tactic to offset this.
Shipping goods from an origin as close to the customer as possible is the key to unlocking drastic savings. For retailers with a store footprint, ship from the store is a great option for lowering your shipping costs and optimising stock turn (ie, selling more at full price as opposed to clearance). For pureplay retailers, leveraging a micro-fulfilment model via a 3PL could be a lower-cost option than centralising dispatch.
Carriers offer greater incentives for PUDO, better known as “click and collect” options where the risk of a failed delivery is eliminated. Customers also appreciate the option of being able to pick up their goods at a more convenient location than the post office after a failed delivery attempt. Consider offering your customers the option of picking up as a lower-cost alternative to home delivery.
How can retailers improve efficiency in the operations process with with reduced operating costs?
More efficient operations are the key to sustaining operating expense savings. Technology is a key investment that many retailers must embrace in a compressed revenue environment. Automating decisions across fulfilment and delivery whilst also looking at eliminating manual labour as much as possible will be key to sustaining cost savings in the long term.
Better customer experiences naturally increase efficiencies for a business. Think about the key areas of pain that shouldn’t require human effort – automating “Where is my Parcel?” (WISMO) enquiries and authorising returns are two areas of low-hanging fruit that tick the box on better customer experiences and better efficiencies for a retailer.
Eliminating manual data entry with centralised systems will result in more effective outcomes and less rework due to human error – think about the areas you currently rely on humans and spreadsheets and look at ways to save both time and money here.
Offering customers multiple delivery options is about ensuring you can sustain great customer experiences at the right price. For example, retailers who ship 100% of their orders with free express shipping can find relief in converting their free shipping proposition to standard delivery whilst imposing a charge for express. Offering click & collect and premium on-demand delivery will also go a long way to helping you recover cost but also meet the expectations of your customers.
As discussed at Shippit’s SCALE event last month, free shipping simply doesn’t exist, and someone eventually has to wear the cost. How can retailers keep this cost manageable and under control as prices skyrocket?
Shipping is the one experience nobody wants to pay for but everyone expects to be free. This industry norm is only getting more embedded thanks to Amazon’s focus on free, fast and reliable shipping.
For anyone trying to compete without the deep pockets of a global player, setting optimal free shipping thresholds is a good way of baking in your delivery costs.
Reviewing cost of shipping as an investment into the lifetime value of your customer may also help you understand how to sustainably offer this to your customers – think about loyalty programmes that encourage repeat purchase incentivised through free delivery, not something you should willingly give away to every customer.
With many shoppers returning to in-store shopping, is it worth investing in revamping your shipping processes?
According to investors Jarden, “there is a broadening adoption of online, leaving the channel well-positioned to outperform through FY24+, particularly given the improving range, price visibility and service (last mile).”
Overall sentiment is bleak locally but the struggle will be felt across both offline and online retail. Market expansion is key so opening up international markets will be an important growth vector particularly for apparel retailers given the weak dollar and relative ease of market expansion through international shipping.
In times of uncertainty, it’s more important than ever to solidify customer loyalty and opportunities to grow. Amazon will continue to invest during a recessionary cycle so it is important to remain competitive to flank competition and sustain online retail businesses as we look beyond the current cycle.
Businesses that will succeed will over-invest in the customer experience and a focus on retention. A reliable and fast online shipping experience is the biggest single determinant of repeat business so this is a non-negotiable investment in our view. Check out how you can cruise through cost control in FY24. Get in touch.