It's 2 weeks before Christmas, and people are shopping like there's no tomorrow.
Your margins are already thin, so even though you're selling more, you're also paying more for shipping, so you decide to switch to a cheaper shipping company. The new rates are half of what you used to pay, so it seems as though the year will end with more cash than you were expecting.
Happy New Year, right?
But why do you think some shippers charge more, and others charge significantly less? Greed?
That might be true for some, but for most, it isn't. Good service costs money, so if you choose a shipping company whose prices are so low it's almost too good to be true, you shouldn't be happy. You should be worried.
Cheap Shipping Usually Means Less Control
When you pick the cheapest shipping option, the first thing you lose is visibility.
You'll still get a tracking number, but it won't show any updates for days, and then all of a sudden, it will show that the package is delivered. Unfortunately, that doesn't necessarily mean that your customer actually received their package.
Doesn't make sense, does it? Well, at least it's cheap.
The real issue here is that the package changes too many hands before it reaches its destination. A usual cheap route involves a broker, a regional carrier, a warehouse, and then a last-mile driver. And the more handoffs there are, the more chances that something will go wrong. If something does go wrong, everyone will blame each other, and the customer will blame you.
Many businesses make the mistake of looking at the price only.
But there's a lot more to shipping than just price. There's tracking quality, handling standards, who to call when the truck is late, and so on. Cheap options don't have any of that because, in order to stay cheap, they have to cut down on as many features as possible. So once something's wrong, all you can really do is cross your fingers and hope the thing sorts itself out. You have no leverage because the cheap carrier knows you're not going anywhere.
What makes things worse is that it's not always the carrier's fault when shipments fail.
There could be disputes involving brokers. warehouses, subcontractors, etc. The issue could even turn into bigger freight broker and shipper liability claims, for which you'll need a lawyer. Rosenfeld Injury Law is a name you'll want to keep in mind if the situation ever reaches this point.
Small Shipping Shortcuts That Make Things Worse
Here's what causes the most damage.
Picking the Lowest Quote Every Time
If the shipping quote is extremely low, the company has weak infrastructure. That could mean overloaded trucks, warehouses with not enough staff in them, drivers that don't get trained… In short, nothing good. The price looks great at first, but then your packages start showing up late, or they look like they got chewed up and spit out.
And this will cost you more in the long run.
Congrats on saving those 4 bucks on shipping, but now you'll pay 40 in processing refunds, chargeback fees, replacement inventory, and not to mention what a big loss it is to lose a customer's trust.
Growing Faster Than the System Can Handle
Many small businesses spend a lot of money on marketing and sales, but don't invest anything in logistics.
But how are you going to get those orders out once they start to come in?
Your inventory will get stuck in bottlenecks, packing will take forever, and you'll be in such a rush that you might send the wrong orders to people.
Customers don't care about marketing if they spend money on items that never show up, or if they show up after a month. Logistics is the first thing that will break under the pressure of a high volume of orders.
Thinking Fulfillment Isn't That Important
A lot of entrepreneurs spend an eternity on improving their product sourcing and planning ad campaigns, and that's not a bad thing, but the problem is that they treat fulfillment as something annoying that they'll figure out later. That's a very backward approach.
Shipping is how you turn a first-time buyer into a repeat customer, which means a great product with terrible shipping will still come down to a bad review.
Bad logistics will do so much damage that no ad campaign will be able to fix things.
Conclusion
Cheap shipping isn't actually cheap.
Once those delays, damaged goods, complaints from customers, and operational confusion show up, you'll regret every single cent you ‘saved' when you decided to skimp on shipping. If the rate is too low to make sense, it's not good. Do yourself a favor and skip companies whose only selling point is the fact that their price is low.
You need to deliver what you promised, on time, and in one piece. A cheap shipping company can still manage to do that sometimes, but there's no guarantee with them.
It's always a gamble, and you can't afford that.