Exhibitor Insights from Retail's BIG Show 2017. Small Parcel Shipping costs have soared over 35% in the past 5 years. LTL carriers are imposing sharp rate hikes annually. At the same time, Retail customers are hyper sensitive to shipping costs and have come to expect 'free shipping'. How do Retailers stay competitive with their shipping costs?

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Top 5 Tips for Reducing Shipping Costs in
the Retail Industry
DON COBURN, President, Bottom Line Experts

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for Reducing Shipping
Costs in the Retail Industry
Bottom Line Experts
Don Coburn – President
January 15, 2017
SPONSOR

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Challenges in Retail Shipping
• “Free Shipping” has Become the Expected Norm
• Consumers are Impatient – Want Instant Gratification
• Strong Shift from Malls to E-Retail / E-Commerce
• Shipping Costs Continue Sharply Rising Every Year
• Small Parcel Shipping Costs Have Risen 35% in Past 5 Years
• LTL Carriers Imposing Sharp Rate Hikes Annually
• Far Outpacing Inflation

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Speaker Background
Corporate Expense Reduction Specialists – Focus on Shipping / Freight
LTL / TL / International / Intermodal Shipping
• 400+ auditing staff, 3,000+ clients
• $750M in Shipping & Freight Buying Clout
• Work with Some of Largest Retailers in the Country
Small Parcel Shipping
• 50+ Auditing Staff (mostly ex UPS / FedEx)
• Former UPS / FedEx Pricing Analysts, Sales Execs, Mgmt
• 500+ Clients, $200M in Documented Client Savings since 2008

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$26M in Annual Shipping/Freight Savings From These (11) Retail Clients ($2.4M Avg)
Retail Industry Focus

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Audience Background

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TIP #1:
Focus On Inbound Shipping

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TIP #1 – Inbound Shipping
By Show Of Hands:
• Who Receives FREE SHIPPING on Some / All Inbound
Shipments?

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TIP #1 – Inbound Shipping
By Show Of Hands:
• Who Believes These Inbound Shipping Charges are
ACTUALLY Free???

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TIP #1 – Inbound Shipping
Inbound Shipping is NOT “Free”, In Fact It Is a Profit Center
• Inbound Shipping is Nearly Always Marked Up
• Some Vendors Specify Shipping Charges on Invoice, Others ‘Bury’ it
Most Scrutiny and Effort Tends to be on Outbound Shipping
• Inbound Shipping is Neglected, Seldom Scrutinized
• Inbound Shipping is NOT Free
• Inbound Shipping is a Vendor Profit Center
Retailers Are Overpaying for Inbound Shipping

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TIP #1 – Inbound Shipping
Step 1:
Estimate Inbound Shipping Cost:
• Typically Range From 5% - 10% of Total Goods Purchased (Inventory)
• Not to be Confused With COGS (Cost of Goods Sold)
• Example: $100M Retailer:
• $25,000,000 Goods Purchased Annually x 7.5% =
$1,875,000 Annual Inbound Shipping Costs (est)

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TIP #1 – Inbound Shipping
Step 2:
Begin with Small Parcel Shipping (SPS)
• Require That Vendors Use Your Small Parcel Account # for Inbound
Parcel Shipments
• Most Vendors Will Comply
• Exception:
• They Are Passing Along Their Direct SPS Costs (VERY Rare)
• If Vendor is Much Larger Than You (Higher SPS Spend)
• Their SPS Rates Are Better Than Yours

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TIP #1 – Inbound Shipping
Step 3:
LTL / TL Shipments
• Focus Initially on Your Largest (Top 5) Vendors
• Ask Vendors to Requote with Modified Terms
• Some Will ‘Play Ball’, Some May Not
• “We Want to Buy Your Products but Not Your Shipping Services”
• Request New Terms: FOB Vendor Dock
• Identify Actual Inbound Shipping Costs
• Solicit Quotes for Inbound Shipping on Top 5 Vendors

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TIP #2:
Consolidate Your Small Parcel
Shipping (SPS)

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TIP #2 – Consolidate Small Parcel
Many Companies Use Multiple SPS Carriers
• Sometimes Customer-Driven
• Small Service Differences May Exist
• Some Perform Package-by-Package Cost Assessments to Select Carrier
for Each Shipment
$15.75
$16.85

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TIP #2 – Consolidate Small Parcel
Multiple Parcel Carriers Is Rarely More Cost-Effective
• More Cost Effective to Pool Spend with (1) SPS Carrier
• Carrier Pricing Includes Target ‘Tiers’
• SHARP Dropoff in Incentives for Falling Below Target Tier
Sample Small Parcel Tier Incentive Schedule *
Service(s)
Weekly Transportation Charges Ranges ($)
0.01 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00 - xx,xxx.00
$xx,xxx.99 xx,xxx.99 xx,xxx.99 xx,xxx.99 xx,xxx.99 and up
Next Day Air - Letter - Prepaid Frt 0.00% 35.70% 51.00% 52.00% 53.00% 54.00%
Next Day Air - Package - Prepaid Frt 0.00% 36.40% 52.00% 53.00% 54.00% 55.00%
Next Day Air Saver - Letter - Prepaid Frt 0.00% 35.70% 51.00% 52.00% 53.00% 54.00%
Next Day Air Saver - Package - Prepaid Frt 0.00% 36.40% 52.00% 53.00% 54.00% 55.00%
2nd Day Air - Letter - Prepaid Frt 0.00% 31.50% 45.00% 46.00% 47.00% 48.00%
2nd Day Air - Package - Prepaid Frt 0.00% 33.60% 48.00% 49.00% 50.00% 51.00%
2nd Day Air - Hundredweight - Package - Regular
Pickup 0.00% 15.40% 22.00% 23.00% 24.00% 25.00%
* For Illustration Purposes Only. Not actual data.

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TIP #2 – Consolidate Small Parcel
Drive as Much Volume to (1) Carrier as Possible
• Reduce Carrier Choices for Customers
• Amazon Offers No Carrier Choices
• Change E-Commerce Shipping Options
• Offer Time-in-Transit Choices, Not Carrier Choices

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TIP #3:
Create Shipping Rules for Parcel
Shipments

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TIP #3 – Create Parcel Rules
An Optimal Mode Exists for Every Shipment
• Mode Shifting / Optimization Can Offer HUGE Savings in Parcel
• Two Day Shipments May Not Require “Two Day” Shipping Mode
• Next Day Shipments May Not Require “Next Day” Shipping Mode
• Manual Analysis is Possible
• Some Specialists / Experts Offer Software Optimization Solutions

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TIP #3 – Create Parcel Rules

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TIP #3 – Create Parcel Rules
Parcel Rules Sheet
• Publish and Distribute to All Responsible for Initiating Shipments
• Include Rules for Various Zones & Transit Times
• Create Method(s) for Evaluating Adherence to Rules Sheet
• Run Weekly Reports to Highlight Non-Compliant Shipments
• Distribute to Customer Service / Shipping Department

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TIP #4:
Separate LTL and Parcel
Contracts

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TIP #4 – Separate LTL/SPS Contracts
Small Parcel Carriers Also Offer LTL Services
• Frequently Attempt to ‘Link’ Contracts Together
• Sales Tactic to Limit Choices / Avoid Carrier Changes (Hooks)
• VERY Seldom is Favorable for the Client
• NEGOTIATE SPS AND LTL CONTRACTS SEPARATELY

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TIP #5:
Use Rewards Cards for Payment
Method

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TIP #5 – Use Reward Cards
Small Parcel Carriers Allow Bill Payment with Credit Cards
• No ‘Penalties’ are Assessed for This
• Some Business Rewards Cards Are Offering 1.5% – 2.0% CASH BACK

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Questions