Proven Ways to Lower Shipping Costs for Small Business
By Abhishek Sebin on
Small businesses, especially those in the e-commerce space, know how quickly shipping costs can affect their profits. Between packing materials, carrier shipping fees, and extra costs for weight and dimensions, it may seem like you are spending more on shipping than your business.
But there is good news! There are many methods to reduce shipping costs without compromising on the quality of your service.
In this blog, we will elaborate on how to reduce shipping costs for your online business. We will explore different options, such as flat-rate shipping, planning effective shipping policies, choosing the right package size, checking for carrier discounts, etc.
By the end of this article, you will have actionable insights and a clear understanding of how to save shipping costs and keep your business growing.
Use Flat-Rate and Prepaid Shipping Options
Why does reducing shipping costs matter? Controlling your shipping expenses saves your profit margins and lets you offer customers more competitive pricing. And happy customers keep coming back!
One of the easiest ways to lower shipping costs is to utilize flat-rate and prepaid shipping options. Both these methods empower you to predict shipping expenses, which is crucial when budgeting for shipping processes.
Utilize flat-rate shipping options from major carriers for predictability
Flat-rate shipping lets businesses charge a fixed price for shipping despite the weight of the package, size, or destination.
This benefits enormously if your products have different sizes and weights, as you won't have to pay more for heavier items. It is more viable than weight-based shipping rates.
Benefits of flat-rate shipping
- Simplified Pricing
Customers would know how much they need to pay for shipping beforehand, which reduces cart abandonment during billing. For example, if an online seller charges a flat rate of $15 for shipping, customers can budget their overall purchase cost when placing an order.
- Cost Efficiency
Flat-rate shipping is one of the best ways to ship lightweight items that would otherwise incur lower shipping costs. For example, selling small electronics using flat-rate shipping boxes can save more compared to different rates based on the size and weight of the box.
Consider prepaid shipping labels to simplify processes
Prepaid shipping allows businesses to pay for shipping labels in advance. This streamlines the shipping process and offers many benefits. Since many carriers offer discounts on prepaid shipping, you could spend less per package. But you need to know how many shipments you will be sending beforehand.
Benefits of prepaid shipping
- Cost Savings
Purchasing prepaid shipping labels can often secure discounts instead of standard rates. This is useful for businesses that ship items back and forth.
- Convenience
With prepaid labels, customers need not calculate shipping costs at checkout. For instance, many e-commerce platforms offer return labels that buyers can print at home. Hence, order returns become effortless and encourage customers to repeat their purchases.
Bulk purchase of shipping labels for cost-efficiency
Purchasing bulk shipping labels helps reduce shipping costs. E-commerce merchants shipping high volumes of packaging can negotiate better rates with carriers or use integrated platforms that provide discounted shipping labels.
Benefits of purchasing bulk shipping labels
Saves money
For instance, retailers who ship thousands of packages monthly are likely to qualify for lower shipping rates from USPS or FedEx. This reduces per-label costs and improves the business's overall profitability.
- Integrated shipping platforms
Services like PostShip allow businesses to access discounted rates even if they don't have high-volume thresholds. Postship partners with multiple carriers to provide your customers with an integrated and branded order-tracking experience. These integrated carrier platforms offer competitive pricing, helping you save and invest in other business areas.
Flat-rate, prepaid shipping and bulk purchasing options are some of the most straightforward ways to minimize shipping costs, but there are other factors that you should consider. We will discuss why accurately calculating shipping costs is essential.
Calculate the Shipping Fees
Shipping costs include various expenses incurred in delivering products from the seller to the customer. They include:
- Charges levied by the shipping carriers based on the weight and dimensions of a package, and the distance to the delivery location.
- Packaging costs related to boxes, padding, tape, and other materials used to protect items while in transit.
- Expenses for staff involved in packing and handling the orders.
- Additional charges for international shipments that depend on the delivery destination.
Calculating shipping fees is vital for e-commerce businesses that aim to balance cost efficiency with customer satisfaction.
Key Determinants of Shipping Fees
Consider the following factors that contribute to the shipping fee of an order fulfillment process.
Package Weight and Dimensions: Heavy packages generally incur more costs, as carriers often charge based on the size and dimensional weight of the package. Using appropriate boxes can help minimize the packaging cost. For instance, a package weighing 1.6 pounds will incur more shipping fees than one weighing 0.6 pounds.
Delivery Speed: Quicker shipping options are usually more costly. Offering faster delivery options to the buyers will incur more expenses. Faster delivery options like overnight shipping, come at a premium price compared to standard delivery services. A two-day air service will cost more than ground shipping because of its urgent nature.
Shipping Distance: The farther a package travels, the more it costs to ship. Carriers use distance-based shipping zones to determine shipping rates. Packages sent to higher zones (most distant locations) will cost more money. For example, sending a package locally will be cheaper than shipping it across the country or opting for international shipping.
Shipping Carrier Rates: Different carriers offer different rates and services. It's better to compare who offers the most affordable rates. Ideally, options like USP, DHL, USPS, and FedEx offer cost-effective shipping solutions.
Accurately calculating your shipping fee is crucial for transparency and cost control. But how can you ensure that your packaging is not driving prices up? Let’s explore the importance of using the right-sized packaging materials.
Use the Right-sized Packaging Materials
Choosing the right package size is paramount for determining your shipping costs. Carriers calculate the shipping fee based on dimensional weight, which considers both the weight and size of the package. Using oversized boxes for small items will result in an unwanted fee.
To minimize shipping costs, select the most efficient packaging that protects the product while avoiding unnecessary bulk. Many carriers offer free packaging materials for flat-rate shipping services, which will help cut down the cost further.
How to choose the right packaging material for your shipments?
Custom-fit packaging solutions
Opting for custom packaging that matches the dimensions of your products can reduce the package volume and dimensional weight. This results in efficient usage of space within the box and potentially lower shipping costs.
For example, IKEA's engineers reduced the packaging size of their Ektorp sofa by 50% by breaking it down into similar parts, saving €1.2 million a year.
Streamlined Packing Materials
While protecting your products during transportation is essential, excessive materials like bubble wrap and foam peanuts can increase the package’s dimensions. Also, avoid unnecessary padding to reduce the volume.
You could use more streamlined options, such as air pillows or inflated poly mailers, which provide excellent protection while saving space.
Optimizing Packaging Boxes
Auditing and analyzing your box size options can optimize your packaging process with sensible space utilization. To handle outlier packages, it is best to include three to five box sizes larger and three to five box sizes smaller than your average product size.
For example, using a 13-pound dimensional-rated box for a 6-pound material can cost approximately $5 more in shipping. Also, using carrier-provided packaging boxes can save on purchasing additional boxes.
Getting your packaging right is an easy way to lower shipping costs, but there are other things to consider. The weight of the packaging material can also influence your costs. See below how opting for lightweight packaging materials is a smart move.
Choose Lightweight Packaging Materials
Packaging materials can add weight to your shipment, directly affecting the shipping cost. Can you reduce shipping costs with lightweight materials?
Absolutely!
Use lightweight, protective materials like air pillows and bubble wrap
Materials like bubble mailers, air pillows, and other biodegradable packaging options help reduce the package's weight without compromising the safety of your products. Since carriers charge based on the package's weight and dimensions, switching from traditional cardboard to lightweight options can help you save costs in the long run.
Examples of lightweight packaging materials include:
- Padded bubble mailers for small and non-fragile materials
- Air pillows or packing peanuts to fill empty spaces keeping the weight intact
- Biodegradable plastics and recycled materials for eco-friendly packaging
Opt for bags instead of boxes when possible
Poly bags and other flexible packaging options are lighter and more compact than rigid cardboard boxes. They can easily conform to the product shape, thereby reducing space wastage and the overall weight of the package. Bags are suitable for lightweight or flat items that don't require the structural support of a box.
Choose lightweight corrugated cardboard for boxes
When boxes are required, select the lightweight ones with corrugated cardboard as they can help reduce weight and provide ample protection against rough transits. Corrugated cardboard is a popular choice for e-commerce packaging due to its durability and customizability.
Ensure packaging materials maintain brand consistency
Along with cost savings, e-commerce businesses should also consider how their packaging materials look in terms of branding. Does it have a brand identity and what message does it convey?
Lightweight packaging must ensure it shows the desired brand image and provides a positive unboxing experience for consumers. It is advisable to incorporate branded elements, like logos or colors, into the packaging design to reinforce the brand image and create a memorable impression.
Switching to lighter materials might seem like a small step, but every ounce counts when you're shipping at a large scale. Before sending a package, remember to weigh it and optimize its packaging dimensions.
Weigh Your Package and Optimize Dimensions
Weighing and measuring each package will help you reduce shipping costs. Most carriers charge based on the dimensional package weight, which is calculated by multiplying the length, width, and height of your package and dividing it by a specific factor set by the carrier.
How to optimize package weight and dimensions:
Use a postage scale to ensure accurate weight measurements
Check carrier guidelines for dimensional weight to avoid paying extra
Compress packages to reduce their sizes wherever possible
Understand and monitor dimensional weight pricing
Dimensional weight pricing is a method used by carriers to calculate shipping costs based on a package's volume rather than its weight.
For instance, a package measuring 12 inches by 18 inches by 18 inches has a volume of 3,888 cubic inches. Carriers divide this volume by a DIM factor (often 166 for domestic shipments) to determine its dimensional weight.
If the DIM weight exceeds the actual weight, the higher rate applies. Businesses must monitor these metrics to avoid unexpected shipping charges.
Select carriers with favorable dimensional weight policies
Different shipping carriers have varying DIM weight policies. Take, for instance, FedEx and UPS may have different DIM factors, which can affect shipping costs or large but lightweight packages.
By comparing these policies, businesses can choose carriers that offer more favorable rates based on their shipping profile.
Regularly review and optimize packaging strategies
Using appropriate package sizes can help minimize dimensional weight charges. For example, an online clothing store might switch from standard boxes to custom-size poly mailers for smaller items, significantly reducing shipping costs and also enhancing the customer's unboxing experience.
Now that you have the packaging strategy, it's time to consider your overall shipping policy.
Create a Shipping Policy
Establishing a clear shipping policy helps set customer expectations regarding delivery times and costs. It is a strategic method for e-commerce businesses to reduce shipping costs while enhancing customer trust and satisfaction. Many customers will happily pay a reasonable shipping rate.
Therefore, it is essential to have a policy outlining the rates, delivery times, and additional services like tracking and insurance. A consistent policy helps manage your shipping budget easily. How does a shipping policy reduce e-commerce shipping costs? See below.
Clarity on Shipping Costs
A clear shipping policy outlines shipping costs based on different methods and regions. By providing transparent pricing details, businesses can reduce cart abandonment rates, as 47% of customers do not continue purchasing if they have to pay an extra fee at checkout.
Setting Delivery Expectations
Businesses can effectively manage customer expectations by specifying estimated delivery times based on shipping methods. A notable 24% of customers drop out of their purchase if the shipping takes too long.
For instance, if a retailer indicates that standard shipping takes 5-7 days while express shipping takes 1-2 days, consumers can choose depending upon their urgency.
Bulk Purchase Discounts
A well-structured shipping policy encourages bulk purchases by offering incentives on shipping or discounts on larger orders. This helps increase sales volume and also optimizes logistics by consolidating shipments.
If a retailer sets a free shipping threshold at $70, customers may purchase more, and adding more items to meet this threshold will considerably reduce the number of packages.
Streamlining Internal processes
A well-defined shipping policy outlines everything related to shipping and helps the internal team understand the protocols for handling packages. It enhances order processing efficiency and the fulfillment process.
When employees facilitate packaging, labeling, and dispatch based on policy guidelines, it ensures uniformity across the entire shipping process and results in minimal errors and quick order processing.
Leveraging Shipping Software
Incorporating shipping software into shipping policies can automate parts of the shipping process. Shipping software lets you automate processes like label generation, order tracking, and return management.
This saves time and reduces human error, also cutting down expenses in case of shipment errors. Using integrated shipping software solutions also helps businesses integrate multiple carriers and compare rates to select the most affordable option for each shipment.
PostShip provides a branded order tracking and returns experience, making your shipping process more efficient and customer-friendly. The first 100 orders are free! Check out the pricing today!
Along with a well-structured shipping policy, let's discuss how consolidating shipments can lower shipping costs.
Consolidate Shipments
Consolidating shipments can minimize shipping costs if you regularly ship multiple items to the same location. Grouping small packages into a larger shipment can reduce the shipping fee since you only need to pay for fewer labels.
Use optimal packaging techniques to fit multiple orders
Efficiently packaging various items into one box can save on shipping costs. For example, Amazon often uses 'box in box' techniques to pack smaller items in larger boxes without wasting space.
Coordinate with suppliers and vendors for batch shipping
Collaborating with suppliers to receive goods in bulk can reduce shipping frequency and cost. A retailer ordering products from multiple suppliers might schedule deliveries to coincide, allowing for fewer trips and lower overall shipping costs.
Establish centralized distribution centers to streamline processes
Setting up distribution centers close to major consumer bases can help reduce shipping distances and costs. For example, companies like Zappos use multiple fulfillment centers across the country to expedite delivery times while lowering shipping costs.
Consolidating shipments can lower shipping costs. Postship allows you to integrate multiple carriers and automate your shipping process. We provide a unique branded page for tracking and returning consolidated shipments.
There are plenty of ways to reduce shipping costs by being resourceful with your packaging supplies. Now, we will focus on efficient order fulfillment strategies, which can help you streamline your operations and cut costs further.
Employ Efficient Order Fulfillment Strategies
Effective order fulfillment can help ship products faster while keeping the costs low. Whether these orders are shipped in-house or using third-party logistics providers, streamlining your fulfillment process can reduce labor costs and eliminate shipping delays.
Implement batch processing of orders
Batch processing of orders allows businesses to handle multiple orders at once rather than individually, which can streamline operations and reduce labor costs associated with order fulfillment.
Position inventory strategically to reduce shipping zones
Businesses can minimize shipping distances and associated costs by placing inventory closer to key markets. For instance, retailers analyze sales data to determine optimal warehouse locations based on regional demand.
Use advanced inventory management systems
Implementing systems tracking real-time inventory levels helps prevent overstocking or stockouts, optimizing order fulfillment processes.
Shipping labels
Utilizing automated systems to generate shipping labels can reduce errors and speed up the shipping process, leading to long-term cost savings.
Insure with third parties
Using third-party insurance options for high-value packages can protect against loss without incurring high carrier fees.
Partner with 3PLs
Collaborating with third-party logistics providers (3PLs) benefits businesses by leveraging their expertise in logistics management, potentially reducing shipping costs through better route planning and bulk shipping rates.
Opt for dynamic routing algorithms to minimize costs
Advanced routing software can analyze real-time data to determine the most efficient delivery routes, thereby reducing fuel consumption and delivery times.
A streamlined fulfillment process saves time and helps lower shipping costs by reducing errors. But that is not complete without learning how to optimize carrier costs.
Check for Carrier Discounts
Most major carriers, including UPS, USPS, and FedEx, offer discounts to small businesses that ship frequently. Contact your carrier directly to inquire about any special rates that could help you reduce shipping costs. Businesses can also use shipping software to integrate with different carriers and choose carriers that offer the best rates in the market.
Businesses can:
- Ask about business shipping rates from your carrier
- Join a rewards or loyalty program to earn discounted shipping.
- Explore third-party shipping services that offer negotiated rates with carriers.
Carrier discounts can lower shipping costs, especially when paired with the other strategies we have discussed. Let’s wrap up with a quick summary of everything we have covered so far.
Conclusion
Lowering shipping costs is essential for small and medium businesses to maintain profitability and stay competitive online. Utilizing strategies like flat-rate shipping, prepaid shipping, optimizing the packaging process, and leveraging bulk shopping discounts, businesses reduce shipping expenses without sacrificing service quality.
Additionally, employing shipping software and exploring carrier discounts helps automate processes and secure the best rates. Implementing a well-defined shipping policy also reduces costs and enhances customer satisfaction through transparent pricing and clear delivery expectations. These methods allow small businesses to streamline their shipping process to incur minimal expenses by improving efficiency and driving long-term growth.
A reliable and branded order tracking and return management system, Postship transforms your shipping challenges into revenue generation opportunities! Want to learn more? Book a demo today!
