High shipping costs are off-putting for customers so it is crucial for ecommerce businesses to find the right balance. Reducing the initial costs as much as possible is the key to both companies and their customers benefiting the most, and this ultimate guide to reducing ecommerce shipping costs will show businesses of any size how to save lots of money.
What are Shipping Costs?
Ecommerce shipping costs cover all the aspects of packaging and posting a package within the ecommerce industry. They include the cost of the necessary transportation by a carrier such as UPS to get the package from the shipping carrier to the customer, including surcharges and fuel charges as well as any other factors related to the amount of distance the package must travel to its destination.
How are Shipping Costs Calculated?
There are four factors used to calculate delivery costs and it will help every ecommerce business to understand how each works so they can learn how to reduce shipping costs. These factors reveal ways to reduce shipping costs and are as follows:
- Package weight
- Package dimensions (dim weight)
- Fuel surcharges
- Zone distance
The heavier the package, the more effort required to move it from one place to another, so this factor has a significant impact on the shipping costs. The shipping volume or size of the package, also known as its dim weight, also has an effect, as the larger a package is the more space it is takes up during delivery. Fuel surcharges are a reflection of the cost of fuel used by services delivering orders to shoppers.
The distance deliveries travel has been divided into eight domestic zones by the USPS. Zone 1 is for packages being delivered within a 50-mile radius of the point of origin, and Zone 8 is for packages travelling over 1800 miles.
How to Save on Shipping Costs: 19 Top Tips
There are many ways to reduce your shipping costs if you are a seller, whatever the size of your business. Here are the 18 very best ways to lower your shipping rates and increase your profits.
1. Add Shipping onto Customer Orders
Simply passing the shipping rates entirely onto the customer can save a business money. It may be a deal-breaker for some customers if the costs are very high, but this issue can be overcome by offering the customer various shipping options according to their needs from cheaper standard delivery or tracked shipping, to the more expensive next-day shipping.
2. Sell to Countries with Affordable Shipping Charges
Different countries have different shipping fees so you can often save money by selling to countries with more affordable shipping fees. For example, one nearby shipping destination is Canada which has a First Class Package International Service rate starting at $14.25. The starting rate to the United Kingdom is just two dollars more at $16.25, so it can be advantageous to a US-based business to extend their reach across the Atlantic ocean.
3. Compare the Pricing of Different Shipping Carriers
It is important to compare the rates offered by different shipping carriers such as UPS and FedEx as it is one of the best ways to reduce shipping costs for an ecommerce store. One shipping company might offer better rates domestically, while another may have better rates for international deliveries. Another still might offer a better rate for heavier packages. Here are the major shipping companies and their strengths:
- USPS – Good choice for smaller parcels delivered within the US.
- UPS – UPS has excellent ground shipment for larger packages within the US.
- FedEx – Fast delivery times including overnight and 2-3 day shipments.
- DHL – Huge global reach and environmental commitments.
4. Consider Regional Carriers if you Need Cheaper Shipping Solutions that Do Local Delivery
For local deliveries, the cheapest option might be a regional carrier. These operate in specific areas, either one state or multiple connected states.
5. Consider Using Packaging Provided by Your Carrier
You can reduce your packaging costs by using the packing materials provided by the shipping carriers. Small businesses should also look to reuse packaging wherever possible, though it is essential to ensure the old address labels are removed or covered completely.
6. Reduce Package Dimensions
As package dimensions impact the shipping costs charged by shipping companies and carriers, it is important to make your parcels as small as possible. Ways to reduce the size of your package include:
- Using smaller boxes.
- Better fitting boxes means less filler material.
- Pack multiple products in one box.
7. Opt for Hybrid Services
Hybrid services use different carriers to pick up deliveries from your business and move them onto another delivery service who are better positioned to make the final delivery. Each of the carriers involved is able to move the package more cost-effectively this way than if one of the carriers were to complete the entire delivery all by themselves.
8. Get Shipping Insurance with a Third Party
With so many parcels and letters delivered every day, some are bound to be lost, stolen or damaged along the way. Third party shipping insurance covers the cost of these losses, and can be crucial for a small business who ships products of significant value. Carriers often offer their own declared value coverage, but there are also dedicated third party shipping insurance specialists such as Shippo, Arpin International Group, InsureShip and U-PIC.
9. Use Bubble Mailers to Reduce Shipping Costs
Bubble mailers and poly mailers are excellent product packaging ideas for shipping non-fragile orders. These padded shipping supplies provide enough protection for non-fragile items without taking up much more space than an envelope, and do not weigh as much as the cardboard used in boxes.
10. Pay the Shipping Costs Online for Cheaper Postage
You can get cheaper postage costs and save time going to the post office by paying online with shipping software like Pirate Ship. This gives you access to the Commercial Pricing discounts offered to companies shipping over 50,000 deliveries a year with USPS without worrying about all rights reserved.
11. Get Suppliers to Use Your Account Number
To access the higher volume discounts organically, you can increase your shipping volume by getting your clients to use your account number when they ship their own shipments.
12. Buy a Postage Scale
Small businesses should use a scale to weigh each individual package to ensure they only pay exactly what is required for each package, instead of rounding up to a higher cost as can happen at a post office. If you get the best postal scale for your business, you will have more accuracy and control of your shipping costs.
13. Opt for Prepaid Shipping
Prepaid shipping costs are paid for by the shipper, and can mean there are discounts available. This is a good idea for companies covering the costs of shipping deliveries themselves.
14. Consider Last-Mile Delivery
Last-mile delivery involves a warehouse that receives shipped goods, and from there they are delivered to the final destination. Similar to hybrid shipping, this method can save a business significant amounts of money if a service is available in their area.
15. Reduce the Cost of Shipping Through Longer Delivery Windows
The faster a package must be delivered, the more expensive the service costs, so opting for longer delivery windows can mean less expenses. Whether this is a viable option or not will depend on each business and whether their customer satisfaction levels would decrease with such longer delivery windows.
16. Make Your Packages as Light as Possible
Package weight impacts the price, so making deliveries lighter is another method to reduce costs while increasing cost savings and profit margins. This includes getting the best shipping tape so you won’t have to use a whole roll for a package. Some methods to reduce package weight and save on expenses include using:
- Lightweight packing materials.
- Multiple parcels to spread weight cost.
- Corrugated containers.
- Foam inserts.
17. Automate Your Shipping Process with Software
Shipping software automates the shipping labels process to save time, which is especially useful as small firms grow and their order volume increases. Lots of shipping software can integrate with inventory management and the organization of your fulfillment center, with the software usually having intuitive controls such as toggle navigation options.
Some popular shipping software with all rights reserved products are:
18. Consider Fixed Price Shipping
Fixed price means entering set rates for delivering an order to that country, with these rates being what will be paid by the customer regardless of the order’s contents. It is useful for a small business that ships internationally and can save money in the long term as more orders will likely incur a lower cost of shipping than the set rates.
19. Outsource Your Fulfillment
Outsourced fulfillment requires hiring a third party to manage some or all of the order fulfillment process. This can include holding the stock for orders at the fulfillment center as well as packaging and shipping orders. Outsourced fulfillment services saves warehouse space in your own fulfillment centers, and can help a start-up get up and running or a small business expand without moving premises.
Which shipping method is cheapest?
The USPS has the cheapest shipping rates for most deliveries containing orders up to a medium to large size, using either their First Class Mail or Priority Mail services. For very large packages, you will be better off with UPS or FedEx.
What is the best way to reduce shipping costs for small businesses?
The best ways for a small business to reduce shipping costs are:
- Add shipping onto customer orders.
- Use small business shipping supplies provided by carrier.
- Reduce weight and dimensions of shipments.
- Pay shipping costs online for lower shipping costs.
- Outsource your fulfillment.
What are the best ways for an eCommerce business to reduce shipping costs?
The five best ways to reduce eCommerce shipping costs are:
- Get suppliers to use your account number.
- Use last-mile delivery.
- Use hybrid shipping carrier services.
- Fixed price shipping on orders.
- Use shipping software.
What is the cheapest way to ship small items?
USPS First Class Mail is the cheapest option for small packages weighing under 13 ounces, especially if they are thin and flat items. For packages weighing over a pound, then USPS Priority Mail is the cheapest option, plus Priority Mail includes insurance and tracking.
How do businesses offer free shipping?
There are three ways to offer free shipping. The first method is a bit sneaky and involves simply adding the shipping cost into the price of the products, which might not always help meet customer expectations.
The second method is to offer a minimum spend threshold to encourage customers to spend more on your products to receive the free shipments offer. This method can make customers spend a bit more than they intended to get the offer, and thus increase your bottom line.
The third method is to simply eat the shipping cost yourself in the hope that the offer will increase sales and your profit margin enough to make it worthwhile.
Does free delivery increase sales?
Shipping packages free absolutely does increase sales as studies have shown it to lead to a significant reduction in cart abandonment, which is a very good thing for the bottom line of any business. It is important to offer the free delivery at the right moment in the purchasing cycle though, as it is most effective once a customer has already decided they want the product. Seeing a free shipping at that moment results in more customers going through with their purchases.