Understanding the REAL Costs of eCommerce Shipping for Your Business

welcome to the curiosity podcast a show about everything ecommerce and digital
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business the aim is simple to help you thrive online and now your host Matt
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Edmondson well hello my fellow ecommerce entrepreneurs my name is Matt Edmondson
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and this show is for those of us who are curious about e-commerce and want to know how to get better at doing digital
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business coming up in today's show I am getting into all things to do with
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delivery that's right that really well not so interesting but how so important
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by a part of e-commerce delivery so if you deliver products directly to your customers or you are thinking about
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delivering products direct to your customers you are gonna want to listen up as this is gonna be quite in-depth
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with lots of good stuff coming up in this show I will of course put a link or
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put links that I mentioned in the show notes along with like a summary I
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suppose of what we've been talking about in this podcast all on my website at Matt Edmondson comm you can check that
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ok now we are gonna get into all things shipping ok now the thing to bear in
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mind here is and the reason why I want to talk about it is because after your product costs the direct product costs a
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you what it costs to buy what it cost you to buy the products which you're selling to the customer usually with
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e-commerce the second biggest direct cost that you have as a business is
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shipping right the shipping cost so as a business your aim has got to be to offer
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the lowest shipping rates possible but still give your customers the shipping
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options that they want at a rate that they expect maybe it's free shipping
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maybe they expect to pay for I don't know but you sort of you don't want to compromise on quality but you've
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definitely got to manage prices and you've really got this fine balancing act where shipping is concerned ok so
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there are Thrym 9.3 why am i saying sorry there are five key things to think about when it comes to shipping products
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to your customers okay and there's a quick summary here are those five now as
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I've said in previous podcasts if you are driving don't feel like you have to do crazy things to take notes just head
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on over to the website we'll put all the show notes there so but if you're sat at your desk listening to your podcast like
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I do then definitely take know or maybe sometimes I listen to podcasts on the bike
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you know the stationary bike in the gym and you can put notes on your phone anyway all that aside let's get into
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these five key things right the first one I'm gonna call operational the second key thing to think about is going
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to be environmental factors we've then got packaging number four is going to be
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shipping and number five I'm gonna call they're hidden things right and let's get into each one of those now so we're
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gonna start with operational number one operational what do I mean by that well these are all the operational costs that
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you have to think about when it comes to shipping your order so for example who's
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gonna pick and pack right who's actually taking the product off the shelf putting it in the box and sending it out to the
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customer who's actually doing all the goods in so when something comes into your warehouse whose own box in that and
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putting it on the shelves or maybe you're just operating at home out of your garage right but you still got to
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account for your time so every time you and you know you get an order of a hundred items that box comes in whether
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you know you've got to process that you've got to count them that takes time these are all operational issues and
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they all have costs with them okay so how many people do you have to hire how
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much time is it going to take you've got a think about those things right and is
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there ways to make it better now we found great efficiencies in our own
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website when we lay up in our own website in our own warehouse when we laid the warehouse out differently right
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so doing things like grouping products that are often sold together makes a lot
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of sense so if someone buys you know widget X and they also usually buy widget Y well purple Dziedzic X and
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widget Y together in the in the warehouse so when the person picking them they've they're both there at the
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same time they've not got a walk from one side of the warehouse to the other which just makes the whole thing more
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efficient right but all your best selling items much nearer the front where the pickers are so that again they
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don't have to walk all the way back to the warehouse to find something the majority of orders then get picked quicker there's all these things that
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you can do that makes it more efficient and you can you can take those ideas and
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apply them to your garage at home you know so if you're shipping from your garage put similar items together where
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you know where you're not walking from one side of the room to other to pick and pack you want to do it quickly and efficiently without you know sending
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crazy things out to the client you've got to get the order right but find those efficiencies another thing that we
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did that really made a big massive difference for us very early on we realized that you know we could write
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some code for our system that would allow us to scan the orders and that's exactly what we did so we wrote some
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code and started scanning our orders so on the screen in front of you as you scan it it either is red or is green and
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if it's green you can ship it if it's red there's something wrong with the order so what that meant was it was like
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99.9% accuracy then in shipping right so when it's never gonna be perfect
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together but is almost perfect so every order that goes out is correct well the
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very first month that we implemented this we saved over 7,000 pounds which is what about ten thousand dollars in costs
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of managing the wrong order sent out to clients so by the time the wrong order had been sent out they'd told us we'd
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had to arrange collection and we had to arrange shipping the new product it was costing is about 10k a month and
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as soon as we implemented a scanning system all that money was saved and of course the customers are happier because
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the right orders getting through to them and actually our shipping was a lot
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quicker because we didn't need two people to check orders we only needed one who could scan and so the whole
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thing just moved an awful lot quicker so you can use technology to help you I know I've stood in client warehouses
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where we've looked at these things like can we move things around can we change things around but even simple things
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like like I've stood in clients see multi-million pound companies but they
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have people actually manually doing labels you know they look at the order and they go right well this order I'm
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send out using this parcel system and this order I'm going to send out using that parcel system and they're manually
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making this choice where you don't need to do that you can you know you can either get a plugin or write some code
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for your site where the website automatically chooses the ship in the best shipping format for the client
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generates a label and automatically tells the courier company there's a parcel that you can need to come collect
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and ship out to apply it so it just reduces that whole need makes everything so much quicker and faster and keeps our
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operational costs at a much lower rate than what they were so that's point
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number one think about the operational site number two I said with environmental factors now it goes
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without saying that we obviously have a responsibility where our environment is concerned and managing shipping is a big
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area where we can have environmental impacts both good and bad now ecommerce can be more
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environmentally friendly because you know if I go to the shopping mall or the shopping center I've got to get in my
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car I've got to drive there I've got a park so I'm using my car and you know they take up a lot of space and so on
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and so forth whereas with the e-commerce I'm just on a website and I buy the product so I saved that whole car journey now obviously with e-commerce
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I'm posting the order to the claim but there are efficiencies to be made when
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you group a load of those products a lot of those parcels together it becomes
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slightly more environmentally friendly right so we've got we've we've got that being e-commerce which is a big plus but
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did you know that when you send goods out to customers normally the quicker that they want
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those goods the faster that you send them the were the bigger the impact is
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on the environment right so if you send a parcel say Next Day Delivery versus 3
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or 4 day delivery the parcel that sent three or four days delivery has a much lower impact on the environment and
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whilst this isn't a direct cost to our business obviously it is a direct cost to the environment which we need to be
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aware of and think about ok and plan for and take responsibility for
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are we being carbon neutral is a big one you know your business when its shipping out products should aim to be carbon
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neutral and also check things like your packaging you know so we stopped using plastic bubbles that you know the space
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saver things you put in boxes stop products moving around and keeping them safe because they were plastic and
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plastic single-use plastic is not great for the environment so we turn to popcorn of all things because popcorn is
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super amazing not only is it a low calorie snack as and when you're peckish but it's also biodegradable and
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environmentally friendly and blah blah blah right so have a think about how you
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can become more environmentally friendly than environmental cost of shipping that
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I think you have to think about and go through each of the points of your shipping and your delivery to customers
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from your you know your staff how you your warehouse runs what packaging you
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use what shipping company you use and think about your environmental impacts and then aim to be carbon neutral and
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have at least a neutral effect on the environment if not a positive one because we all can now so let's do it
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let's save the planet right why not number three is packaging now the packaging cost what do I mean here so
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this is obviously when you've picked your products off the shelf you've got to put them in something to send to your
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customer it could be an envelope it could be a padded envelope like a jiffy bag it could be a cardboard box it could
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be a plastic bag I've had parcels arrive in all kinds of things through the post
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okay and my tip here is because again you've you've got a balance a number of
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things you obviously got to think about what we just talked about the environmental side of things but you've also got to think about what your
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customers expectations are you've got to think about what your competitors are doing could you do something that is
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better than them you certainly don't want to do anything that's worse than them and but could you do anything
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that's better for example with Jersey Beauty company we noticed all our
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competitors were sending products out in the jiffy bags right the padded emboli and we thought actually we could make
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this better so that your goods arrive in a better condition so we send stuff out in cardboard boxes the cool thing is
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cardboard boxes are from recycled materials whereas the jiffy bags have single-use plastic in there was all
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kinds of benefits to doing this right unfortunately also means slightly increased costs because the shipping
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rates were higher for the cardboard boxes but we we actually thought that was going to be worth it for our
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customers in the end and it's something that we had to trial and test ok so don't compromise service for costs you
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know what you give to the customer but you've obviously got to be aware of them we were very very aware and like when we
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decided to move from plastic bubbles to popcorn will that increased our packaging costs it made the cost of
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shipping the goods out to the customer higher but again we were prepared to
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take that cost because of the environmental factors right so that's what we that's the decision that we made
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you've obviously got to make your own call but think about all of these things
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we are now going to take a few minutes to stop pause and review this week's
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ecommerce news hi Matt hey how we doing
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good good Matt fake reviews okay so I never had a
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few is that were you saying no I'm saying fake reviews on Amazon actually okay
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so Amazon has a lot of fake reviews it does it really does yeah yeah you know
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maybe but Amazon yes yes which creates a lot of confusion for the average
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customer that they have do you think so do you actually think people can spot a fake review so it's not just reading a
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fake review it's also what happens if you end up buying a product based on a pig yeah I mean it's massive isn't its
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massive problem I'm a massive problem on Amazon mmm how to deal with fake reviews
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I am I don't I don't know
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if I'm on Amazon and I see a product with just like one or two reviews I just automatically assume that they're fake
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reviews right such as one or two if I see a problem a product way and no fifty
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to a hundred two hundred reviews I think actually there's got to be some genuine ones in there mmm-hmm and then I think
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actually if there's a product that's got tens of thousands of reviews yeah a lot of those I think it couldn't be faked now I have no basis for that logical
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thinking it's just how I just have my brain works when I look at Amazon actually you know
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when they've got like the best sellers man Amazon yeah do are they generated
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like through the reviews the number of reviews they have and also can I cut many stars is that created genuinely
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don't know I used the bestsellers a lot in research and and I know that Amazon
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Update said bestsellers hourly and I Jamin it is done on the basis of how much is sold mm-hmm and so I would tend
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to trust their bestseller ray ranking more than that trust their review ranking okay but when I was at Amazon
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because you know I go down there and open up with Amazon I was with Amazon
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they were telling me that you know a vast majority people on their website I think it's more than 50% I can remember
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the exact state and they go on their website but they don't buy right they just literally go on the website to look
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at reviews so they'll be stood in a store somewhere and looking at a TV and think was this TV any good I don't know
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we'll have a look at the reviews on Amazon and see what people say not necessarily buy from Amazon but to check
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to see whether it's you know what I say yeah yeah so I know that the reviews
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thing for Amazon is one of its most redeeming features and people use their reviews think more than they use actual
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Amazon's services because as we all know Amazon are not the cheapest anymore but
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they do have all the reviews and so people do check them so yeah I think I
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don't know how they're going to deal with the fake reviews problem I genuinely don't I it's a real tricky one
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and whether they only let people review products that have purchased them
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is one way I suppose but even that I don't know can lead to problems so I
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think on our sites you have to do you have to purchase to believer if you don't do you can actually just leave a
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review you as long as you've registered and so yeah I don't know it's a really
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interesting problem for Amazon and one that I think will continue mm-hmm so I know I'm sure I'm sure I'm not sure they
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really care at the moment do do they care about fake reviews because it's not really hit mainstream media too much um
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well if they don't care now they might soon yeah they should do I think people
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are becoming more more cynical yeah yeah very good okay next enjoy calm enjoy
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calm was good to be one of the coolest domain names ever well when I tried to
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search for it mm-hmm it was hard for me to actually find the website cuz all these other things about enjoying life
18:33
were coming up organic SEO is not great no not yet
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who are they so they are an e-commerce startup that is silicon valley-based
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most of them are and it started it was started by the the former Apple VP of
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retail operations and basically he his
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idea was to have the convenience of online shopping together with the
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personal service that people get from like a physical store so he had Apple in
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mind and he was one of his things that
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he said in in this article I read was that he he observed that a lot of people
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would come into an Apple store and get help to understand like how to set up
19:31
their new devices and stuff but he was thinking about all the other masses that buy Apple products but don't actually go
19:37
into a store yeah don't get that help so he created enjoy calm and what happens
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is that customers can shop online for their devices they can receive them on the same day
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and they can if they need help setting up the device they can also opt for and enjoy expert yeah enjoy export and to
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hand-deliver the item and set it up for them all right now in the UK on there
20:07
see that that I'm looking at the website now they just come into the UK yeah they've just partnered with you yeah
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that's right and did it say they've got some crazy amount of funding like 130 million in funding yeah they do you know
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what whoever has given enjoy 130 million euros in funding just give me a call because you know what we've got we've
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got lots of places where we could for that kind of commerce but you know what
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I mean joking aside and I like their idea mm-hmm it's cool it is cool when
20:39
you look at their website I hope they get more people on board than just ye I mean I am actually with EE so maybe I
20:45
should try this and see what would see what it comes out like but that's fascinating what they do and they
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deliver within two hours don't they yeah and and around the country just putting your postcode in check mm-hm and so then
20:58
they'll deliver the product for you within two hours and if you need help they also deliver it with an expert who will set it up for you
21:04
at wherever you're at yeah all your questions yeah ya like it ya like it like it that's why they need 135 mini
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here's us as some setup that cheese um coop what's next Alibaba Alibaba mm-hmm
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it has just very recently bought out Keola calm okay so ke ola huh is Chinese this
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China's biggest shopping site in an imports high demand European brands into
21:37
China and Southland air as opposed to like us buying so okay so for the outside of China buys from Alibaba but
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ke ola was importing stuff from europe back into china mm-hmm okay and the early Bob rivers gone and bought them
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out yeah because they were a huge competition for them so well I suppose when you're Alibaba you can do that yeah
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it's like oh you're my competitor you're a little bit annoying so I'm just gonna buy you out yeah because I can't because
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I have so much money I can do what I want yeah there are the Chinese Amazon oh well okay well I mean that's
22:07
kind of you know I suppose that's cool for China although I don't know you know these big guys that sort of go and buy
22:12
other big guys and become massive guys I don't know if that benefits a consumer at the end of the day maybe that's just
22:19
me maybe that's I don't know I'm never big fans on these big buyers but I can see why they've done it like I
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say you know though competitor go and buy themselves the whole problem straight out of the bet and be nice to
22:30
have that kind of money maybe if we had 135 to do part of that we could just go
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and buy a whole bunch of competitors and create like a super a few you know super few super sites and so I come back to my
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previous point if you have 135 million you want to invest give us a call all right that's great thanks sort of thank
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you that's the news so now let's get
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back to it okay so point number four are the actual shipping costs the cost of
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shipping the product out to your customer and now if your my opinion offering your customers the right
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shipping rates and options is going to be one of the keys to success as an online business okay you can't charge
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too much for delivery but if you charge two littling you're not covering your costs and you're not making profit
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that's also not great mix into the throw of all of this at actually a lot of
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people really want free shipping it's still a big draw so again whilst it's free for the
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customer you're obviously paying for it so you've got to understand that and
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understand what the rates are what services you're gonna give to clients so therefore you can create these sort of
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shipping rules and make sure you're actually not gonna fail as a business it
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came so shipping rates are based largely on four factors okay if you didn't know
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this already you won't learn it now number one is service and speed number two dimensions and weights number three
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the destination and number for the shipping volume a case let's look at these in a bit more depth service and
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speed was number one now most customers expect an of shipping options on your website okay
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now if you've got free shipping or you've got slow shipping like you know it's going to take three to five days or
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whatever that's to be expected but you've also got to have you know what's the cost for expedited shipping you want
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to hear quicker and how much you're gonna charge for that what are your competitors doing can you
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offer something that's better or more competitive so just map out that you may
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have to talk to different couriers and different suppliers to get different rates and different ideas on the cost
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but really spend some time thinking about it like when does the package need to arrive at your customer does it need
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to have tracked delivery ie it's got some kind of tracking number on there so customers can track where things are up
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to it's quite a common service here in the UK now everybody's sort of starting to expect it so if you're do if you're
25:07
doing e-commerce in the UK you have to bear in mind everybody's expecting it so we have to at least offer that now right
25:13
does it need to be signed for is it being shipped to a business or a home address what kind of products are
25:19
you actually shipping some did you know that there are some products that we are not allowed to ship from Jersey Beach
25:25
company because our insurance company won't let us do it so we have to make sure that we're not sending those out
25:30
right number two dimensions and weight obviously the bigger the parcel the
25:36
heavier the parcel the more expensive it's going to be and again you're just gonna have to do some shopping around to find out who's gonna do what for what
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price most couriers have a have a sort of an initial flat rate which is a parcel up to this size and up to this
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weight it's just one fee and it's usually two kilos and under is normally
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that sort of barrier but it's not the same for each courier company you're gonna have to check them out right obviously destination number three has a
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big impact so we have in the past to use
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different couriers to get different rates so for example we use one courier
26:15
ship parcels to the UK and but we should put a lot of products internationally so I take a country like Sweden where we
26:22
send a lot of parcels to the and we we contacted other couriers to find out who could do something better
26:28
for us for Sweden you know what we found a much better rate and they were very specialists around Sweden saved us a lot
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of money and and and actually meant we could give a much better service to our customers as well that's what we call a
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win in the industry so we definitely went with those but we only got those after shopping around with the different
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destinations that we had a number for shipping volume obviously the more you ship the better rates you get and it may
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be that if you're small and you're just starting out you're gonna have to do a
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bit of shopping around there are courier brokers for want of a better expression out there that you can use so rather
27:08
than going direct to the courier company you could use a brokerage service there's an effect bought say 10,000
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slots which they've got to fill and they'll at a much lower rate so then they'll say you a portion of those and
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you're not paying the crazy high rates of couriers in the past I've seen people
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sort of you know I've got an e-commerce like you've got an e-commerce site over there why can't you why let's work
27:30
together on shipping and so the you know the cost between the turbos come down so you can do partnerships you could use
27:37
fulfilment companies again if you're doing small amounts maybe that will help and I we do fulfilment for the companies
27:44
that you know we benefit when we collaborate and work together and get lower shipping rates because of the
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volume okay so with shipping rates the bottom line is you've got to shop around
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you've got to get the best rates but you've got to understand what it is your customer wants and you've got to understand can your courier do that for
28:02
example if you're shipping a lot to residential customers you're probably not going to want to use UPS right
28:08
because they're not the best for residential shipping or at least they weren't and when we started out an
28:13
e-commerce but maybe you want to use a courier that is more specialized than
28:19
that type of thing it maybe you don't want to use the Royal Mail because the Royal Mail lose too many parcels and you
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want to use a different thing you want tracking numbers and if you want tracking numbers there's a cheaper courier over here that offers a better
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service etc etcetera so understand what it is that you want and then literally
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get on the phone have some cause and do a whole bunch of shopping around and even if you're currently
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running your e-commerce business right and you've been working with the same courier for six months 12 months I would
28:47
still be shopping around we do it once a year here we have a big sort of overhaul and we talk to different careers we get
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different rates different agreements in place and we usually find actually as long as we do about once a year not
29:01
every other week the the time involved in doing that is paid back by the costs that we save okay
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so have a look around now finally I want to look at hidden cost so if you stayed
29:13
with me so far well done we're going to get into hidden costs now and hidden costs or one of those things that you never actually
29:20
hear talked about but it's amazing how big of an impact these things can have
29:26
on your shipping costs right so what do I mean by hidden costs for example when
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you use use a courier company and you're choosing a courier company ask questions like how many times will they try and
29:39
deliver a parcel to a residential address if the customer is not there to
29:44
pick that parcel up right so they've tried to deliver they've knocked on the door the customers not there what do
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they then do with that parcel do they try and deliver it again how many times do they put it in you know do they leave
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it with a neighbor do they put it in a safe place or do they return it back to you and if they return it back to you how
30:03
much do they charge what are the costs of returns all these things you have to think about because this is going to
30:08
happen and the bigger your e-commerce business gets the more this is gonna happen and you're gonna have a lot of
30:15
customer service headaches just chasing parcels genuinely chasing parcels so
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understanding that with your courier you know if they've left it in a safe place will you know about it does a courier
30:26
tell you where they've left it so you can then inform the customer to save them calling you to say all my parcels
30:31
not arrived and so on and so forth I cannot begin to tell you how many times
30:38
Korea has put a parcel in a safe place and I'm doing those you know that finger inverted commerce thing because they've
30:44
put it in the customers bin or trashcan
30:49
as you'd call it in the safe but here in the UK we call him bins and they've put him in the bin because it's well safe
30:54
it's waterproof it's got a lid on it it's outside the customers house but of course the customer's not known this and
31:00
so he hasn't realized this and the parcel has been thrown away and so the courier's going well we delivered it and
31:06
the customers go more we've never received it and you're playing piggy in the middle going saying somebody somewhere has got to pay for this right
31:13
because you've still got to send it out to your customer they still got to receive it and you know you can have
31:19
arguments with a courier so there's all kinds of things like this in hidden costs I mentioned GPS they don't really
31:26
do residential deliveries there's a surcharge for them so when you talk to careers what are the surcharges is there
31:33
a residential surcharge what's the fuel surcharge that seems to be a favorite one with a lot of careers these days
31:38
they're like oh it costs you know whatever two pounds fifty deliver it but we're gonna charge you a surcharge of X
31:44
percent fuel surcharge level hang on where does this come into it why can't you just give me a flat rate and they
31:49
like all these little fuel sort surcharges so you then have to spend time figuring out what the real actual
31:55
cost is because of all these hidden costs okay so make sure you definitely
32:01
read the fine print and you also want to understand things like how are the
32:07
courier's paying their drivers so here in the UK because ecommerce is such a
32:14
big deal there are a lot of private courier companies that are subcontracted out
32:19
right and so and there's lots of guys who for whatever reason have have gone
32:28
and work for the courier companies they've gone and got themselves a van and they're self-employed so a lot of drivers can be self-employed and they
32:34
get paid by the parcels that they deliver so if you're paid by parcels
32:40
deliver guess what you're gonna deliver the maximum amount of parcels in the shortest amount of time you're gonna
32:45
look at where all the parcels are groups and you're gonna deliver those first because that's where your income is going to be but if you've got to drive
32:51
20 minutes outside of that group just to deliver one parcel you kind of gotta
32:56
think to yourself is it really worth it when I could make more money doing another 20 parcels over there so
33:02
we have seen service suffer as a result of that but you you want to know this as
33:09
an e-commerce business how are the courier drivers paid how likely is it my customers are gonna you know not receive
33:16
parcels because they live you know slightly off the beaten track what about
33:23
things like insurance costs so if a parcel goes missing on it's not delivered who pays for that is there an
33:29
insurance policy on that what is the limit of that insurance policy so you know if you're using the Royal Mail they
33:35
pay up to whatever it is I can remember the exact figure say it's 20 pounds which is fine if you're shipping a
33:42
parcel that's got a temper and value but if you're shipping something that's got a hundred and fifty pounds value and that goes missing well you know that's a
33:48
lot of loss you've then got a Coppa so we've spent a lot of time understanding
33:53
what percentage of parcels go missing how what percentage of parcels we get
33:59
compensation claims successful on and we think it's lower than 50% right so if a
34:05
courier company loses say a thousand pounds of our products and we put insurance claims in for those thousand
34:12
pounds after months and months and months we all get less than five hundred of it back so just whatever it is for
34:18
your business you have to figure it out it's not always as rosy as the salespeople would lead you to believe
34:24
there is the actual reality okay so there are all these hidden costs now some of them you can predict when you
34:31
think about them like the ones we've gone through some of them just come through experience and knowledge after
34:36
you've done it a bit of a bit of time for example like the percentage of compensation claims but all of these
34:43
things you have to put into the mix when you're calculating the cost of shipping and the cost of your products on the
34:49
website because only then will you know the true cost and like I said at the start of the show right the second
34:55
biggest direct cost after product cost is gonna be shipping for most ecommerce
35:01
businesses and we have to like work hard to keep that service high but keep a
35:07
cost like right and continually shopping around talking with couriers
35:13
understanding what your customers expect what you can deliver what your competitions doing is so critical
35:19
because the delivery is such an important part of the e-commerce business it pays to get it right so like
35:26
I said oh that was jam-pack right lots of stuff in there like I said you'll be glad to know a lot of those points and
35:33
all those notes are gonna be on the website Matt Edmondson comm and you can
35:38
check that out make sure that you do in the meantime make sure you subscribe to
35:45
the show wherever you get your podcasts it's free and like today the show is usually full of great stuff about how to
35:52
set up run and grow your own e-commerce business so do make sure you subscribe
35:57
to keep up to date and if you wouldn't mind if you're enjoying the show if you wouldn't mind giving me a quick review
36:03
that would be super super awesome I would really really appreciate that and carry on connecting with me on social
36:09
media it's great to get to know some of you great to connect with some of you and have conversations I'm really really
36:16
enjoying them but again all my social media links from my website madman CENTCOM but if you go to Facebook if you
36:21
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36:28
find me or the radio on DJ either way we're both cool people so connect with both of us why not okay that's enough
36:36
from me I think thanks for listening my fellow e-commerce entrepreneurs and I'll be back next week with some more help
36:42
and advice on ecommerce until next time you've been listening to the curiosity
36:49
podcast with Matt Edmondson subscribe and join us next time as we carry on conversations about all things ecommerce
36:55
and digital business [Music]