Running a subscription box is both incredibly rewarding and challenging. Each month you have to procure products that will delight your customers and do so in a budget that still leaves you with desired margin. When you account for your cost of goods (COGs), marketing, platform, and merchant processing fees some times things can be tight. One key cost center is always shipping. It is looked at as a fixed cost and often rolled into the COG calculation. Subscription box owners have a lot of opportunity to save on shipping costs, but they just made be unaware. Let’s fix that. Here is what subscription box brands should do to save on shipping costs.
Common Shipping Practices for Subscription Boxes
There are many different platforms to manage one’s subscription box business. There is Shopify (paired with Recharge or Bold), Cratejoy, Subbly, and a handful of other major players. Also, from our direct experience 90%+ of subscription box owners are using one of the following integrated shipping services: PirateShip (USPS only), ShipStation, or Shopify (internal system). These shipping platforms offer discounted rates that seem appealing to small and medium sized businesses. Let’s take a closer look:
- PirateShip – Slick USPS only option. Offers discounted rates for USPS, both domestic and international. The best and cheapest public option for commonly used services such as First Class Package and Priority Mail (Cubic, Regional & Flat Rate)
- ShipStation – Great software to manage multiple carrier options. You connect your USPS, FedEx, UPS, or DHL accounts and then can rate shop across all the services for each shipment. A lot of customization and shipping rules are available to optimize your experience.
- Shopify – This is more of a hybrid solution somewhere between PirateShip and ShipStation. Shopify provides discounted rates (often just 20-40% off published rates) to merchants to use and also provides the availability to connect your own negotiated rates.
The average loaded cost per package for these services (dependent upon package characteristics) is around $7.50-$10.00
The Alternative, Cheaper Service
USPS Consolidators have been around for a long time, but they are becoming more common as FedEx and UPS price some customers out of the market with their ridiculous and exorbitant fees. So how are consolidators different than traditional carriers?
If FedEx or UPS picks up your package they own the entire transportation from your dock to the customer’s front door. A consolidator relationship works totally different. With a consolidator relationship a different company is responsible for the pick up from your dock to the drop off to USPS branch locations across the United States. Then, USPS delivers the ‘final mile’ of the package’s journey. There are many consolidators out there. Some common names are OSM Worldwide, Pitney Bowes & RR Donnelly. UPS even has their own consolidator service called SurePost. FedEx had a competing service called SmartPost, but just recently moved this offering all in-house and rebranded to FedEx Ground Economy.
These ‘shared transportation’ relationships are mutually beneficial for both companies: the consolidator has the linehaul network to do the pick up and cross country transportation and USPS is already contractually obligated to deliver to every U.S. address six days a week. USPS is best when hyper local. Since both companies (consolidator & USPS) are doing what they are good at it they are avoiding the more costly areas of the operation, respectively. Their costs goes down which means the cost for the service goes down dramatically.
So — How Good Are the Savings?
First, let’s look at something that should be familiar! Whether you ship FedEx, UPS, or USPS you know that shipping rates are determined by zone based pricing. Same for this consolidator service which is called Parcel Select Ground. This map is out of Lessgistics shipping headquarters in Indianapolis. You can see the closer areas are zones 2-5 and the further are zones 6-8. Indianapolis is actually one of the most central locations to service the national population so the average shipping zone is lower if you were comparing to someone shipping on the East or West Coasts!
Here is what the current rates look like using this Parcel Select Ground through Lessgistics
As you can see these rates are far and away better than what you would see in PirateShip, ShipStation or Shopify’s shipping module.
Why This is the Perfect Service for Sub Boxes
First, there are a few things you should know about this shipping service:
- This is a slower service. Typical transit times are 2-7 days. The extra time is accounted for in the consolidation process mentioned previously.
- This is a domestic only service. International shipments still have to go a different service
- APO/FPO shipments are exempt from this service.
This service is PERFECT for subscription box renewals. Your customers are already expecting a renewal shipment once a month. There is not near as high of an expectation for quicker shipping for a renewal vs. an initial customer sign-up. They just want to know it has been shipped. Plus, by using our software we can forward date your customer email notifications to offset the additional time in transit. Your customers can receive the shipping notifications while the packages have already started moving through USPS network.
That’s really about it- that is what subscription box brands should do to save on shipping costs! So if you are willing to have a little bit of a slower shipping service to save you hundreds or thousands of dollars in shipping per month reach out to Lessgistics today to find out more.