Written by Ken Morton, Jr.
For years, freight was one of those expenses that many golf retailers simply accepted as part of doing business. You ordered merchandise, it arrived, somebody paid UPS or FedEx, and the expense disappeared somewhere below the gross-margin line.
Those days are over.
Between higher carrier rates, fuel and residential surcharges, dimensional-weight pricing, vendor freight policies, and the ever-increasing expectations surrounding e-commerce delivery, shipping has become a meaningful part of the cost of goods we sell. For smaller golf shops and boutiques, the impact can be especially painful because we don’t always have the shipping volume or negotiating leverage of a national retailer. But that doesn’t mean we’re powerless.
In today’s retail environment, freight management needs to become part of merchandise management. Every dollar we save getting a product into our shop—or getting it into our customer’s hands—is effectively another dollar available to protect margin.
Start With the True Landed Cost
One of the easiest mistakes a buyer can make is looking at product margin without considering what it actually costs to get that product onto the selling floor. A $60 wholesale item selling for $120 appears to generate a healthy $60 gross profit. But what if incoming freight adds $4? What if another $1 is effectively absorbed through handling, packaging or transfer costs? Suddenly, your $60 cost is really $65.
That difference multiplied across hundreds or thousands of units can become significant. Buyers should increasingly evaluate landed margin rather than merchandise margin. When comparing vendors, programs or special buys, freight terms deserve a place right alongside discount, dating, markdown protection and return privileges.
Negotiate Freight Before You Negotiate Price
Retailers frequently ask vendors for another point or two of discount while overlooking an expense that might be costing them considerably more. Ask the questions. Can the vendor offer prepaid freight at a certain order threshold? Can multiple purchase orders be consolidated? Is there a preseason freight allowance? Can replenishment orders be accumulated and shipped weekly instead of individually? Can freight be capped at a percentage of invoice value?
Even when a vendor won’t offer completely free freight, there may be opportunities to negotiate shared freight, reduced freight, freight caps or promotional freight windows. And don’t underestimate the power of your buying group. One of the great benefits of associations and buying organizations is collective leverage. Freight programs negotiated across dozens or hundreds of retailers can potentially create opportunities that an individual golf shop could never negotiate on its own.
Stop Shipping Air
Dimensional-weight pricing has changed the economics of shipping. Carriers aren’t necessarily charging you based only on how much a package weighs. They’re charging based on how much space that package occupies in their system. That means oversized boxes filled with packing paper can be extraordinarily expensive. Audit your box assortment. Many retailers can benefit from carrying more box sizes rather than forcing products into three or four standard cartons. A smaller box can sometimes save several dollars on a single shipment. Pay particular attention to golf bags, footwear, outerwear and awkward accessories. The difference of just an inch or two in carton dimensions can occasionally push a package into a considerably more expensive pricing category.
Consolidate Vendor Shipments
Small retailers often unintentionally create freight expense through frequent small purchase orders. A buyer sees that they’re short three dozen gloves, places an order. Two days later, someone notices they’re short hats and places another. Then a footwear reorder goes in. Three orders. Three boxes. Three freight charges. Consider establishing regular replenishment days with key vendors. Rather than sending five small orders throughout the week, accumulate needs and submit one consolidated order whenever inventory requirements allow. The same strategy can apply to store transfers between multiple locations. There will always be merchandise that needs to arrive immediately, but not everything needs to arrive immediately.
Ask Vendors to Combine POs
This sounds ridiculously simple, but it can save real money. If you’ve placed multiple orders with the same vendor that are scheduled to ship within a few days of each other, ask whether they can be combined. You may also want to establish standing instructions with key vendors:
“Whenever practical, please consolidate open purchase orders before shipping.”
Some vendors’ distribution systems won’t accommodate this easily. Others will. It costs nothing to ask.
Use Your Own Carrier Account When It Makes Sense
When merchandise is being returned to a manufacturer—whether it’s defective merchandise, an accommodation, overstock or an authorized return—don’t automatically accept whatever shipping method happens to be convenient. Compare rates. Your UPS, FedEx or other carrier account may offer better pricing than the vendor’s return-label charge. Conversely, some manufacturers have substantially better negotiated rates than a small retailer could ever receive.
The important thing is to know which is which. For authorized vendor returns, ask specifically, “Can you issue a prepaid return label?” If the return involves defective merchandise, a vendor error or incorrectly shipped goods, the retailer should also be asking why they should be responsible for the freight at all.
Audit Your Carrier Agreements
UPS and FedEx agreements aren’t necessarily “set it and forget it” programs. Retailers should periodically review their actual shipping activity and understand where they’re spending money.
Look at:
- Average cost per package
- Residential delivery surcharges
- Delivery-area surcharges
- Additional-handling charges
- Oversize charges
- Dimensional-weight adjustments
- Address corrections
- Saturday delivery charges
- Fuel surcharges
You may discover that the problem isn’t your base shipping rate at all. It’s the surcharges.
There are also third-party shipping platforms and multi-carrier services that aggregate the volume of thousands of small businesses and provide access to discounted rates. Depending upon your volume and package profile, services such as Pirate Ship, Shippo, Easyship, ShipStation and others may be worth comparing against your existing carrier agreements. Don’t assume the shipping system you’ve used for the past ten years is still your least-expensive option.
Let Software Shop the Shipment
Retailers shop vendors. We shop products. We shop credit-card processing rates. Why wouldn’t we shop shipping rates? Multi-carrier software can compare available services for an individual package and help identify the least-expensive appropriate option. The important word is appropriate. Saving $3 by choosing a service that adds four days to delivery might not be worthwhile for a customer waiting for a birthday present or a pair of shoes needed for Saturday’s tournament. But saving $3 on hundreds of non-urgent shipments certainly adds up.
Rethink “Free Shipping”
Consumers love free shipping. Unfortunately, UPS doesn’t. Someone is paying for it.
Small retailers should be careful about trying to imitate the shipping policies of billion-dollar companies whose logistics economics are completely different from their own. Instead of automatically offering free shipping on every order, consider a threshold that encourages a larger basket. If your average online transaction is $82, for example, free shipping at $125 might encourage a customer to add a hat, glove or dozen golf balls. Now shipping isn’t simply an expense.
It’s an average-transaction-value strategy. Test your threshold periodically. Look at average order value, gross margin dollars and average freight expense rather than simply celebrating an increase in orders.
Build Some Freight Into the Price
There is nothing sacred about separating merchandise price and shipping expense. For certain products, particularly unique merchandise, logoed goods and private-label products that aren’t easily price-shopped, retailers may have an opportunity to incorporate some fulfillment expense into the retail price. A $39 item plus $9 shipping may psychologically feel very different to a consumer than a $45 item with $3.95 shipping—even though the economics aren’t dramatically different. Pricing strategy and freight strategy should work together.
Use In-Store Pickup to Your Advantage
Brick-and-mortar golf retailers have something many pure e-commerce competitors would love to possess: A physical golf shop. Encourage buy-online/pick-up-in-store whenever possible. Not only does it eliminate outbound freight, it creates another customer visit. And that customer picking up a polo shirt might leave with a dozen golf balls, a glove or a new putter.
Consider making “FREE In-Store Pickup” prominent throughout your website and checkout process. Your store isn’t a liability in an e-commerce world. It can be your competitive advantage.
Be Smarter About Returns
Free returns have trained consumers to treat online retail like a dressing room. For small retailers, that can be devastating. Consider whether every return truly needs to be free. Clearly communicate policies before purchase, particularly for apparel and footwear. Provide better sizing information, photography and product descriptions so customers make better decisions before ordering. For golf equipment, make specifications extremely clear. A returned driver that traveled across the country twice may have generated $30, $40 or more in transportation expense before anyone even considers the labor required to process it.
Reducing the return rate can be every bit as valuable as reducing the shipping rate.
Don’t Pay Freight for Someone Else’s Mistake
When a vendor ships the wrong item, duplicates an order, sends damaged merchandise or makes another fulfillment error, immediately request a call tag or prepaid return authorization. Retailers sometimes absorb these small charges because it’s easier than making a phone call or sending an email. Multiply “it’s only $14” by dozens of incidents over the course of a year. Those little expenses become real money.
Create a simple policy for your receiving team: If the vendor caused the return, request vendor-paid freight.
Consider Freight When Evaluating Vendors
Two vendors can offer identical wholesale margins and still have dramatically different profitability. Vendor A ships prepaid, consolidates orders, accepts returns using its own freight account and rarely makes fulfillment mistakes. Vendor B charges freight on every shipment, sends multiple partial shipments, uses oversized cartons and makes you pay to return mistakes. Those aren’t equal vendor relationships.
As buyers, we should increasingly include freight performance when evaluating our vendor partners. Measure it. The simplest recommendation may be the most important: Create a freight KPI.
Track inbound freight as a percentage of purchases. Track outbound freight as a percentage of e-commerce sales. Track freight cost per online order. Track return freight. Track expedited shipping. Then compare those numbers month-over-month and year-over-year.
What gets measured tends to get managed. A retailer spending $60,000 annually on freight that finds a way to reduce that expense by 10% just created $6,000 in additional profitability without selling one additional golf club, shirt, shoe or hat.
The Small Retailer’s Advantage
Small retailers will never negotiate transportation contracts on the same scale as Amazon, Walmart or Dick’s Sporting Goods. Fortunately, we don’t have to. Our advantage is agility.
We can talk directly with our vendors. We can change packaging tomorrow. We can consolidate orders. We can encourage store pickup. We can adjust free-shipping thresholds. We can negotiate freight programs. We can question unnecessary charges. And we can teach our employees to treat freight dollars as carefully as merchandise dollars. For golf retailers operating on increasingly compressed margins, freight can no longer be viewed as simply “the cost of doing business.”
It is another cost we have an opportunity to manage. And sometimes the easiest way to add another point to the bottom line isn’t finding another point of margin from the vendor. It’s making sure that point doesn’t disappear into the back of a UPS truck.
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