How to Cut Shipping Costs without sacrificing Customer Satisfaction
In this PalletSide Chat podcast episode, we’re sharing a panel, hosted by our own COO Maggie Barnett for FounderMade East. Speaking with Brett Tepper from ModKat and Rich Brewer from Boutique Brands, they discuss practical solutions for keeping shipping costs low and customers happy. They cover everything from optimizing fulfillment processes to utilizing technology effectively.
Most business owners know that reducing shipping costs is a major priority, but it can be tricky to do so without alienating customers. It can be daunting, but with the right advice, it can be done without sacrificing customer satisfaction. This expert panel will teach you how to keep your customers happy while shaving dollars off your shipping bill. Tune in for the tips and tricks these experts have gleaned from their own experiences running successful eCommerce businesses in an ever-changing landscape. Shipping rates may be skyrocketing, but that doesn’t mean your eCommerce business has to suffer!
The Litter Box Business
When it comes to litter boxes, even the most design-savvy among us can be taken by surprise. Just ask Brett Tepper and his business partner, who found themselves unexpectedly in charge of cat box duty. What they discovered was a litter box that was, in their words, “not happening.” The following day, Tepper’s business partner came in with an idea for a better design.
Thus began a journey that would take them from Walmart to Taiwan and eventually result in a successful product. Today, Tepper and his partner continue to work with the same manufacturer, and their litter box remains one of the most popular on the market. They are considered “OGs” of the Shopify world, as they were one of the first 300 people to use the platform. Who would have thought such a simple, but smelly, idea could lead to success?
“So I had a few developers lined up, and then one of the developers said, ‘Have you heard of Shopify?’ So I started looking into it, and I was like, ‘This is it.’ Yeah, they have been with it since.” -Brett Tepper.
How ModKat Handles Exploding Freight Costs
ModKat prides itself on being able to adapt to change. So when the pandemic hit and their sales exploded, it was a happy challenge. However, soon they found themselves facing a different problem: exploding freight costs. Freight bills soared from $6,000 per container to $12,000, then $18,000, eventually topped at an astonishing $32,000. They knew they had to make tough choices to keep their business afloat. They started by eliminating free shipping, then slowly escalated prices.
With four primary sets of SKUs, ModKat has increased pricing on their higher-end litter boxes. The downside to shipping litter boxes is that they are big, so they all hit dim weight and can only fit a few per container. With a 40-ft HQ container, they can only fit about 550 of their largest litter boxes. This directly affects the pricing scale, so that’s where most of the cost-cutting has been done. Fortunately, they have enough margin on the refills to keep them at the same price. The other great thing about the litter box liners is that they fold flat and ship small, so freight doesn’t affect them as much.
How ShipHero Has Helped
If you’ve ever worked in eCommerce, you know a lot goes into fulfilling orders. And if you are doing it yourself, a whole other stress level comes with it. That’s why ModKat outsourced fulfillment to a 3PL when Tepper started his business. But then, around 2012, he got a 5,000-square-foot space and started prepping orders himself. Tepper mentions that it was great and awful at the same time. He learned a ton about how fulfillment works and why 3PLs work a certain way. But after a year, he realized it wasn’t a tenable situation and returned to using a 3PL. He’d been with the same one for seven years but recently switched to ShipHero. If you’ve thought about fulfilling orders yourself, Tepper says go for it – but be prepared for many long nights (and early mornings).
ModKat went back to dim weight and because of that, they had four warehouses with their old 3PL, and keeping inventory in all four warehouses was difficult. That was taking up a ton of their time, just ordering correctly for all warehouses. So, knowing that ShipHero did load balancing was a massive thing for ModKat. Then on top of that, ShipHero also consolidates shipments. Which saved them a ton of money on shipping costs. So all of those things allowed ModKat to focus on other parts of their business rather than just managing logistics all the time.
Boutique Brands
In the world of fast fashion, speed is everything. That’s why Rich Brewer of Boutique Brands has made it his mission to streamline the fashion ecosystem and help his employees move more quickly. By streamlining the process from manufacturing to reselling, Brewer and his team can turn inventory faster and keep up with the latest trends. And they’re not stopping there. They’re also constantly reviewing their website and ensuring they appeal to customers. It’s all about staying ahead of the competition and keeping costs down.
Automation, Automation, Automation
As an eCommerce business knows, shipping costs can eat into profits quickly. But what happens when a company returns to charging for shipping? It’s not easy to tell customers that they now have to pay after getting used to free shipping. And it’s even harder to do it in a way that doesn’t damage the customer relationship. That’s why it’s important to have systems that allow you to rate shop among carriers and find the most cost-effective option for each shipment. By automating the process as much as possible, you can minimize the impact on your bottom line and keep your customers happy.
The Return Process
Returns are allowed at Boutique Brands. There are, however, some brands that charge shipping to and from their stores. Occasionally, customers have to print a label and pay for it, but Brewer is working to simplify the process. They have yet to do exchanges, which Brewer wants to implement because that will cut down on the total loss of revenue from returns if they can use a system like Happy Returns. It automatically creates a product on Shopify. Customer service teams can then click a button and be done. Brewer is currently engaged in analyzing what’s working, what’s not, and who has the best return on investment for returns.
“We are more or less just maximizing every automation we can maximize.” -Rich Brewer.
Provider transparency
Provider transparency is something that has become increasingly important in recent years. Consumers want to know where their products come from and how they are made. They also want to be able to track their orders and see precisely where they are at all times. This level of transparency can be challenging to achieve, but it is something Flexport is working hard to provide. While the data isn’t always up to date, ModKat appreciates the insight Flexport (a freight-forwarder) gives them into the supply chain process.
Recently, ModKat has been dealing with some supply chain issues beyond its control. They have had to ration inventory and cancel orders, and their customers have understandably been frustrated. In response, they created a feature on their website where people can sign up to be notified when an item comes back in stock. They thought this would help alleviate some of the frustration, but it turns out that people get even more frustrated when they get 100 notifications that an item is back in stock, only to find that it’s already sold out again. Despite the challenges, Tepper is grateful for his loyal customers and will continue to do everything he can to keep them happy.
Preparing for the Next 12 Months
Over the last three years, the world has been turned upside down. We have seen economic turmoil, political upheaval, and a global pandemic. So what are ModKat and Boutique Brands doing to prepare for the next 12 months? For starters, they’re stocking up on essentials. ModKat is ordering like crazy, trying to get as much inventory as possible. They’re also trying to figure out ways to pep up their customers. At some point, they plan to reintroduce free shipping or offer discounts. But the most important thing is that they’re getting back on their feet. The sales are picking up, and they see more customers every day. ModKat is excited about the future and ready to take on whatever comes its way.
For Boutique Brands, maximizing automation is their key to success. By using data to select styles that are in demand, and cost-effective carriers, brands can reduce costs while still providing the latest trends to customers. Additionally, expanding social media outreach and implementing loyalty programs can help increase brand visibility and customer engagement. By taking advantage of these various marketing and operational strategies, Boutique Brands can stay ahead of the competition and keep their businesses growing.
“We’re actually ramping up our influencer campaigns, our UGC, our loyalty programs. All of this stuff is going into play to basically drive more business to help mitigate the additional costs.” -Rich Brewer.
Turn the Challenges of Today’s Marketplace into Opportunities for Tomorrow’s Success
If there’s one thing that’s certain in eCommerce, it’s that shipping rates are always on the rise. Carriers announce new rate increases yearly that can eat into your profits if you’re not careful. But don’t despair – there are still ways to keep your shipping costs under control, even in the face of rising rates. Optimizing your fulfillment processes and utilizing technology effectively can minimize the impact of rate hikes on your business. By streamlining your operations and using shipping rates as a lever to drive customer loyalty, you can turn the challenges of today’s marketplace into opportunities for tomorrow’s success. So don’t let rising shipping rates get you down – use them to fuel your eCommerce success.
The FounderMade East panel was hosted by ShipHero’s COO, Maggie Barnett, and she was joined by Brett Tepper, the co-founder of ModKat, and Rich Brewer, the product manager at Boutique Brands. This session is packed with great information for anyone in eCommerce, whether you outsource your fulfillment or manage it in-house. So, take a moment and listen to the full panel or watch it on YouTube!
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About the Panel Host: Maggie M. Barnett, Esq., is the COO of ShipHero. She is responsible for planning and executing the overall operational, legal, managerial, and administrative procedures, reporting structures, and operational controls of the organization. Barnett’s greatest strengths are leadership, risk mitigation, change management, and a passion for business transformation. She is known for her expertise in delivering operational excellence and her ability to provide guidance and mitigate risk. Her leadership of ShipHero is grounded in a servant mentality, always doing the right thing for our stakeholders. Her passion for ShipHero comes from the ability to drive operational excellence throughout the organization impacting the lives of our employees, customers, and partners.
