How SMEs can cut freight costs by 50%

Don’t think your business is stuck for options for shipping goods to customers. There is now a wealth of logistics services supporting the booming e-commerce space, delivering big cost and time savings for SMEs.

Retailers, manufacturers, raw material suppliers and more are dependent on the logistics sector to deliver their goods to customers or to supply parts, materials or important documentation to stakeholders in a timely manner.

Traditionally, businesses relied on the national postal service, Australia Post, to ship goods.

However, as the internet of things makes online and remote purchases the norm, the logistics sector has been forced to dramatically change its service offering to deliver their customers and end-users more efficient, timely and favourable delivery options.Woman signing for a parcel delivery

“What e-commerce is actually doing is it's fundamentally changing consumers' expectations. They can order 24 hours a day, they can choose 24 hours a day, and the expectation of choice, the expectation around selection and delivery have all changed. So it's a far more competitive environment than bricks and mortar retail, but there's a repetition to the experience,” says David McLean, a former Microsoft executive who went on to found logistics service Hubbed.

“I think what's happening is businesses, especially e-commerce businesses, are starting to understand that the customer experience for them doesn't end with the purchase; it actually ends right at the final point of collection and the out-of-box experience that the consumers are having when they receive their products or services.

“The challenge for that and for the logistics space is that up to 50 per cent of the cost of actually shipping something is in the last mile delivery – that is actually getting it directly to the customer's home.”

This shift is evidenced by the explosion in the number of alternative delivery platforms that have started up, including Hubbed.

In early 2016, Zoom2U provided another clear example of the changing nature of the logistics sector, when the courier service joined forces with major online takeaway food platform Menulog to offer its network of restaurants and take-away food outlets a cost-effective local delivery service with which to expand their business.

In the case of Hubbed, the business operates in partnership with a national network of established retailers such as newsagents and petrol stations, which act as drop-off and collection points for Hubbed’s customers.

“What they are looking for are reasons to get more foot traffic into their stores. The price points are very competitive for them to provide a similar service to the likes of Australia Post, and their hope would be that they would get other product sales that support their business,” he explains, adding that retailers also receive a fee from Hubbed for their services.

“So they really want your customer more than anything else, and that really makes the model a cost-competitive one, because the rates that we have to provide are minimised.”

As David points out, many start-up logistics players like Hubbed also do not charge according to the weight of goods, making them much more attractive for price-sensitive SMEs.

The fundamental point, according to David, is that technology is allowing alternative courier providers to operate with far fewer overheads and far more flexibility for the end-user, meaning lower costs and improved customer experience.

“We have this Uber-esque model in that we have a store within a store without the physical assets,” he says.

“Small businesses more than anyone are taking advantage of the volume from an outbound shipment perspective and the cost competitiveness of it.”

Case study: ‘I cut freight costs by 50 per cent’

Danielle Sweeney, Design in Words and Calligraphy Supplies AustraliaDanielle Sweeney, who started a calligraphy business in 2011, Design in Words, providing neatly written text for weddings and special events, relied on the shipment of completed works and supplies.

For regular deliveries that were not time sensitive, Australia Post suited her fine, but for things that needed to be sent quickly, traditional postal services and couriers weren’t fast enough or were just one bad experience after another.

Danielle then discovered an alternative that cut her courier costs by half. My Business speaks exclusively with Danielle about how innovation in the logistics sector has benefited her business.

My Business: Tell us a little about your business?

Danielle Sweeney: I have a calligraphy firm, and I specialise in weddings, special events, I work with corporate clients, private clients around Australia, and internationally. Timelines are usually pretty quick. My other business is a calligraphy supplies business. It's an online store specialising in calligraphy-specific supplies. There's nibs, pens, ink, that sort of thing.

MB: How much do you typically ship each week?

DS: I'm constantly shipping around the country, and for that I use Australia Post because they're small parcels and not particularly time-sensitive. But I do ship a few time-sensitive parcels a week within Melbourne … one or two a week – sometimes it can be as many as five. For those within Melbourne, I use Zoom2u.

MB: How much were deliveries costing you previously?

DS: It was costing me at a minimum, I would say, about $45 previously to have anything delivered on the same day, and that can run as high as $90 or $100 to have it pretty quickly.

MB: Why did you decide to go with Zoom2u?

DS: I was having a really hard time working with couriers for some day work because they simply weren't interested in picking up maybe one parcel a week, or up to five parcels a week. In order to get that, I had to pay much higher freight rates. I saw Zoom2u … and thought, 'I'll check these guys out and see what happens' … It was so easy, and from then on, I haven't used anyone else.

MB: What change has it made to your business?

DS: It's been a massive difference. It's cut out my time commitment greatly, and it's also a real peace of mind to know you can track … exactly where the parcel is going to be, and when it will arrive. I would [also] say it's cut down on my courier costs by about 50 per cent.

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