Reining in Runaways

Q: I've started tracking the freight costs on our incoming shipments, and have been shocked to see some run as high as 32 percent of the invoice. How can we get this runaway expense under control?

A: The rising cost of gasoline has increased the rates charged by all types of freight companies, so it pays to look for the least expensive way of shipping each order. Although writing “cheapest and best” as your shipping preference on a purchase order may help, you can't always expect your vendor to research the best method for you.

Small orders are usually best sent via parcel post, UPS or FedEx Ground. Try to avoid receiving very small orders, because even at a comparably lower rate, it can be a high percentage on $20 worth of merchandise. Most companies require a minimum order, which helps prevent a small number of products being shipped.

Back orders are often a hidden source of high freight costs. Retailers are within their rights to specify on purchase orders that they won't accept back orders of less than $50, or even $100, unless the vendor pays the freight. This may serve as an incentive for suppliers to consolidate back-ordered items, or ship full orders initially.

Heavy items and large orders are often cheapest to ship via an LTL (less than truckload) freight company. We recently prepared a page of Receiving Preferences to fax along with orders that we know will be delivered in this manner. Because of the location of our store's back door, we specify:

• No trucks over 30 feet in length, and only “straight” trucks (not cab and trailer)
• No shipments after 2 p.m.
• The best way to reach our receiving door, with a map

We hope that this information will help avoid trucks that have to be unloaded on the street, and shipments that arrive after our stock person has left for the day. Truckers are not required to bring shipments into the store, and our sales staff does not like to take time away from customers to haul heavy boxes through the front door.

Because of the cost involved in shipping by truck, we try to consolidate our orders to receive as much merchandise as possible in each order. For items that are very heavy or bulky (such as soap, food in jars, furniture and stoneware), look for vendors close to your store.

Ask for free freight or freight allowances when you write orders, especially for heavy items. You might also be able to get such offers through show specials or by working with sales reps. Some vendors also offer free and half freight if you place an order of a certain size. Check invoices carefully to assure you've gotten the discounts you negotiated.

When you receive merchandise with high freight costs, you can often take that into account in setting prices. Simply divide the cost of shipping by the number of items and add that amount to the retail price.

Q: We're worried that online shopping and discounters will lure away even more of our customers. How can we make sure they stay loyal?

We all want to make sure that we're offering our customers an enticing mix of great customer service, wonderful products, and convenient policies and procedures. In short, we want to offer what Kate Newlin, author of Shopportunity! (HarperCollins), calls "a transcendent shopping experience." If you've been out shopping recently yourself, especially at a big box store, you know how rare that can be!

Newlin breaks the ideal shopping experience down into four components: anticipation, pursuit, prominence and appreciation. The first element of a great shopping experience, anticipation, comes in part from the pleasure of past shopping trips. The pursuit of something special, whether a gift, a home accessory, or a piece of clothing or jewelry, is enjoyable if there is the likelihood of success. This is where inventory, or selection, becomes a key component of creating a positive experience. Retailers need to have merchandise that will surprise and delight, as well as items that customers have come to expect from you.

Newlin's second element is pursuit. Customer service in most big box stores is not really service, it's clerking. But in a good independent store, the sales staff becomes a partner in the customer's pursuit of the right item. Asking a customer questions and listening to the answers are key elements in providing an enjoyable experience. It is equally important to make it easy for customers to purchase. Have stock well marked and ready to go, and make sure your checkout procedures are customer-friendly.

The third element is prominence. It's probably been a while since a clerk at Wal-Mart commented on your good taste in kitty litter and socks. But in specialty shops, we have the opportunity to make shoppers feel good about their purchases. We can admire their selections, and box or bag them with care to reinforce their choices.

The last element of Newlin's ideal shopping experience is appreciation. After a customer has left your store, you want her to have a feeling of satisfaction that will lead to positive word-of-mouth and many return visits. In addition to selling high value, quality merchandise, you can encourage returns by creating a prestigious brand for your store. And become an active participant in your community. These two elements are key to creating a store that customers are proud to shop in.

As Newlin says, hoping to inspire shoppers to kick the addiction to low price and enjoy their consumer experience: "It is fun. It is excitement. It is independence. It is thrill. It is shopping."

Carol L. Schroeder is the author of Specialty Shop Retailing: How to Run Your Own Store, a new edition of which was published in May by John Wiley & Sons. Send questions to info@orangetreeimports.com.