Shipping costs as % of turnover?

[suigeneris]

We ship around 100 items per day. Split half between courier and Royal Mail. We have accounts with the major ones at the best rates we could get (TNT, DHL, DPD, FedEx, etc).

Although I appreciate it isn't a perfect measure of shipping costs, as a proportion of turnover our shipping charges are between 4.3% to at most 6.5% per month (generally amounting for a lot of back orders coming in) and average 4.8% per year.

Would you say this is relatively high or low? (I'm considering pushing the warehouse guys to aim for 4% by religiously checking rates for anything odd)

(Without disclosing actual turnover of course) is anyone managing to get much lower than 4.8% of turnover? (and if so what processes to you follow to keep it low?)

Average shipping cost based on number of items shipped per month rather than turnover would be a better measure but there are always outliers like the odd pallet abroad etc. so turnover provides an easier metric to look at providing profit margins remain similar (!)

What do you guys think?

 

[buyingbureau]

Hi Suigeneris

I think you may struggle to get comparable benchmarks with other companies. Even large e-tailers within the same sector have differing but still competitive rates owing to the differences in their consignment profile (weight, cube, distance, service level, drop density etc).

Your prioritisation of the importance of courier rates with your staff indicates that you guys are already on the ball. The big wins seem to come from moving pallet movements from couriers to pallet networks and by pushing as much of the low cube/weight/value product through the Royal Mail.

You seem to have a diversity of couriers. I appreciate that if you are consigning globally you may well need a number of different couriers to give you coverage and best price on major traffic lanes. If, however, the majority of your traffic is domestic then consolidating your business with one or two suppliers can leverage your spend and improve the quality of management information you get (e.g. they can provide you with spread sheet records detailing all despatches). This detailed management information makes tendering your business simpler and rates more competitive since it details your consignment profile.

Besides supplier cost savings it is worth looking at demand cost savings. Obviously the use of same day and over-night services are to be discouraged unless a premium can be obtained from the customer. If a low value order is to be split between an in stock consignment and a back order consignment it can be worth a courtesy call to the customer to establish if they really want to place the order if it cannot be fulfilled from stock. This can avoid a proportion at least of loss making back orders.

It is also worth exploiting the bundling of items. Where two cartons are consigned to the same post code on the same day you really should be enjoying a bundled rate from your courier for that order.

The final issue is one of quality of service. I imagine that you are happy with your current service providers’ quality. Some organisations have lived to regret sourcing services solely on rate card cost only to find their courier of choice merrily dropping consignments over their absent customers’ garden walls. As always the sourcing decision should be made on total cost to the business rather than just the service itself.

 

[internetspaceships]

As posted above, it's difficult to compare different companies because they all sell goods of differing values.

We ship an average of 25 consigments per day. Some are courier pouches, some are batches of multiple pallets and plenty of boxes (often multiple) in between.

Yes we spend thousands per month on couriers as I'm sure you do and our sales values range from £20 to £40,000.

We also have a minimum courier fee of £10 + VAT for small items so overall our nett costs for courier are minimal as it all balances out.

If you ship over 100 items per day, do you charge the couriers out at cost, or build it in to the price, or do you "make" on each shipping?

Our actual gross costs for couriers are in the region of 1.3% of turnover but as mentioned above it's not a true cost overall.

 

[suigeneris]

We run a free delivery model over a certain low order value which unfortunately means most shipping cost is all a cost. However, the big "but" is in the fact we can sell so much more from offering free delivery in the first place - I'd offer free returns also (suggested this helps with conversions as well) but I found this is too open to abuse from people who just want to try something etc.

I know businesses are different, but is anyone else shipping comparably similar volume and getting much better than 4.8% of turnover?

We already use Royal Mail for majority of smaller shipments - still on Smart Stamp though and due to look at packet post as I understand there are massive savings (20-30% in some cases)

 

[internetspaceships]

Well to help the debate, what's the value of the items you are selling and how much are you paying for delivery per item?

That way I could help you more.

Jon

 

[suigeneris]

Well to help the debate, what's the value of the items you are selling and how much are you paying for delivery per item?

That way I could help you more.

Jon

I've said as much as I'm confortable in saying and the information given is enough to have a discussion on shipping costs as % of turnover and no more.

I've already specified the spend as a % of sales and how many items we ship a day/month.

I'm simply curious if many others come close to this as a % without going into more detail.

Any other responses?

 

[internetspaceships]

Well you haven't actually said enough for anyone to give you any sensible advice.

So either offer up the information and let us help or close the thread off. I've said why we cannot help based upon the information you haven't provided because until you do, it cant be done properly. What do you think we would do with those figures anyway?

 

[suigeneris]

Ignoring those who have nothing better to do than complain (I can't believe I'm even spending time replying to this member) this thread hasn't gone as far as it could go as no one has chipped in and said "I spend 6% of my turnover on shipping" or "4.8% is a little high, I spend 4%"

It's not a perfect amount of information I've given as I don't want an in depth analysis of my business on a public forum, I am simply CURIOUS to see how much others are spending as a general indicator.

Anyone else care to chip in before the other member predictably starts to moan some more?

 

[silvermusic]

Well you haven't actually said enough for anyone to give you any sensible advice.

Must admit I thought it was just me not getting it.

Firstly, on it's own, shipping costs as a percentage of turnover is going to be different depending on the type and number of items you ship. For example, one business may sell a few small boxes of very expensive feathers while another sells tens of thousands of cheap bricks to far off countries by the pallete load. OK, it's an extreme example but you get the point I'm trying to make. You need to compare like for like to come up with a meaningful figure.

Secondly, I may think differently from some other folk, but I've never paid anything for shipping costs, my customers do. Whether that's included in the price and advertised as Free P&P or charged seperatly doesn't make any difference. From that point of view as a percentage of turnover it's not a figure that interests me greatly as long as I'm not making a loss on it. It's one of those overheads that has to be accounted for in selling.

 

[internetspaceships]

Must admit I thought it was just me not getting it.

Firstly, on it's own, shipping costs as a percentage of turnover is going to be different depending on the type and number of items you ship. For example, one business may sell a few small boxes of very expensive feathers while another sells tens of thousands of cheap bricks to far off countries by the pallete load. OK, it's an extreme example but you get the point I'm trying to make. You need to compare like for like to come up with a meaningful figure.

Secondly, I may think differently from some other folk, but I've never paid anything for shipping costs, my customers do. Whether that's included in the price and advertised as Free P&P or charged seperatly doesn't make any difference. From that point of view as a percentage of turnover it's not a figure that interests me greatly as long as I'm not making a loss on it. It's one of those overheads that has to be accounted for in selling.

This is basically what I've said, and when I ask for some clarity I get slagged off. Oh well. Next time you could start a thread asking how long your piece of string is compared to everyone elses, but you don't want anyone to know how long it is.

 

[silvermusic]

What would make a far better question is ways to reduce shipping costs if they're eating into cash flow and it's becoming a problem. Going back many years when I started I found that a killer, had to pay the post office by personal credit card for a while.

 

[P4D | Parcels4Delivery]

Hi there,

Sounds like you're perfect for our P4D Pro account. We'll look at what you send, how often and where to, then determine which of the couriers we work with (City Link, DHL, Parcelforce - all the key names) could provide the best rates for you and the most efficient service for your customers.

Our cheapest rate at the moment is £6.99 next day with City Link for delivery anywhere in the UK up to 20kg. If you're sending regularly we can offer a better tariff, but not only that, you also get access to our bespoke online software to cut your admin time right down. P4D was bourne out of our MD's experience running his own ecommerce business 6 years ago, so we know where to cut back and understand where time savers are needed.

Finally, we have an API too, so you can link your shopping cart with your P4D account and we'll retrieve all your delivery information for you

If you'd like to read more about P4D Pro see http://www.P4D.co.uk/pro and if you'd like to hear from our Account Manager to discuss how it all works, either fill out the form or drop me a line.

Hope that helps,

Nat
nat[@]p4d.co.uk

 

[Mpg]

Bordering on spam

 

[P4D | Parcels4Delivery]

Bordering on spam

Why?

The OP wants to know how to reduce their shipping costs and P4D Pro is designed for this exact purpose.

If the OP chooses not to contact us, we certainly won't be emailing them or phoning to see if we can get their business. The information is all here, if they want it.

This is a business forum and when a direct question is asked about something I have an answer to, I will put it out there, whether that is P4D or a question about something else I might know about. Surely that's why we're all here?

 

[Mpg]

Why?

The OP wants to know how to reduce their shipping costs and P4D Pro is designed for this exact purpose.

If the OP chooses not to contact us, we certainly won't be emailing them or phoning to see if we can get their business. The information is all here, if they want it.

This is a business forum and when a direct question is asked about something I have an answer to, I will put it out there, whether that is P4D or a question about something else I might know about. Surely that's why we're all here?

But you have NO mention of percentages


Sorry I apologise I missed where they asked about reducing their shipping costs so I re-read the thread and missed it again.

I thought the OP was just asking what percentage of turnover people were paying.

 

[P4D | Parcels4Delivery]

But you have NO mention of percentages

Sorry I apologise I missed where they asked about reducing their shipping costs so I re-read the thread and missed it again.

I thought the OP was just asking what percentage of turnover people were paying.

Apology accepted

I don't mention percentages because we'd need more information to determine an individual tariff for the OP. Then, when we've offered one, they can compare that percentage with what they currently experience.

That's that cleared up, then!

Cheers,

Nat

 

[ChocolateFactory]

I've said as much as I'm confortable in saying and the information given is enough to have a discussion on shipping costs as % of turnover and no more.

I've already specified the spend as a % of sales and how many items we ship a day/month.

I'm simply curious if many others come close to this as a % without going into more detail.

Any other responses?

http://wck2.companieshouse.gov.uk/578fdf70d3ef4f83e7ecbdefdd7f4542/wcframe?name=accessCompanyInfo

Turnover is as damn near public information. Piss easy to work out how much you're paying in shipping costs.

Get a grip? Perhaps?

 

[Clodbuster]

If it is of interest my delivery costs averages 4.4% of total turnover, last 3 months.