Size Matters: How to Effectively Size Your Subscription Box to Optimize Shipping Costs
Subscription boxes provide customers with the opportunity to try many products in a niche category. Delivered right to customers' homes, subscription boxes offer convenience and save time and money. Who wants to hunt for that perfect item in a crowded shopping mall when you can open your subscription box and find the best selections right there?
Customers also receive products worth more than the cost of the subscriptions. These cost savings propel the industry forward. Everyone wants deals. Sales and promotions, after all, drive retail and eCommerce. Subscription box companies leverage their buying power on behalf of the consumer while trying to provide them with a unique and positive experience.
Birchbox, for example, has made it big in the personal care products industry by providing small samples that entice subscribers to order bigger sizes of the samples they like. It now has 400,000 subscribers. Barkbox found a fit with the dog lover's niche. This New York based firm has seen stellar growth, gaining an astounding 55,000 subscribers in its first year. Subscription boxes have the power to take off like wildfire.
However, exponential subscription growth and exponential profits are separate issues. For your subscription box company to succeed in the long term, strong cost control measures must ensure that each sale adds to the bottom line. After all, if your costs are too high, increased sales may look good on the top line but can lead to a lower total valuation of your company. Even if you eek out a profit despite high costs, the lack of working capital can cripple new business development efforts and put you at a competitive disadvantage.
If you haven't focused on cost reduction lately, it's time to consider the primary expense for subscription box businesses, shipping expenses. Many factors contribute to this expense, including shipping methods, the box's size, and the box weight. Below are several methods that reduce shipping costs, including maximizing box size and weight and qualifying for lower shipping rates. These strategies, when combined with partnering with a fulfillment company, provide value added services and the leverage to obtain prime shipping rates.
Your company can't afford to ship air
Air may be free to breathe, but when it comes to shipping, it costs big money. Packages take up space in shipping vehicles. The basic math for shippers is that the more space they fill, the fewer packages they can fit in each vehicle, and, therefore, the more vehicles they need to run. That means higher expenses for them, which they pass on to their customers.
Did you know that the average eCommerce box contains 50 percent air? Considering the dimensional weight charges UPS and FEDEX implemented in 2015, a 50 percent figure represents a gargantuan amount of wasted money. Box resizing saves an average of 20- to 40 percent on shipping costs. Imagine what you could do with a 50-percent savings on shipping costs?
The dimensional weight pricing is painful for many shippers because it calculates empty box space as if it is full. To determine pricing, shipping companies take the length, width, and height of the package and divide it by a common factor, currently 139. A quick calculation can show you how even a small reduction in the size of your packaging can save you big.
In the age of dimensional weight pricing, dead space kills. Remember, even lightweight filler and dunnage counts against you. Popcorn filler may weigh the same as air, but you'll pay just the same as if the box was full of product. Consider a professional package design company. Many of these outfits employ designers with expertise in attractive shipping containers. They not only design for outward attractiveness, they also design for space efficiency.
USPS Priority Mail with Cubic Pricing
When your package is heavy and small, USPS Priority Mail with cubic pricing provides a great alternative. With this pricing structure, business customers pay only for the small package size and shipping distance. Here are the basic qualifications:
Packages must be less than 20 pounds
Packages must be less than 0.5 cubic feet
To calculate cubic feet, use the formula below:
(Length x Width x Height) ÷ 1,728 = cubic volume in feet
To determine pricing, USPS divides cubic measurement into five tiers, as follows:
The post office then takes these factors and generates pricing based on the distance between zones. The closer the origin and destination zones, the lower the cost.
Often, eCommerce companies ship boxes full of air because they are unable to coordinate their box order with their demand or their equipment. They may want more efficient shipping, but since they have already ordered a certain container, they cannot readily switch. Also, if they are married to a particular packing process, it may not accommodate the shipping box size that is most cost effective.
These problems are easily solved by partnering with a fulfillment house that has many packing lines, allowing easy adaptation of container sizes. In addition, they provide expertise in packing that saves the customer big money. Also, a fulfillment partner will be able to take advantage of their shipping accounts. Because they ship such massive volume, they can leverage the relationships they have built to obtain significant discounts.
The generation of cost savings for shipping means the difference between a highly profitable subscription box business and one that makes little, or even loses money. The dimensions of subscription boxes have become more important than box weight. A good fulfillment partner can reduce your shipping costs through maximization of savings according your box dimensions and their earned shipping discounts. Subscription box business profits depend greatly on optimized shipping costs. Reducing your overall shipping costs can maximize your profitability and optimize your working capital, allowing your subscription box to grow into a money-making powerhouse.
Written by Fusion Fulfillment.
Learn more about us at www.fusionfulfillment.com.
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