12 Simple Tips to Reduce Shipping Costs and Increase Profits

12 Simple Tips to Reduce Shipping Costs and Increase Profits

Shipping is critical for e-commerce businesses. It intimidates some merchants, but they need to address it. They need to learn about the latest tips for lowering shipping costs. But first, it’s important to know the basics of shipping costs;

  • Your export costs when shipping internationally
  • The labor cost of shipping the package
  • The cost of packing materials
  • Courier costs for delivering the package to the customer.

E-commerce shipping is getting faster and faster thanks to Amazon. However, shipping costs are skyrocketing proportionally. This disadvantage affects retailers’ profit margins.

According to Statista, 63% of respondents said they abandoned online shopping carts because of high shipping costs. In another survey by Deloitte, 72% of consumers cited ‘free shipping’ as a significant factor when shopping online.

So it’s up to retailers to find ways to lower shipping costs and increase profits. Here are some tips for lowering shipping costs for small businesses.

12 Tips to Reduce Shipping Costs that Boost Profits

1.  Keep an Eye on Shipping Rates

Since shipping costs are crucial to running a successful e-commerce store, keep an eye on shipping rate changes. Major international shipping service providers  updates their shipping rates every January of the year.

In addition, carriers add surcharges during quarterly earnings, such as the fourth quarter, which is often the holiday peak season for the holidays. To remain profitable during this time, you may need to factor these increases in shipping charges into your product or shipping costs.

2.  Consider Flat-rate Shipping When Possible

Flat rate shipping is when the shipping charges are not tied to the size, dimensions or weight of the package. Considering a flat-rate shipping model can help your business save on fluctuating shipping costs, especially during peak periods.

You can take advantage of flat-rate shipping by consolidating packages into smaller packages when moving them to final-mile delivery distribution points. By reducing shipping costs, you can offer customers volume sales improving your bottom line.

3.  Partner with 3PLs for International Shipping

The role of a third-party logistics (3PL) partner is to optimize order fulfillment by reducing shipping costs and shortening delivery distances. Shipping zones that measure how far your package travels to reach the end customer impact your shipping costs.

In the United States, for example, shipping carriers span from Zone 1 to 8, with the point of origin being zone 1. Small businesses can reduce their shipping costs by working internationally with 3PL providers with fulfillment centers.

Here are some ways 3PL fulfillment companies like NextSmartShip can reduce shipping costs;

  • 3PL providers are experienced in product packaging. And in the case of returns you’ll pay less and the re-shipping process.
  • Their experience in managing fulfillment centers around the world allows them to optimize inventory management for your business. Sending inventory closer to customers for fast delivery.
  • Flexible fulfillment centers in major cities worldwide give merchants room to scale or down without many operational costs.

4.  Consider Prepaid Shipping

You can reduce shipping fees by purchasing numerous prepaid shipping labels from carriers like FedEx and UPS. A prepaid shipping label contains the destination address, shipment type, and barcode with all required information.

To generate a prepaid shipping label, you must pay for it before it’s generated. However, if you receive the shipping label from someone else, you will not pay anything. This method enables merchants to ship packages at no additional cost.

5.   Resize Packaging Dimensions

Your shipping costs are dependent on the size of your packages. And if you are paying for packaging, you may need to resize your packaging. If you can consolidate products meant for the same delivery destination, figure out which package size is optimal.

Also, some shipping carriers like FedEx, USPS, UPS, and DHL Express offer free packages of various sizes when you pay for shipping under specific delivery addresses. Take advantage of these offers.

Other benefits of resizing packaging dimensions include;

  • Better protection for packages.
  • Customer satisfaction results by showing you care about the environment with appropriate packaging sizes.
  • Reduce carbon footprint by saving freight truck space.

6.  Get Discounted Shipping Rates

Consider the following factors when determining how to get discounted shipping rates;

  • Charged Weight

 Knowing the dimensional ( DIM) weight, which converts cubic volume to weight using a divisor, is essential.

  • Fuel Surcharge

Since a fuel surcharge is applied to each package, based on standard nationwide fuel prices, you can negotiate a shipping discount at the contract level.

  • Services

Depending on the shipping service on offer, for instance, you do next early morning delivery or consider cheaper shipping service like next day PM delivery.

7.  Use Discounted Supplies

Packaging boxes, poly mailers, and dunnage can save shipping expenses when bought in bulk. Carriers like FedEx, UPS, and USPS offer small businesses discounts on certain packing materials.

8.  Consider Multi-carrier Strategy

As a merchant, sticking with the first shipping carrier you find is excellent. However, you may be missing shipment cost reduction opportunities when using multi-carriers.

Without an exclusive carrier, you can negotiate for lower shipping costs and get other benefits, including;

  • Mitigating shipping risks like one carrier failing to deliver customer packages on time. Also, if they raise their rates, you have an option to switch carriers.
  • Choosing the right service for your e-commerce store. Some carriers are specialized types of packages they ship. For instance, heavy and fragile items may require carriers with safety equipment for such packages.

9.  Reduce the Weight of Packages

The heavier the actual weight of the package, the higher the shipping costs. Some ways to reduce packages include;

  • Use lightweight packaging materials like packing paper or foam inserts to keep the package tight and lightweight.
  • Design custom packaging that mirrors the product. The closer the shipping package is to the items, the less material it will use.
  • Use corrugated boxes. This e-commerce packaging material is more robust and lighter than cardboard boxes.

10. Use Third-party Shipping Insurance

recent survey indicates that 43.9% expect a refund of discounted shipping costs when customer packages are damaged. Depending on the product, third-party package insurance can save your business on shipping costs than going for shipping insurance offered by the carrier.

11. Check Offers on the Marketplaces you sell on.

For example, if you use Shopify to power your e-commerce, it has partnered with shipment carriers like UPS to offer shipping discounts to its merchants. Additionally, the partnerships have integrated real-time carrier rates and fulfillment provider apps to select the one that suits your business.

12. Offer Local Pick-up Delivery

Customers can buy a product from an online store and pick it up at their local store. Offering local or pick-up delivery reduces shipping costs for you and the customer. Also, local delivery allows you to;

  • Connect with your local community; they can shop at your store in person if you own one.
  • Increase your average order value ( AOV)
  • Improve customer experience by reducing delivery costs and delays.

Over to You – Use the Tips to Reduce Shipping Costs

As a merchant, you may already be using these tips to reduce shipping costs for your e-commerce store. Those out of your control negotiate with your long-term carriers to offer you the best deals. 

Consider a global fulfillment partner if your e-commerce business does international package delivery. This will shorten your delivery distance, which reduces your shipment costs. 

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