How to optimize your shipping costs? 

Whether you have a marketplace or an e-commerce site, shipping costs are a major expense to your business. They can be both an obstacle or a purchase criterion for your customers.

First of all, to define the shipping costs, it is necessary to take into consideration the commercial margin of your company. 

If the commercial margin falls while the turnover increases, it is a bad sign. You will therefore be forced to lower your production costs so as not to lose profitability. 

Indeed, logistics costs also have a very significant impact on your sales margin and therefore on your business. 

In this article we will detail how to evaluate your logistics costs and the different strategies to put in place to control your shipping costs and finally how MyFlyingBox helps you save time and money with an optimized approach to your transport costs. 

  • Definition of the commercial margin

The commercial margin represents the difference between the sale price of the products and their purchase price excluding taxes. The commercial margin makes it possible to evaluate the profitability of your company as well as its commercial performance. 

The commercial margin represents the difference between the sale price of the products and their purchase price excluding taxes. The commercial margin makes it possible to evaluate the profitability of your company as well as its commercial performance. 

If you are buying a large quantity of products, it is important to keep the unit purchase price fairly low. The sales margin must be greater than all of your fixed costs and other operating costs.

  • Calculate the commercial margin

Commercial margin = Selling price excluding VAT – Purchase cost excluding VAT (or Manufacturing) +/- Change in stocks  

Example: the commercial margin of a product bought for 6 euros and resold for 10 euros is equal to 4 euros

In addition, the total cost of purchases taken into account for the calculation of the margin must include:

  • Manufacturing cost 
  • Other ancillary purchase costs 
  • Freight handling charges
  • Non-recoverable taxes
  • Incidental supply costs 
  • Logistics costs 

Evaluate the logistics costs of its shipments

Logistics costs include: the cost of transport, packaging, customs fees, insurance as well as the time spent preparing the order.

Finally, to find the logistics margin, we subtract the logistics costs from the sales margin. 

Finally, to find the logistics margin, we subtract the logistics costs from the sales margin.

How to set shipping costs

Once you know your logistics margin, you can fix the shipping costs. We know very well that shipping costs can be a barrier to purchase for consumers. Ideally, they should be less than 20% of the selling price of your product, this will encourage your customers to place more orders. 

To set the shipping costs, you have to evaluate the average cost of your shipments. To do this, calculate the average cost of a shipment

Average cost of a shipment = cost of packaging + transport + insurance + return rate + cost of order preparation. 

If you already know your average basket and want to offer your shipping costs you can also use another method of calculation. 

Shipping costs = average basket + average cost of a product – cost of shipping costs. 

Example: 50 + 10 – 5 = 55. You can therefore offer shipping costs from a purchase amount of €55.

The geographical area 

Sending a parcel in France does not have the same price as sending a parcel internationally and customs fees will also have to be provided for. 

Segmenting your shipments according to geographical areas in Europe or internationally can simplify the organization of your price lists. Take into account the specificities of certain countries (see article on brexit).

In fact, return practices vary by country.

The cost of packaging

Do not neglect the quality of your packaging which remains your best insurance in the event of damage (see our article on packaging). Good packaging guarantees the risk of breakage, especially if you send fragile parcels (see our article on properly preparing your shipments of fragile parcels). 

The delivery method 

Customers like to have a choice of delivery method. “Indeed, 55%(1) of French shoppers abandon their cart due to insufficient delivery options”.  

Offer your customers the delivery method they want according to their needs. This is a good way to increase your sales. 

The express delivery mode is more expensive and faster (Fedex, UPS) than the standard mode (Colissimo, Chronopost). 

 You also have the choice of the relay point which is much more economical and ecological (Mondial Relay).

The price of insurance

If your shipments are of high value, taking out additional insurance will allow you to insure your parcels. Opt for Ad valorem insurance which insures your parcels up to an amount of €100,000. In the event of theft, loss or damage, compensation will be calculated on the basis of the value declared during your shipment. See our article 

The potential returns

The Hamon law authorizes a withdrawal period of 14 days from the date of receipt of the product. In case of return, you have the obligation to reimburse the shipping costs paid by the customer when ordering. Count 10% return rate as your first margin of safety if a customer sends their order back to you. 

The consequences of late delivery 

If delivery has not taken place on the date indicated on the order form, the buyer is entitled to demand that the seller deliver the goods immediately. In the absence of delivery within seven days, the buyer may request the cancellation of the sale. (source litigation.fr)

In the event of an order not received within 30 days of payment, the buyer may consider that there is a delay or failure to deliver and request the cancellation of the order not received. 

This is why you need to put in place the right strategies to control your shipping costs. 

What strategies ? 

Anticipate seasonality on your sales 

See what your top products are and highlight promotions especially during the best times of the year such as Black Friday, sales, or holidays. Do not hesitate to communicate and invest in Google Ads and Social Ads advertising in order to attract traffic to your site and boost your sales.  

Build customer loyalty 

Build customer loyalty by offering free delivery. In fact, 90%* of buyers say that free shipping is a major criterion for re-purchasing.

Offer free shipping from a minimum purchase amount or on the next order to retain your customers. In fact, 43%* of buyers add an additional item to their basket to avoid paying for delivery. This solution will allow you to increase your average basket. You can also offer free shipping over a period of time or on first shipments.  

The mistake to avoid

Don't offer free shipping if your product prices are higher than the competition. This strategy should only be implemented if you have a sufficient profit margin to cover the delivery costs. 

Product bundling strategy

Product bundling is a marketing strategy that consists of offering several products together in the same pack. This will increase your average basket and optimize shipping and logistics costs for each order. 

Your customers will have a higher perceived value of your offering and this will lead to more sales. 

Save time and money with MyFlyingbox 

The time spent preparing your package is not to be taken lightly. Not only can it impact the delivery time, but it has a cost for your business.

If you take care of the order picking yourself, you will have less time to concentrate on your core business. Time is money ! Otherwise, you will have to hire labor to take care of it.

What opportunities are you missing while your nose is in the cards?

At MyFlyingbox, we offer you to manage all your shipments from a single platform. 

What are the advantages?

Thanks to our platform, you have the choice of several carriers. Have flexibility on delivery methods (relay points, collection) and automatically group your shipments on a single invoice. Also benefit from personalized customer service reachable all week long by phone.  

Do you have one or more online stores? You can integrate API shipping functionality into your CMS and manage your shipments. No more integrating and implementing each carrier individually. This saves you time and money.

Depending on the value of your package, we offer you competitive insurance compared to the market price which covers you up to 100,000 euros.