Ecommerce 3PLs use several tactics to charge less for shipping and still turn a profit. The most common one is rate shopping. It is also known as ship skimming or free-shipping thresholds. Here is how eCommerce 3PLs use it to reduce shipping costs.
What Is Rate Shopping?
It refers to a business model in which a company offers discounted shipping rates to customers. Who place large orders. Online retailers can use this strategy. It can also be used by 3PLs (third-party logistics providers) and warehousing providers. The practice of rate shopping isn’t exclusive to ecommerce.
Rate shopping is a way to compare different insurance companies rates and benefits. You can use it when looking for a new insurance plan or switching carriers.
Some people only use the approach once, but others do it all the time—even if they don’t have to. If you’re one of those people, we recommend using it as part of your routine whenever you receive an insurance quote from a company.
If you’ve never done it before or don’t know how to start, the good news is that it’s easy! The first thing you’ll need to do is find quotes from several carriers on our site. Then compare them side-by-side on our quote comparison tool. All that’s left is choosing your favorite plan and buying it!
Why Should 3PLs Use Rate Shopping?
3PLws should use rate shopping because it is a great way to get the best price for their clients. This method allows 3PLs to enter the shipment details and find the best rate from multiple carriers. This will enable you to find the best rates for your shipments, saving you money. Rate shopping also gives you more options for shipping carriers to choose what works best for your business.
Rate shopping can help reduce shipping costs. It’s easy to use, too! You just enter your shipment details and then choose from several options based on price or carrier type. You’ll know exactly how much each service will cost before deciding!
Quick read: How 3PL Warehouses Can Calculate Customer Profitability.
What Are the Four Kinds of Rates for Shopping?
You’re probably familiar with traditional rate shopping. The first and most basic form of rate shopping. Here, a customer selects a carrier from the drop-down menu in the shopping cart and clicks submit.
Rate shopping is a process that allows a shopper to compare prices across multiple retailers. It is a form of price comparison, an essential step in the buying process for many people.
Rate shopping has four types:
1) Product Rate Shopping (the most common). Comparing different products or services within the same category.
2) Site Rate Shopping. You compare two websites to determine which one has the best price.
3) Ad Rate Shopping. This is when you compare products or services advertised on television or radio.
4) Service Rate Shopping. This is when you are comparing local businesses to see which one offers better service at the lowest cost
Four Benefits of Using Rate Shopping
There are many benefits to using a 3PL that does rate shopping. Many ecommerce merchants can expect to see these benefits:
- Reduce shipping costs: By choosing the best carrier for your package and negotiating with them, you can save on shipping costs.
- Save time. By utilizing the expertise of your 3PL in rating shopping, you’ll be able to spend less time researching carriers.
- Reduce risk: You may have heard the phrase “you get what you pay for.” This is especially true when it comes to shipping. A faster ship means higher costs, which could mean lost packages or damaged goods if there’s any delay in transit. A 3PL that does rate shopping will take as much risk off your shoulders as possible.
As an eCommerce business owner, you know that your bottom line is directly affected by shipping costs. So, a third-party logistics provider can help you find the best deal on your shipments.
Rate shopping allows 3PLs to search through multiple carriers at once. This technology enables eCommerce businesses to offer free shipping. At the same time, they are still saving money on deliveries!
How Do Ecommerce 3PLS Use Rate Shopping?
To understand rate shopping, you need to understand the difference between a “flat rate” and an “actual cost” model. A flat-rate shipping model means paying a single price for your shipment. This is regardless of the size or weight of your package.
Besides, an actual cost shipping model determines rates based on weight and dimensions. For example, You might get charged $0.35 per pound for books shipped via UPS Ground. But only $0.08 per pound for packing peanuts! That comes out to about five times more expensive per pound than sending just books alone!
Carrier and Service Level Options
When you choose a shipper, you should first understand the shipping method. Each carrier has several ways that vary depending on package size, weight, origin, and destination. In turn, each shipper will have different rates for their services. You will want to choose the shipping method that is best suited for your requirements. For example:
Ground service may be the best option if you’re shipping small packages or less than 10 lbs. This is because it’s less expensive than other options like 3-day or 2nd-day air and tends to be faster.
Packaging Optimization to Save On Dimensional Weight
This is essential to your shipping strategy because it can impact your bottom line. To ensure you’re using the correct size box, consider these things:
- The size and weight of your product
- The dimensions of the package (length, width, height)
Once you know what kind of box you need to use, there are still more things to consider when packaging products for shipment. For example: do you need packing materials? If so, what type? Do you need bubble wrap or peanuts? How many layers should be used? Getting this right is essential because it could arrive damaged if an item isn’t appropriately packed. This could result in returns and unhappy customers who won’t want to buy from you again.
Volume discounts are a great way to save money on shipping. Volume discounts are available for ground and air freight. They’re beautiful when you ship many packages simultaneously.
Rate shopping is a game of timing. You have to get your shipment out before the prices fluctuate. Otherwise, you could lose money or even ship your goods for free. It’s challenging to know when to send your interests. But it’s a problem that has been solved by third-party logistics (3PL) providers. They offer “rate shopping” services to help stores ensure they get the best deal on shipping rates. For more details, contact sales support.