Retail is all about margin, and that means cutting costs where it matters—those services that are not differentiators to the customer.
According to a recent report on parcel shipping by McKinsey and Co., desktop shipping or parcel shipping is becoming crucial to the retail industry. According to the report:
- Desktop shipping costs amount to approximately EUR 70 billion globally.
- 70% of consumers still prefer the cheapest option of home delivery.
- 25% of consumers are willing to pay significant premiums for same-day delivery.
- Just over 30% of younger consumers choose faster shipping over regular delivery.
- Consumers prefer home delivery over unattended delivery options.
- China, Germany, and the United States account for more than 40% of the market.
- Consumer deliveries now exceed 50% of the total parcel shipping market.
These statistics underscore the fact that desktop shipping is a critical competency for retailers, but it’s one that brings significant costs that must be managed. It’s also becoming less of a differentiator in the marketplace as retailers race to attract customers with the fastest and cheapest delivery options. What matters most to consumers today is low cost, followed by service, speed, and reliability.
So how can an effective desktop shipping solution help retailers reduce cost?
More visibility to support cost reduction strategies
An integrated desktop shipping solution provides better visibility into the total cost of parcel shipments by breaking those costs down more accurately. Desktop shipping solutions allow shippers to track not just total shipping cost with each carrier, but to break those costs down across carriers to gain visibility into accessorial fees and surcharges such as add-on fees for residential deliveries, extended areas, fuel surcharges, weekly service fees, and other handling charges.
According to a Multichannel Merchant survey, these fees and charges can make up more than 30% of total shipping costs. By tracking these charges more closely, you can target and reduce these costs, either by avoiding them entirely or by negotiating waivers or reductions from your carrier.
Better data to support carrier rate reduction
According to Multichannel Merchant, 36% of respondents considered renegotiating rates and pricing with their parcel carriers to be their best method of reducing shipping costs. However, to successfully negotiate with the carriers, shippers needed better data regarding what services they used, how much those services cost, what additional fees and surcharges they were paying, and other variables that were impacting their shipping costs. Benchmarking may be another benefit of using a desktop shipping solution. Without a desktop shipping solution, most retailers would have a hard time tracking this data.
Many retailers do use an application to track some of this data, but often these applications are provided by their parcel carriers. The disadvantage of using these proprietary solutions is that it is difficult to analyze the entire desktop shipping business across carriers and shipping locations.
Consolidation lowers shipping costs
Ideally, customers will place one single order that contains every item they want, and that item will be fulfilled and shipped all at once. But often this isn’t the case—customers may decide that they want additional items and go back to place a separate order, resulting in an additional shipment. Retailers may not be able to fulfill the entire order and opt to send part of the order now, and the rest later. If you’re offering free shipping to your customers, then sending multiple shipments to the same customer as unique orders is a fast way to inflate your shipping costs.
Desktop shipping solutions allow you to consolidate orders to lower your shipping costs dramatically. One unconsolidated order can cost your company 50% more to ship; if you’re doing a significant amount of parcel shipping, then these costs can really add up over time. Desktop shipping allows you to track how often this is happening, consolidate when appropriate, and develop policies to ensure that shipments are consolidated whenever they are traveling to the same customer or area on the same day.
A consolidation strategy also helps shippers balance delivery speed with costs. For some customers, what matters isn’t when the shipment leaves your store, it’s when it arrives. They care less about speed and more about reliability. With desktop shipping, you can consolidate shipments based on when the order needs to arrive. Rather than sending one shipment now and another in two days, you can consolidate the order and send it all at once, thus reducing cost.
As more retailers offer fast shipping options like same day, next day or two day shipping, customers will increasingly look at cost. Desktop shipping allows retailers to compete against other retailers’ shipping options, while still reducing shipping costs and driving higher margins on the products they sell.