P&P charges can be one of our biggest profit killers, but don’t worry, there are a few things you can do if you’re looking at how to reduce shipping costs on eBay and Amazon and that’s exactly what we’re going to cover in this article.
Royal Mail recently announced their 2016 prices which will come into effect on the 29th March, and I’m not surprised to see an increase on some tariffs, however some prices will actually remain the same.
What’s interesting to note is that prices are cheaper for some parcels if you purchase your postage online rather than over the counter so it’s worth checking the whole tariff to make sure you’re taking advantage of the best deal for the weight of your parcels.
For example, there is no change to the price for sending a parcel within the UK up to 2kg in weight when you purchase your postage online, so if you are not currently purchasing online postage it’s worth taking a look at your options to see how to reduce shipping costs here
You can review the new ‘over the counter’ tariff here
And online prices are here
So, right now, you may be filled with dread at the prospect of your profits potentially dipping further. First though, I want to point out that when running an online business that involves sending physical parcels, of course postage costs will play a huge part in your profit calculations.
There’s no two ways about it. You have to deliver your orders somehow! That’s why spending time looking at how to reduce shipping costs on your eBay and Amazon items is just as important as looking at how to reduce your wholesale purchase price.
I regularly receive emails asking me how online sellers – particularly those using eBay – are able to offer free P&P to buyers. Especially when the basic cost to send a small parcel second class with Royal Mail is currently £2.80. Once you add your selling fees on top of this your profit margins immediately start shrinking, so this is not ideal if you haven’t got much profit to play with in the first place.
But there are lots of reasons why some sellers are able to comfortably offer free delivery without compromising their profits and you may be surprised to learn that actually there is no big secret to all this – you just need to be a bit savvy and use some common sense.
Let’s take an example and assume that you are thinking of selling a typically low-priced product which is currently listed by another seller on eBay for £8.99 with free P&P.
As well as looking at how to reduce shipping costs, consider the cost of the product at wholesale
Having researched the product, you know that the item costs £4.00 at wholesale. If the postage cost is then £2.80 and then you add your packaging, listing and selling fees on top, at first glance it looks like the seller could only be making mere pennies on this product at this price.
But, consider this. Just because you’ve researched the product and have secured a wholesale price of £4.00 per item, this doesn’t mean that another seller will have the same deal for the same product. They may use a different supplier, or order in huge bulk, or have a longer relationship with the supplier for example. All of these things can mean a lower overall wholesale price – and bigger profit margins for the seller.
So, it’s important to ensure you have researched a number of suppliers and the lowest possible wholesale prices and most importantly you have negotiated further if possible. Negotiating is overlooked by budding online sellers so often but even the smallest discount can help your margins.
How’s your packing technique?
A typical small parcel weighing 100g and sent 2nd class with Royal Mail currently costs £2.80. This is significantly more than sending a Large Letter, also weighing 100g, which comes in at 73p. The problem arises with the dimensions of the package, because whilst your item may only weigh 100g and be 35cm x 25cm in size (ok for a Large Letter), if it’s thickness is more than 2.5cm then you have to go up to a small parcel instead which adds a whopping £2.07 to your costs. This is where savvy packing comes in.
If your product is borderline and can be fitted into a Large Letter then you should make every effort to do so because as I’ve already said, the postage cost savings are significant. It’s one way of how to reduce shipping costs on eBay and Amazon quickly and efficiently without too much fuss.
Undoubtedly this is not going to be an option for all products because 2.5cm is an extremely thin margin – however if you are currently using mailing bags with bubble wrap or if you are using padded envelopes, bear in mind that this extra packaging could be bumping up your postage costs unnecessarily, so it’s worth checking to see whether without that extra wrapping you can fit your product into a Large Letter size instead.
Then, instead of adding bulky bubble wrap to keep an item safe from damage, consider using a PiP box.
PiP stands for ‘Pricing in Proportion’ and this type of packaging comes in the form of boxes, perfectly sized to match all of Royal Mail’s package sizes.
You can source PiP boxes from Defendapack here.
Have you considered other delivery services?
Royal Mail is of course extremely well known, is probably the first service that springs to mind for most people and as I’ve already mentioned, by purchasing postage online you can make savings. It’s a no-brainer example of how to reduce shipping costs on eBay and Amazon and for most of us ordering online is a time saver anyway.
You should also be aware that Royal Mail Business Accounts offer even cheaper postage than you can get as a Post Office Counter or online customer.
So in the first instance, whilst you may be calculating your competitors’ postage costs as a certain amount, they may actually be paying a completely different, and much cheaper, rate even though you are both using the same company!
There are two options – firstly using ‘franking’. You will have to purchase or rent a franking machine if you opt for this method but you will benefit from lower prices. How much you save will depend on the volume of parcels you are sending though.
You can find out more here
Alternatively, consider PPI. This stands for Printed Postal Impressions and discounts are available for some services. It’s simple to set up and is an alternative to traditional stamps and franking machines. You simply preprint your postage on envelopes or labels and pay online.
More information on this is here
Royal Mail is not the only delivery company to consider
For small and medium parcels, My Hermes offers a cheaper service than standard Royal Mail, for example the equivalent to a parcel that weighs up to 1kg is £2.70 – a saving of 10p – and should not be overlooked, particularly as their sizing bands are way more generous.
Make sure you look at courier services too if your parcels are larger.
Finally, take comfort in this…
There are always going to be sellers in your niche who are able to undercut you – it’s the nature of the beast, but bear in mind that some sellers may also simply be using certain products to build feedback and to achieve higher traffic to their other products or online shops.
This means that they have no desire to make any real profit from the product and in some cases may actually make a loss, but by selling so cheaply they build lots of positive feedback, a good sales history and in addition potentially get viewers to see and purchase their other more expensive products available in their store.
In other words there are some occasions when spending all your time trying to work out how to reduce shipping costs is the wrong approach, because there may be a case for loss leading.
This may seem extreme, but it works for those who have large inventories to sell on eBay or Amazon and who can afford to make a loss or break even on some products because they can make it up on others.
So, next time you spot an item being sold at what appears to be an inconceivably low price, take the points I have made today into consideration before jumping to conclusions and fearing the worst.
Research more than one supplier, use your negotiating skills, check you are using the most cost effective delivery service and that your packing is spot on and doesn’t shift your postal costs into a higher price band, then make an informed decision as to whether you can compete. That’s how to reduce shipping costs on eBay and Amazon and ultimately boost your bottom line.