Monday, January 17, 2011
At Shoes of Prey we ship our shoes directly from our office in China to customers all over the world. We previously used a company called EMS to do our shipping, however EMS contract with Australia Post for local delivery in Australia and as discussed in another post, we were very unhappy with their service and given 40% of our customers are in Australia we decided to switch from EMS to DHL. DHL are fantastic, our shoes take 3 days on average to be delivered to customers and they deliver to the customer's door and will call the customer or leave a card to arrange an alternative delivery time if the customer isn't at home. I've heard good reports about UPS and Fedex as international couriers too. Our average shipping cost to Australia with DHL is around $30, so we only make a slight loss charging customers $25 shipping. And as our volumes continue to grow and our monthly spend with DHL increases they will reduce our prices so it's feasible that our average shipping cost per shoe will drop to around $20 next year. As a point of comparison, the DHL retail rate for a single shipment of a parcel of shoes to Australia is about $65, so a higher shipping volume leads to a much lower shipping price.
What are the alternatives for online retailers shipping product to customers?
1. Ocean freight and local delivery.
Most traditional retailers and larger online retailers will ship their goods by ocean freight to Australia. Online retailers will then warehouse the product and ship individual parcels to customers within Australia. We used ocean freight to deliver some ready made shoes to stock in Sydney for our Westfield online store. The costs broke down as $x fixed costs for the delivery plus $y variable cost per kg. The shipment took 3 weeks door to door. If you're only ocean freighting a small shipment in terms of weight it's not cost effective because of the fixed costs, but if you're shipping lots of heavy products it's much cheaper to ocean freight. The costs for ocean freight drop even further when shipping whole containers of product as the large Australian retailers do.
2. Bulk airfreight and local delivery.
Another option is to bulk airfreight goods to Australia, then split out the parcels and deliver them using a local delivery service. Where this can be cost effective for an online retailer is when they're shipping light weight goods. Courier companies like DHL charge one rate for the first 0.5kg to cover delivery then a lower rate for each 0.5kg on top of that. If we were selling custom watches or something that only weighted 100g or 200g, rather than paying around $30 per parcel as we do now, (or slightly less given each parcel would be 0.5kg rather than our average of 1.2kg), we could bulk airfreight all the product to Australia, then reship within Australia using a local courier service. Bulk airfreighting a 200g parcel would come out at around $2 per parcel, then the local courier fee should be around $10-$15, a reasonable saving. The downside is the additional day for local delivery on top of the international delivery, and the costs of repackaging the products locally, though individual parcels could potential be labelled in China so they're ready to be unpacked and shipped immediately in Australia.
We actually use this option for our customers in Japan. There's not much of a cost saving in doing this because our parcels average 1.2kg anyway, however our Japanese partners repackage the shoes in line with the very high packaging standard expected by Japanese consumers and we use a very cool local Japanese courier company who literally run the shoes to the customer's door and provide an amazingly high level of service in their delivery, which an international firm couldn't provide in Japan.
3. Airfreight direct to the customer.
As described above, this is the option we use for Shoes of Prey. Ocean freight wouldn't make sense for us as our shoes are individually handmade in China. We've done the calculations and bulk airfreight with local delivery ends up costing around the same as airfreighting direct to the customer and it takes longer. In addition our delivery expenditure would be split across an international then a local courier company, so the discount offered to us based on our volume would be less. Airfreighting direct to the customer works best for us.
If you've had experience shippings goods from China I'd love to hear your thoughts.
Cross posted on Power Retail.
Posted by Michael Fox at 1:59 PM