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How To Reduce Shipping Expenses for eCommerce Companies

Recently, we sat down with Matt Morelli, the Director of Business Development for U-PIC Shipping Insurance, to discuss ways that online retailers can reduce their shipping costs. U-PIC Shipping Insurance provides low cost shipping insurance to companies that send customer orders through any of the major national or regional carriers.

INW: Matt, thanks for taking the time to speak with us. Tell us what you do over at U-PIC.

Matt: Thanks for having me. At U-PIC we provide an alternative shipping insurance solution to companies large and small, who are selling products and shipping them to consumers, or other businesses.

So when you ship a $750 watch, for example…and it gets lost in transit, stolen, or damaged…or your buyer states that they never received the delivery even though the tracking number shows that it was delivered — we cover that, and reimburse the shipper for the cost of replacement or refund.

I suppose our major selling point is the aforementioned, along with our comparatively simple and stress free claims process, and the fact that our rates are typically 50% – 90% less expensive than the carrier rates.

INW: That’s interesting. Do most eCommerce companies insure their parcels?

Matt: No. Interestingly. Based on what we see, I believe that most companies either don’t insure, attempt to ‘self insure’, or do it in passing.

The shipping landscape has changed significantly over the past five or so years. Shipping label software systems are a dime a dozen, and the majority of them offer some form of insurance whether they are partnered with an organization like U-PIC to offer it, or if they are tied directly into the carrier’s own shipping insurance offering. In that case, they may just default to whatever native option they have, or they elect to not insure at all.

One of the major messaging pushes our marketing department is working on right now, is letting shippers who are using these shipping software platforms know that it’s insanely simple to cut their shipping insurance rates by using us. There is no need to change their current process, buy into any new software, etc. We already integrate into each platform with ease, and can cut their expenses significantly in under 24 hours.

INW: Outside of cutting their shipping insurance costs, what else can an eCommerce company do to reduce their shipping expenses?

Matt: There’s actually a lot of things. More than I think most people suspect. Let’s talk about how orders are packed, and how often packaging costs are often overlooked. How many times have you ordered something online, and received a box that is 20x the size of the product you ordered?

This is so common it blows my mind. And unfortunately, the buyer floats the bill on this when they pay the shipping costs. Shipping carriers will use dimensional weight to assess shipping charges. This does not mean how much the package weighs objectively. The product that is being shipped may only weigh one pound, but it is being sent in such a large box, the dimensional weight (Length x Width x Height / Divisor) may be much ‘heavier’. Carriers do this to ensure that they do not lose money carrying a parcel. But…if they are not losing money, it means they’re likely making more than they should on a per parcel basis, and the person paying for shipping is losing money.

As mentioned, the buyer normally pays for this but the shipper is also losing money, by shipping products in grossly oversized packaging. A sincere audit of packaging should be done at least every few years to see exactly how much money can be saved. There are packaging companies out there like Shorr Packaging that can help with things like that.

Companies should also give serious consideration to reusing old packaging. A previous employer of mine was a relatively large beauty product company that would ship out hundreds of orders every day. Roughly 70% of our orders would go out using recycled packaging, from inventory orders that we placed. So if we had, for example, 2,000 combs show up, the box that it arrived in, would be pressed flat and stored for use in a later outbound order. In fact, this became a popular topic on social media in beauty message boards — the fact that we were ‘green’ when it came to our shipping practices. Why throw a box away when you can reuse it? Save money, save Earth…win/win.

INW: Now that you mention it, I’ve noticed plenty of careless packaging practices in orders that I’ve placed. I once ordered a two pack of deodorant online, and it showed up in a box large enough to fit a pair of basketball shoes.

Matt: Exactly. The cost of shipping that product out likely was higher than it should have been, and the cost to the shipper was also likely higher.

Another major consideration is…when is the last time you attempted to negotiate rates? After you’ve been with a carrier for a year or so, you likely have some ammunition that you can take back to them and use to negotiate a more favorable rate. If you ship a reasonable volume, call your shipping carrier rep and discuss.

Shippers also need to be mindful of additional fees. There can be all kinds of surcharges that you may not be aware of. Shipping a parcel to a customer who needs it on a Saturday? You’ll pay extra for that. Signature confirmation needed? Bring your checkbook. Ask your shipping carrier rep for an explanation of fees so that you can plan and act accordingly.

Furthermore, while it may give you more leverage to negotiate rates if you pump all or most of your volume through a single carrier, there may be better options if your client base is within a particular region. A smaller regional carrier may actually be a better fit. Definitely worth looking into.

Companies may also elect to have their suppliers use their shipping account number, rather than getting billed by the supplier for the cost to ship new inventory over. Your rates may be better than the rates that they get, and this also give you more ammunition when it comes time to renegotiate rates.

Lastly, going back to packaging — don’t forget that some carriers will offer free packaging supplies like boxes. The USPS offers several different styles and sizes of free boxes depending on the type of shipping chosen. This can save businesses a lot of money.

INW: Thanks Matt, this is a lot of information, certainly more than we expected. We appreciate you sharing some insights with our readers. If someone is interested in getting a quote to see about lowering their shipping insurance costs, how can they contact you?

Matt: It’s been my pleasure. The best thing to do would be to visit and leave their information in the short contact form. We’ll have a licensed agent reach out to talk about what we can do. Meanwhile, there is a little bit of information there that answers some questions as to how we operate and what we help our clients achieve. Thanks for having me!

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