By: Jeremy Bodenhamer, CEO of ShipHawk
Furniture retailers are always searching for ways to improve their top line revenue and transaction margins. The three main levers at their disposal—price, cost of goods, and shipping cost—can combine to either make or break the profitability of each transaction. As consumers become more sophisticated in their path to purchase, from “showrooming” within brick-and-mortar stores to conducting extensive price comparison online across retailers, businesses are losing the ability to drive profitability through pricing alone.
Shipping, a critical lever for furniture retailers, is often the least optimized and exploited. One popular tactic among retailers is to offer “free shipping” to customers. On the surface, this tactic may attract more traffic and purchases. Unfortunately, this “quick fix” usually ends up hurting furniture retailers’ margins in the long run, since it is typically unclear up front what the actual cost of delivery is going to be.
Understanding your true shipping costs, optimizing the cost/service tradeoffs within your business, and streamlining your logistics processes can have a significant positive impact to your bottom line. Below are three ways furniture retailers can use shipping as a strategic tool to improve their margins:
1. Know Your Costs:
It is difficult to increase your margins if you don’t have all the facts and figures at your fingertips and organized in a way that makes sense. You can’t determine your margins if you don’t know your costs. For furniture retailers, after the cost of the goods themselves, the most expensive cost of most transactions is transportation. Shipping large, heavy, or irregular shaped items can involve significant manual labor to secure quotes from carriers, or guesswork and estimates that can prove inaccurate.
The bottom line: Know, don’t guess.
Examine each and every element of your shipping process. Do you know where your customers come from or what they’ll be purchasing before they arrive? Probably not, but by using new technologies that readily crunch this data in real-time, you can generate accurate costs and apply smart subsidies instantly, helping optimize the process overall.
In addition, knowing the total costs associated with each sale – including goods, taxes, and shipping – before a consumer clicks “buy” will help you maximize each opportunity. Every time a sofa or nightstand is placed in a shopping cart, you should know the optimal shipping option for that customer. Pass that information along directly to the buyer, who will appreciate the transparency. In fact, a recent report by UPS and comScore notes that 37% of carts are abandoned because shipping costs are listed too late in the transaction.
As you get a better grasp of your total costs, don’t forget to test the efficiency of the carriers you work with. Some may have long transit times that can hurt conversions, while others may have quicker transit times or lower damage rates that can save you time and/or money, leading to happier and repeat customers.
2. Make Your Goods Available to More Buyers:
When selling merchandise online, you need to strike a balance between catering to the geographic area you feel most comfortable distributing goods to, and making your merchandise available to as wide an audience as possible. Too often, retailers are mindful of the former, but dismiss the latter, limiting potential revenue. Widening your target market will attract more buyers and heighten demand for your goods, which can translate into higher prices.
Increased demand will also allow you to scale your business, potentially reducing the prices you pay for the goods themselves and for transportation. Though the challenge of shipping large and diverse items like furniture can be daunting, don’t be intimated. Instead, use smarter shipping practices to step out of your geographic comfort zone and allow your business to broaden its customer base.
Many furniture retailers dig in their heels when it comes to evolving the way they handle bookings, dispatching, managing and tracking shipments, preferring to handle these tasks “as they’ve always been done.” After all, fancy software that manages back-end shipping logistics was just for fancy furniture retailers who could afford it, right?
Today, the landscape has changed. A plethora of sophisticated but inexpensive automation tools designed for retailers of all sizes are now available to help automate logistics processes—and put an end to hours spent inputting orders and manually tracking shipments. This, of course, will boost margins for the long-term and whip your business into tip-top fiscal shape. By automating the grunt work, you’ll also free up your employees to focus on what they do best—designing, building and selling furniture.
Using technology to streamline your logistics processes will also help attract customers who respect transparent, timely, and reliable shipping for their purchases. These new technologies automatically send customers updates regarding the status, location and estimated date of delivery for their items, reducing calls to your customer service department and generating customer loyalty.
With tough competition from large and small retailers alike, and the difficult task of consistently delivering furniture cost-effectively and intact, retailers face real challenges when it comes to maintaining their margins. By gaining insight into your total cost for each order, and using technology to scale your business to more markets and automate the time-consuming parts of your logistics process, you can keep margins high and provide a better overall experience to your customers.
Jeremy Bodenhamer is the Co-Founder and CEO of ShipHawk, a logistics automation technology that provides instant shipping solutions that help businesses grow. He is the leading expert in the intersection of shipping and eCommerce, has been featured on TechCrunch, AOL, and SoCalTech, is an active volunteer in the community, and is a frequent panelist and speaker on innovative technology and business development. Jeremy lives in Santa Barbara with his wife, educator and youth advocate Bethany Bodenhamer, and their three sons. Jeremy can be reached at email@example.com.