As an online retailer, your goal is to get your products into your customers’ hands as quickly and efficiently as possible. But does this ‘need for speed’ have to eat into your profits?
Here are just a few ways that online retailers in Singapore can save on logistics costs.
Running a successful e-commerce business is challenging. There’s always mounting pressure to offer increasingly-competitive prices (thanks to the rise of Chinese e-tailers like Taobao and AliExpress) and provide the speediest delivery to customers – all while being profitable. According to the 2019 Third-Party Logistics Study, the average online retailer can expect to forgo 11% of its sales revenue on logistics expenditure. In other words: as an online business owner, if your product retails for S$100, you can expect to spend S$11 to get it delivered to your customer. This adds up quickly and gnaws away at your profit margins. To help you improve your bottom line, here are several ways you could save on logistics costs as an online retailer in Singapore.
Take Your Business’ Unique Requirements Into Account When Deciding On A Warehouse
|Dedicated Warehouse||Serviced Warehouse|
|Average Price/S$||1.80 to 3.80 per sqft||40 to 60 per pallet|
|Minimum Lease||1-2 years||6-12 months|
|Set Up Cost||High (lights, electrical points, equipment, racks/shelves)||Low (move-in fee & one-time onboarding fee)|
|Space For Office||Yes||No|
Here’s something to think about. Are you underutilising your current warehouse space? For instance: if you’re currently using a co-warehousing solution (e.g. SpaceShip), where you have access to co-working space, warehouse storage space, shared operating equipment, and logistics services, be honest: do you need the co-working space? Also, could your warehouse be over-sized for your business requirements? Bigger warehouses tend to have longer lease-terms that lock you in, plus are often unfurnished – meaning you’d have to fork out money to set up things like lighting and rods, all of which will cost you money.
In most cases, downsizing to a smaller space (which still meets your needs) will translate to sizeable savings, which you can pass on to your customers. Ultimately, consider what you truly need in your warehouse: space, equipment, and office space – don’t just opt for a space because it seemingly has everything (but you don’t even use them!)
Invest In High-Quality Packaging To Minimise Chances Of Product Damage
Statistics show that the average e-commerce pack is dropped 17 times on-route. Thus, is it any surprise to learn that 34% of packaging-related returns are due to product damage? Worse still, 57% of consumers expect a full refund if their package arrives damaged. Imaginably, this can get extremely costly for you as an online retailer – and the financial impact on your bottom line goes beyond the direct cost of replacing a damaged item. You also have to consider the logistics costs of new shipments, operational expenses related to time lost and production line impacts, and potential revenue loss from a return customer.
Worryingly: replacing a damaged product can cost you up to 17 times more than the original cost of shipping it! Thus, it should be apparent that you need to invest in high-quality packaging to ensure it survives, safe and sound, to your customer’s hands. Consider getting an SME loan if your cash flow is tight!
Pick The Right Courier Suited For Your Products
|SingPost (small parcels)||PolyM||2.00|
|NinjaVan’s Ninja Packs (small parcels)||XS 230 x 170mm||3.30 (3.70 for Padded)|
|S 350 x 250mm||3.58 (4.08 for Padded)|
|M 470 x 330mm||3.98 (4.48 for Padded)|
|Qxpress Delivery (bulky parcels)||5kg||4.30|
|Uparcel (bulky parcels)||60cm / 1kg||8.00|
|80cm / 5kg||9.00|
|100cm / 8kg||11.00|
|120cm / 10kg||14.00|
|140cm / 15kg||17.00|
|160cm / 20kg||20.00|
|200cm / 25kg||24.00|
|GrabExpress (instant delivery)||4 Hour (up to 10km)||7.30|
|4 Hour (10-20km)||10.30|
|Instant (bike)||5.30 base fare + 1/km|
While sifting through the available courier services in Singapore may seem like a hassle (there are so many!), it’s well worth the trouble. That’s because, if you do the math, each courier is cheapest for a specific parcel size (i.e. small, bulky, van/lorry delivery). So – take your product dimensions into account, then go for the cheapest option available in that category. Let’s assume that you’re primarily shipping out smaller parcels, for instance. Opting for SingPost instead of Ninja Van saves you S$1.30 on every package. Now, imagine if you had 100 packages to deliver daily. That’s easily S$3,840 over 28 days!
Consider Purchasing Additional Shipping InsuranceRunning a business is fraught with many risks. Think about a fire devouring your stocks, an employee getting into a car accident, or in this specific case: you find out that 80% of the products you sent to a fulfilment warehouse in Singapore got damaged beyond repair in Singapore. And while risks are unavoidable, you can minimise them. An excellent way to protect yourself would be business insurance, more specifically, something known as transit insurance. Also, look at your business as a whole – and see if there are any areas you could plug with additional insurance coverage.
This article is contributed by ValueChampion, a personal finance research firm.