SMBs have more than enough expenses day-to-day without having to add to them with costly shipping. But what options are available and where can businesses save money?
Starting a business making iPhone covers and selling them on eBay might sound like a good idea. Production is cheap, they look great, and they’re selling well. But customers in Europe, Asia and the US are clicking through to the final page only to find out that the cost for shipping from Australia is more than the cost of the product. Would a discerning customer still purchase the case, or will they look for something available locally?
Australian businesses are limited by distance from the rest of the world, and could be missing out on sales as they compete with manufacturers able to offer more competitive shipping rates. So what options are available to compete and how can you, as a small business, make as much of a saving as you possibly can?
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According to NAB’s Online Retail Sales Index, online spending has grown 26 percent year-on-year in February 2012. While eCommerce is booming and Australian retailers are moving to sell their products in a global marketplace, businesses need to remain competitive by offering the best prices possible right through from product to delivery.
To do this, it is vital that SMBs don’t rely on their usual courier or postal service, without seeing what other options are out there. “The complexity comes when choosing which carrier to use for which destination and which route,” says Mark Helvadjian, founder of ShippingEasy, an online source for comparing, booking and tracking domestic and international shipping. “It’s important to recognise that different carriers have different strengths in different areas. One might be particularly strong in a metro area, another might be national, and another might be international. No one carrier can typically fit all of your needs. And so the pain point for SMEs particularly has been they don’t have the ability to set up four accounts because they cannot negotiate enough volume to get a great price.”
Helvadjian discovered this personally when he was about to establish himself as an online retailer. After realising there were no easy options for SMEs to compare and book the best shipping prices, he created ShippingEasy. “I really wanted to start ShippingEasy as a hassle free solution that was tailor made to the SME market. And so we started up and did the hard work by negotiating the best deals with the top carriers, so the initial pain point of negotiating volume pricing was automatically taken away. Now businesses can plug ShippingEasy directly into their online store. It’s as simple as plug and play.”
You’ve compared prices among carriers and think you’ve worked out how to get the best deals available. How else can you find ways to save money? Taking distance out of the equation might be something you can achieve. Ship2Anywhere, an online shipping service that offers an easy and cheap shipping solution using carriers DHL and Australia Post, recently opened their second site Ship2AnywhereUSA. The idea behind the second site, according to co-founder Michael Teasdale, was to cater to the many Australian buyers who were purchasing items online from the US but were unable to have their products shipped to them. Ship2AnywhereUSA provides a US postal address that then forwards items on to Australia.
However, Teasdale says they soon found out they had a very different customer. “We found that about 60 percent of our clientele were Australian businesses,” he admits. “They’re signed up because they have US suppliers in different locations. But now they use our service to get all their suppliers to ship to their USA address, we put it all in one big box to send to Australia and save them 30-to-40 percent on their shipping costs.”
With US domestic shipping being comparatively cheap, and very often offered for free, if you’re selling to the US it’s vital to provide competitive rates. “One guy who manufactures horsefeed and measuring cups approached us saying that he wants to grow in the US market but shipping poses too much of an expense. If someone buys his product on eBay for $2, the customer’s not going to pay $30 to ship it from Australia to the US,” Teasdale explains. After seeing the take-up of their other services by SMEs, and wanting to offer more solutions to businesses, Teasdale and Ship2Anywhere’s co-founder Jack Fitzgerald came up with another option. “What we’re doing now for Australian business customers is saying ship over your goods in volume to our facility in New Jersey, and as your orders come in from eBay, we can fulfil it straight to the customer with two day shipping and a price of $5. If you know your product and you’re confident it’s going to sell in the US market, it’s a great option for Australian businesses to expand globally without the risk.”
Customer is king
Saving on shipping is not only vital for small businesses, it’s also something that’s incredibly important for customers and, therefore, in small businesses retaining customers. So how can SMEs keep their customer numbers up? Moving into the online retail space is highly advised, and is becoming easier than ever.
In competing with the other big delivery companies in the market, Australia Post have come up with a number of options to benefit the SME. “We’ve been doing a lot of work on understanding the SME market. For example, helping them get online. We have a product called Shop In A Box, which is a template online store we offer for under $10,” says Richard Umbers, executive general manager for parcels with Australia Post.
Along with offering simple virtual storefront applications, Australia Post has been working to ensure that businesses can guarantee safe delivery of their product to customers. “If you’re a new business that’s selling online you want proof that your goods have been delivered, and that requires a whole different technology. It’s not just a postman putting it in the post box anymore,” Umbers explains. In response to this need, Australia Post introduced a new parcel product called ‘Pack and Track International’ which offers tracked delivery between the United States, the United Kingdom, New Zealand and Australia. “This is adding a whole new complexity to our parcel operations,” confirms Umbers. “We are able to invest quite significantly in backend infrastructure to be able to support this very different kind of customer and in particular the eCommerce industry.”
Australia Post is also ensuring that customers can receive their goods, no matter the hour. “One of the observations people have made about the Australian market is that if you’re not at home, you can’t receive your parcel, and this restricts the ability to buy online,” says Umbers. “We’ve come up with 24/7 parcel lockers as our initial step to making sure that there are many more delivery options. This benefits business because the more delivery options means they can be sure that customers are going to get their product. I can’t underestimate what we do for the SME market, but it’s also about what we do for the SME’s customer that makes a difference as well.”
No matter the size of the packages you’re sending, or the frequency with which you send, shipping can be a painful cost for SMEs. If there’s any way to save money in this complicated arena, it’s well worth the effort researching the best ways to cut your shipping costs.
How to save money on sending your goods domestically and overseas
Some expert shipping advice from Maersk:
No matter what shipping method you end up choosing make sure that it fits with your overall supply chain strategy or the money you think you might be saving could be going down the drain somewhere else. Simply put, the benefits of looking at your end to end business holistically can be huge.
Consider the aim of any supply chain: to deliver the right products, in the right quantities, at the right time, with minimal cost to you. Looking at the time and cost of your supply chain as a whole, you might be surprised where you can save money.
For example, an importer with high storage costs might need to think about why they hold so much stock in the first place. If the excess stock is being held simply to ensure enough stock availability for customers it might be more cost-effective to pay a little extra on transportation to ensure stock arrives in more appropriate quantities more often, or more regularly, than spending the money on storage costs. Similarly, if someone is holding excess stock as a result of poor delivery performance it might make more sense to simply look for a more reliable transportation option to save the inventory cost.
At the end of the day there is no one-size-fits-all approach so it is worth coming up with a few scenarios that look at the impact different transportation solutions will have on your overall supply chain.