7 Tips to Reduce Logistics Costs for D2C startups

Managing logistics costs can be a catalyst for growth in revenue for every D2C brand. India, home to over 800 D2C brands, also spends enormous amounts of money on logistics
7 Tips to Reduce Logistics Costs for D2C startups

With the D2C industry estimated to go beyond the 60 billion dollar mark in 2023 in India, more new startups are only bound to emerge each day. However, the D2C industry is one where competition is quite ferocious. Not every startup can pull off what the big guns today have. 

In fact, even established brands (knowing the benefits of D2C) may not be able to build a solid online presence. However, the most prominent issue with D2C brands currently would be their logistic costs. 

Managing logistics costs can be a catalyst for growth in revenue for every D2C brand. India, home to over 800 D2C brands, also spends enormous amounts of money on logistics. A firm’s ability to reach out and deliver to as many pin codes as possible assists in expanding its geographical scope and doing good business in every area possible. 

However, profits cannot be made unless the expenditure on every business operation (logistics being a vital one) is calculated and optimised. This is exactly why we’ve decided to focus on logistics costs for this post.
The Importance of Logistics Costs for D2C Startups
The cost of logistics can drain out some of the biggest numbers on any D2C brand’s capital. If we’re to look at statistics, even the biggest D2C brands in India, such as Lenskart, doubled their spending on logistics alone in 2020 compared to 2019. 

Inc42 plus analysis

(Source: Inc42 Plus Analysis)

The image above is nothing short of a learning point for new D2C startups and how their  logistics costs can shoot up, affecting their overall net profit. To help solve this problem, this article will list 7 ways existing or upcoming D2C brands can reduce logistics costs.

7 Ways to Reduce Logistics Expenses and Improve Business Growth

1) Implement Hybrid Services
Implementing hybrid services can be a great start to reducing logistics costs. The basic idea is to use more than one mode of transport to deliver a product. 

For instance, if you need to deliver an item to another state, instead of sending it over by domestic air services, you can send it over by a train and then through a shipping truck to reach the local pin code. 
Air transportation can be costly and fluctuate more easily. Hence it’s best to use more than one medium of transport for D2C startups. 

2) Adjust Package Weight
One factor that adds up to your overall logistics cost is the package weight. Shipment charges can vary in correspondence to the weight of your package. 

The heavier your package is, the more costly shipping it will be. Check whether you use large sized boxes for smaller items. Larger boxes can add unnecessary volumetric weight if the object inside is not as big. 

Ensure to use appropriately-sized boxes for products. A little bit of dunnage for smaller items is fine too, but avoid adding too much.

3) Automate Your Shipping Operations
If there’s one inevitable aspect of logistics, it’s the implementation of automation. With solutions such as inventory and warehouse management, live-tracking, route optimisation, etc., your new brand can be miles ahead of others with these programs. 

To begin, an automated shipping system can help firms get rid of labour costs. Integrations such as automated packaging assist in minimising errors and are a good solution for firms who cannot find skilled individuals.

Automation also helps you reduce the overall volumetric weight of your package through cartonization. This is when products are shipped in the most efficient box sizes per se. In addition, automation softwares can look up live carrier rates to give you the best options at hand. 

With the help of route optimisation software, you can also save up a good amount of money on fuel and wages. By figuring out the fastest route to reach the final destination, this software can lower the total amount of fuel used. 

4) Have Solutions For Returns
No matter how good a brand is, it cannot completely stop returns. However, the intriguing bit about returns is that customers value their experience. 

If you provide a good return experience, it’s more likely that customers will buy from you again. Ensure to invest in promising solutions for returns and provide the best experience you can to build a good reputation. 

5) Partner With SaaS Firms Directly
Since you’re a startup, a helping hand can be your best headstart! Instead of running behind carriers directly all the time, you can partner with a SaaS company that provides shipping solutions. 

SaaS companies help you get access to multiple carriers simultaneously and also manage them at one dashboard. They also provide you with relatively lower rates and offer different solutions such as NDR and shipping exception management. 

In case you’re new to the term, shipping exception is when a shipment is delayed due to unavoidable circumstances such as bad weather. This is a key factor to optimise since businesses can lose a decent amount of money by not responding correctly to the situation.  

For improving customer satisfaction, SaaS may also provide real-time order tracking and send notifications to your customers when their parcel reaches a specific destination or provide regular updates. 

6) Keep Your Supply Chain Transparent
During delays, shipping costs are affected in the long run. Rather than waiting to figure out the problem at hand, contact your shipping partner directly if you do not see any updates on the current delivery.

Ask them to confront the issue immediately. This can help you solve any issues in real-time while avoiding the expense of sending another product to the customer. For shipping exceptions, having a management software will help you to minimise any major disruptions and damage. 

7) Get Supplies At Discounted Rates
Here’s a little insight about carriers; they provide discounts on shipping supplies if you buy them in bulk. These can be shipping labels, poly mailers, bubble wraps, boxes, etc. 

However, it is key to ensure that you do not compromise on the quality of these products for a low price. You can, however, leverage the total amount you spend if you decide to work with more than one carrier and get the best rates from each of them. 

Overall, minimising shipping costs to an optimal level can elevate the profit margin and revenue. As a D2C startup, you’ll face a good amount of competition and staying one step ahead is crucial. We hope this article proved helpful for you to optimise shipping costs and grow in the world of D2C!  

READ MORE: Logistics Sector Projected to See up to 9 pc Growth This Fiscal

(To know more about what is happening in the retail, D2C, and e-commerce industry, please attend IReC.)  


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