Navigating accessorial charges — the additional fees that carriers charge on top of base delivery costs — is among the most challenging aspects of managing shipping costs for online merchants.
The list of accessorial fees is long and confusing. Now, high fuel costs are further complicating shippers’ efforts and driving up costs. Not only are they seeing such charges on their invoices, in many cases they’re also finding a fuel surcharge added to many line-item surcharges. As the cost of fuel continues to rise and fuel surcharges are piled onto other fees, businesses and their customers are feeling the pinch of higher shipping costs.
There are hundreds of accessorial charges that carriers apply to deliveries. Residential deliveries incur surcharges, as do signature-required deliveries, bulky items, peak-season deliveries, and those to areas that may not have the density that carriers desire. Oftentimes shippers aren’t aware that packages are subject to surcharges until after they receive an invoice and investigate the charges. When this happens, it’s frustrating for shippers to discover they must pay for delivery services they believed were covered by the contract.
In some cases, shippers can adjust in order to avoid certain surcharges — for example, by shrinking or using differently shaped packaging, or switching to lighter materials. However, there are times that shippers simply must pay the extra costs, such as when they ship to customers in zip codes where delivery area surcharges (DAS) are applied.
Businesses know it’s important to keep shipping costs at bay, because expensive shipping rates cause online shoppers to abandon their carts at checkout. Moreover, if merchants want to offer shipping deals to drive sales conversions while remaining profitable, they need affordable rates.
Managing shipping costs can feel overwhelming. Rate tables can get complicated, and descriptions of surcharges are buried inside carriers’ terms and service guides. For business owners, it takes significant time and effort to learn about the different fees and when they’re applied. Following are suggestions for shippers on how to begin managing costs as fuel surcharges continue to surge and drive the price of shipping higher.
Know your shipping patterns. Understanding which products you ship regularly, the shipping categories that those items fall under, and where your customers live makes it easier to control costs. Take time to study your shipping habits. Are you shipping primarily to residential addresses? Do your shipments require adult signatures? It might seem like a simple step, but the more effort you put into clearly defining and understanding your current shipping patterns, the easier it will be to identify which surcharges are most problematic.
Identify your most common surcharges. Audit invoices and identify which surcharges are costing you the most. Then examine whether there are changes you can make to avoid some of those fees. For example, you could eliminate the residential accessorial charge and related fuel surcharge on a portion of your shipments by encouraging customers to have orders shipped to a commercial pickup location instead of their home. According to one study, nearly one in five online shoppers will choose shipping to a pickup location when offered. That potentially means shippers could eliminate up to 20% of their residential and remote area surcharges, along with part of their fuel surcharges, by converting some residential shipments to commercial shipments.
Control what you can. After identifying your top surcharges, think about which ones are controllable and which are not. Then focus on making adjustments and controlling what you can. As a shipper, you can’t change where your customers are located, so remote area surcharges aren’t easily avoidable. However, there are plenty of aspects of shipping that you can control. Look for those opportunities, and act on them to save money.
Learn how to avoid getting charged double. Shippers are often surprised to learn that fuel surcharges can be applied to many other accessorials. That means if a shipment incurs both a residential surcharge and an oversized delivery surcharge, fuel will be applied to both — once for the residential surcharge and once for the oversized package. Preventing all avoidable accessorial charges is necessary to ensure that multiple fees aren’t assigned to individual deliveries.
Negotiate reduced charges as you grow. As shippers grow over time and increase their shipping volumes, they gain more power to negotiate a reduction in charges. This is something you should do regularly, by working with carriers to minimize expenses for both. Of course, when discounts are applied and delivery charges don’t follow published shipping fee tables, it becomes even more important to watch invoices closely, and verify that you understand charges and that they’re correct.
Fuel and other surcharges assigned by carriers can greatly impact online businesses. Taking appropriate steps to manage shipping costs can help online retailers avoid extra costs and provide better and more affordable experiences for customers.
Jeff Macak is chief operating officer at Via.Delivery.
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