Reducing shipping costs for your eCommerce store is one of the most effective ways to improve your bottom line. Small businesses, in particular, can see a massive upside in taking the time to lower shipping costs.
If you offer free shipping, lower shipping rates will increase your profit margin. If your customers pay for shipping, they are more likely to complete a purchase with a positive customer experience if you charge lower shipping costs.
A 2019 study from the National Retail Federation (NRF) found that three quarters of respondents see free shipping as a must. This was a 68% increase from 2018. That expectation includes free shipping for orders of less than $50. The best way to afford free shipping is to reduce shipping costs.
The latest update to this report focuses on convenience. ECommerce companies should know that 83% of shoppers say convenience is more important now compared to five years ago, covering both online and in-store purchases. BOPIS and other elements are increasing your competition due to the pandemic, so it’s now more important than ever to offer dependable free, fast, affordable, and other shipping options.
High shipping costs are the number one reason people abandon online shopping carts. So how can you reduce your shipping costs? Is it possible to get a lower shipping rate? Here are seven ways you can reduce your shipping costs.
1. Slim down package weight
You can’t reduce the weight of your products, but you can slim down your packaging and infill.
- Use a bag rather than a box whenever you can. You can ship most clothing safely in Tyvek or plastic shipping bags.
- Corrugated cardboard boxes come in a variety of thicknesses. Use the lightest box that will protect your products during shipping.
- Match the box to the product. Ship in a box that isn’t much bigger than the products in the order. This reduces the amount of infill you need to add to the box.
- Reduce the weight of your infill. Use air-filled pillows whenever possible. Do some trial runs and assess the weight of a typical order using several types of infill to find the lightest option.
- Minimize your product packaging. The packaging around your products is an important part of your branding. It also adds to the weight of your products. Look for creative ways to convey your branding without adding much weight and bulk to your orders.
Small reductions in packing materials can add up to substantial eCommerce shipping cost savings over time. As a bonus, you’ll also save on the cost of packaging and infill.
2. Lower the DIM weight
Shipping your products in smaller boxes can save you money on DIM weight pricing, too. DIM weight is a calculation that all the major carriers use to incorporate size into their price structure. Your carrier may charge a 5-pound package like it’s 6 lbs., 7 lbs., or more if the box size triggers the DIM weight formula.
DIM weight pricing primarily affects large and lightweight or fragile products. A small product packed in a big box with a lot of infill stuffed around it is a DIM weight fail. This style of packing can increase your eCommerce shipping costs. It may feel more secure to ship your orders with lots of padding. Typically, you can ship even fragile products safely with minimal infill when properly boxed and packed.
Even if you can’t avoid DIM weight pricing, you can reduce your DIM factor. Pack your products in the smallest boxes they can safely ship in, and you will see your average shipping costs come down. Work with your fulfillment warehouse to find better ways to package your products to avoid DIM weight charges.
3. Consolidate shipping boxes
If you can consolidate your orders into fewer boxes, you can save a lot on shipping. The FedEx Ground rate to ship a 5-pound box from Knoxville, TN, to Gainesville, FL, is $11.61. The charge to ship a 10-pound box to the same destination is $14.32. A 20-pound box is just $18.62.
For example, let’s say you sell toolkits. Each kit weighs 10 pounds. The kits are securely packaged and can be shipped without an overbox. When people order multiple kits, you ship them individually in their boxes. However, if you packed two kits into a box and shipped them together, the cost to ship is $18.62 rather than $28.64. In this example, you can shave 35% off your shipping costs when you send two kits in one box instead of two.
Consolidating your orders into fewer boxes is one of the best ways to reduce shipping costs. This may also make it easier to offer discounts on volume sales.
4. Avoid Expedited Shipping Charges
Expedited shipping charges can slaughter your bottom line. For example, a 5-pound box ships from Knoxville to San Francisco at a rate of $19.06 via FedEx Ground. Delivery takes approximately six days, but FedEx Express Saver will get it there a day earlier for $46.92. And FedEx 2Day costs $60.85. In general, ground shipping will be more expensive than air shipping, and you will trade time for money.
The best way to avoid expedited shipping charges is to process your orders quickly. If an order languishes at the fulfillment center for several days before it’s picked and packed, you’ve shortened your window for on-time shipping. Instead, handing it off to the carrier sooner gives you a better chance to meet delivery expectations. If a customer has paid for expedited shipping and the order leaves the warehouse late, you could lose money. You might need to use a faster delivery service and pay the difference.
Note that in 2021 and 2022, this may not be as big of an issue as in the past. Customers realize that we’re all facing supply chain delays, so you’ll get some benefit of the doubt. That said, eCommerce businesses shouldn’t try to rely on this to mitigate in-house issues.
A note on same-day processing
You can’t speed up shipping without paying extra for shipping. However, you can get your orders out faster. Work with a fulfillment center that offers same-day order processing. You want them to discuss order processing and not necessarily same-day shipping or same-day delivery.
Those other terms can confuse customers and set expectations of immediate delivery, which is generally not feasible — or necessary — for nearly all eCommerce businesses. This distinction protects your business. That same-day guarantee ensures that orders are never sitting and waiting on processing, which can cause delays and mean things still take weeks even using expedited shipping.
Red Stag Fulfillment stands alone in the industry when we say we’ll ship 100% of your orders according to your chosen service level (Next Business Day, 3:00 pm, or 5:00 pm cutoff). If not, you don’t pay for that shipment, and we’ll pay you $50 for the concern.
We call that our order-processing guarantee to help everyone understand the speed discussed. If you’re then paying for faster shipments from the carrier, the combination can ensure fast delivery. You can make this even better by integrating directly with your eCommerce platform to give customers the most accurate estimates for fulfillment speeds.
5. Shorten the shipping distance
Moving your products closer to your customers saves on eCommerce shipping costs and delivery time. Shipping zones determine shipping costs. The zones correspond roughly to the distance between the point of origin and the destination of the package. A package shipped to Zone 2 will cost less than one shipped to Zone 8.
You can reduce your shipping zones by working with an eCommerce fulfillment company that has multiple warehouses. The closer a warehouse is to the customer, the more you can reduce your shipping costs.
There are some logistics involved in distributing your products among multiple warehouses. The number of warehouses that make sense for you depends on your business size and order volume. Amazon has hundreds of warehouses across the country to deliver a high volume of orders quickly. However, most eCommerce sellers can reduce shipping costs and delivery time with just a few warehouse locations.
For example, Red Stag Fulfillment has two warehouses in Knoxville, TN, and Salt Lake City, UT. These two locations can reach more than 96% of American households within two days. Our warehouses reduce your eCommerce shipping costs by lowering the shipping zones that most orders travel.
6. Negotiate with carriers
Volume shippers can negotiate lower rates with FedEx, UPS, and other shipping carriers. If your eCommerce business is big enough, you may be able to secure discounted prices. However, even small businesses and startups can benefit from carrier discounts.
If you sell through an eCommerce platform, check to see if your orders are eligible for lower rates. In addition, your order fulfillment company is probably a volume shipper. Ask if your fulfillment provider can pass that savings to you.
7. Get help from the pros
When you think about reducing your shipping costs, you might think it’s more economical to manage your own fulfillment. However, many online retailers find they save money by outsourcing their fulfillment.
Here are some of the ways that third-party logistics can lower your fulfillment and shipping costs:
- Flexible warehouse space. Red Stag won’t lock you into a lease on warehouse space (or even a long-term contract!). You can increase or decrease the amount of shelf space you pay for as needed.
- Packaging pros. The expertise of the packaging pros at your fulfillment warehouse means your products are less likely to arrive damaged. You pay for less return shipping and re-shipping. In addition, their packing expertise can help you avoid or reduce DIM weight pricing.
- Discounts. Discounts. As mentioned above, 3PL services companies may have reduced shipping rates. In some cases, your 3PL may be able to pass on these discounts to you. Order fulfillment warehouses also buy boxes and other packing materials in significant quantities. You may be able to save on packaging through your third-party logistics company.
- Inventory management. Leverage the experience of the managers at your fulfillment center. They can help you set restock levels and get you closer to optimal stocking levels. Expert inventory management assistance will help you stock enough to fill all orders without tying up too much capital in inventory.
Reducing Shipping Costs FAQ
How to reduce shipping costs?
Reducing shipping costs can be done in a number of ways, including:
- Reducing package weight.
- Reducing DIM weight.
- Consolidating shipping boxes.
- Using fulfillment services to shorten the shipping distance with strategically positioned warehouses.
- Asking carriers for better shipping rates.
- Avoiding expedited shipping when possible.
How to get the lowest shipping rates?
Getting the lowest shipping rates can be done by negotiating with carriers for better prices. Asking for the lowest shipping rates through carrier negotiation is a common strategy, and one that is more effective as shipper leverage increases with higher volumes of products that need to be shipped.
Getting Professional Help
Saving on shipping isn’t the sexiest part of running your business. But it could be the make-or-break factor in your long-term profitability. Fulfillment is the lynchpin of the supply chain for eCommerce businesses.
Free or low-cost shipping is hugely important to most online shoppers. Getting help from fulfillment professionals is a great way to reduce shipping costs and keep your customers happy.
This post was originally published on January 24, 2020 and was updated on November 29, 2021 with up-to-date information and an understanding of the ongoing supply chain concerns.
