The Newmine team spends hundreds of hours working with Retailers and Brands each week. Our clients face real challenges and our team gets results. To capture our knowledge and share our experiences with you, we have developed a blog series titled: FUNDING GROWTH: MINING FOR GOLD BEHIND YOUR BUY BUTTON because after all, that is what we do!
Every online or omni-channel retailer, big or small, global or startup, is challenged to find the budget required to fund the initiatives necessary to meet aggressive growth objectives and stay competitive. Newmine Consultants have spent their entire careers in retail operations, and we know the retail enterprise of today is far more complicated than it was even two years ago. Moreover, the retail enterprise of tomorrow will be even more complicated.
There are new opportunities to reach your customers, personalize their experience, and to grow your business. All of these new opportunities require investment in technology, people, and processes. You have to invest to stay competitive and grow. How do you find funding when facing competitive priorities and rapid response opportunities?
There are operational initiatives to improve your bottom line that can unlock substantial funding sources. For this post, I’m going to focus on the first of those areas; Outbound Shipping Cost Reduction. It will be sure to improve your bottom line.
Outbound Shipping Costs
An online retailer’s outbound shipping expense ranges from 5-8% of net sales and is one of the largest line items in the P&L. The fact that you DO have options to reduce this expense can save you money, if you know what to look for:
- Determine which factors are driving your costs.
- Negotiate shipping terms that provide the best return for you.
With free or heavily discounted shipping now being the norm, outbound shipping costs demand regular analysis and action. You might believe that you have a rock-solid contract with our outbound carrier(s), however, is it relevant to your shipping profile? Does it keep pace with changing carrier terms and pricing (EX: DIM charges)? In addition, often times there are also upstream order profile and packaging/fulfillment factors that must be considered as part of the cost reduction initiative. Our team has performed this analysis 100’s of times, we know it will add millions to your bottom line each year.
What is the potential?
We recently worked with an online retailer with net sales of $50MM and a current outbound shipping cost of $3.5MM (7% of net sales). We helped them to find a cost reduction of 10% which added $350K to their bottom line. A significant amount to fund their growth initiatives.