How to Cut Small Business Shipping Costs

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Cutting Shipping Costs - Woman with a lot of boxes
Christine LeeChristine Lee
October 6, 2021
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One of the main issues facing eCommerce businesses is the cost of shipping. How can small businesses and startups compete with the likes of Amazon?

Delivery person with a box

Every year, shipping rates continue to increase, yet consumers demand low to no shipping costs, but bigger brands are the ones getting shipping discounts. So how can you compete?

This guide gives you some tips on how to cut small business shipping costs while still providing that customer experience and fast delivery time that’s expected in today’s busy world.

Tips to How to Cut Small Business Shipping Costs

For businesses that want to optimize their shipping rates, it’s important to understand the following:

  1. What are your current shipping costs per product
  2. Know the basics of shipping and delivery experience for customers
  3. create cost-effective shipping strategies that benefit you and your customers
  4. Be transparent about your shipping costs and delivery times

There are many variables to consider with shipping, including the hidden costs. If you’re handling fulfillment completely in-house, then here are some ways to help reduce the cost of shipping.

1. Set Up Shipping Zones

It’s no secret that shipping fees increase when shipping to destinations that are far away from your home base. With shipping zones, you can create geographical areas that carriers easily ship to within the United States. Zones are created based on the distance a shipment would have to travel from a certain location, labeled Zone 1 through Zone 8.

If a zone is a higher cost, it’s likely because the distance is far away and will cost you, as well as slow down your delivery. That’s why it’s important to identify where shipping to higher zones will cost you more, then develop a plan to partner with companies that have multiple fulfillment centers to cut down shipping costs to these higher zones.

2. Discounted Supplies

USPS Priority Mail Box

Many shipping companies like UPS, FedEx, and USPS offer boxes and envelopes for free to small businesses or at a discounted rate depending on the packaging supplies. In addition, you should be purchasing all packing supplies like bubble wrap or air-fill in bulk to cut down on costs.

This helps you reduce your average per-shipment cost over a longer period of time, but investing in bulk, discounted supplies does have an upfront cost.

3. Negotiate Lower Shipping Rates

If you do enough business, most shipping companies have pricing discounts available based on your volume. You don’t have to ship millions of items per year either. Many discounts are available depending on your volume, so there’s a reason not to try and negotiate volume discounts in exchange for loyalty to a shipping provider.

4. Weigh Packages and Choose the Right Dimensions

Worker weighing a box

Are you shipping packages that are difficult to transport? Unless you have to ship items in oddly shaped, large packages that weigh a ton, you should avoid irregular shipping packages. You should invest in a postage scale to plan for costs and purchase shipping labels according to weight and dimensions.

If you’re using boxes that are unnecessarily big for the items you ship, you’ll also pay more because of the additional space that the package takes up in transport. This is because larger boxes also create larger dimensional weight.

5. Try Prepaid Shipping Labels

If you know that you’re shipping a certain number of items with the same weight and dimensions, then you can also pre-purchase shipping labels upfront and get around a 20% discount on shipping costs from FedEx and UPS.

You can use the labels anytime, so as soon as your order is ready to ship, you already have a label ready to go. However, this only works if you mostly ship orders containing the same dimensions and weight, or if you know this information ahead of time for a large number of orders.

6. Understand Psychology of Online Shopping

Free Shipping sign

Everyone knows that adding “Free Shipping” can increase your sales, but there is actual psychology that people will pay more for items with free shipping than for a lower-cost item with $8.99 in shipping.

So when customers see value with free shipping, the costs of shipping have likely been factored into the overall price instead. This means that you can adjust the product price to include shipping cost and offer free shipping, but this only works on higher cost or novelty items.

You can also offer a flat rate shipping fee to all customers that blend an average of shipping costs according to your average order value. You can increase the average order price slightly and lower your flat rate this way.

In other cases, stores require a minimum amount to be spent before unlocking free shipping. This works out multiple ways for your business as you’ll increase the average order value but also deliver value with fast, free shipping.

7. Change Shipping Carriers

Man delivering a box to a woman

If you're not getting any discounts or offers from your current shipping carrier, consider switching to a carrier that offers more areas to ship to and discounts. There are a number of shipping calculators from major shipping providers, such as UPS, USPS, FedEx, and DHL that you can use to see how much your shipping costs would change.

  1. UPS Shipping Calculator
  2. FedEx Shipping Calculator
  3. USPS Shipping Calculator
  4. DHL Shipping Calculator

8. Use the Right Packaging

There are a few packing mistakes that new companies make when shipping products that just inherently increase your shipping costs. For example, you may add to package weight using a certain type of paper filling. You may also use boxes when a poly mailer is just as efficient.

If you are struggling with shipping costs, then you may want to cut down on custom branded boxes, branded inserts, shredded paper filler, and other custom filling items that increase your total shipping weight.

How Will You Grow Your Business This Year?

There are many ways to increase your business growth, whether it’s through analyzing your shipping costs more closely, improving your inventory management, or securing financing.

For small businesses looking to increase sales, hiring an e marketing consulting company can help you implement the strategies and tactics to grow your business in today’s ever-changing digital world.

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