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 huge upside in taking the time to lower shipping costs. Particularly 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 recent 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 the previous year. That expectation includes free shipping for orders of less than $50. The best way to afford free shipping is to reduce shipping costs.
At the same time, customers expect fast delivery. A 2018 survey found that consumers increasingly want faster delivery options, including same-day delivery. Online shoppers will pay for expedited delivery in some situations. However, fast and cheap (or free) is the winning combination for shipping costs.
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 7 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. Most clothing can be safely shipped 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 test the weight of a typical order using different 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 Your 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. Using the DIM weight formula, a 5-pound package could be charged as if it weighed 6, 7, or even 10 or more pounds because of the size of the box.
DIM weight pricing mostly 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. However, in most cases, even fragile products can be safely shipped with minimal infill, if they are 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, CA for $19.06 via FedEx Ground. Delivery takes six days. 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. The sooner you hand off an order to the carrier, the longer you have to meet customer 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.
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 shipping. Make sure the warehouse guarantees that it will meet your same-day fulfillment deadline. In addition, seamless integration with your eCommerce platforms is vital to same-day shipping. This will ensure that your orders arrive at the warehouse immediately, so they can be processed right away.
Note that same-day shipping is not the same as same-day delivery. Same-day shipping gets an order on a delivery truck the same day your customer places it. Same-day delivery gets the order to the customer the day it’s placed. Many fulfillment companies offer same-day shipping. Same-day delivery is less widely available.
5. Shorten Shipping Distance
Moving your products closer to your customers saves on eCommerce shipping costs and delivery time. Shipping costs are determined by shipping zones. 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 makes sense for you will depend on the size of your business and the volume of your orders. Amazon has hundreds of warehouses across the country so it can 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’s two warehouses are located in Knoxville, TN, and Salt Lake City, UT. From these two locations, deliveries reach 97% of US customers within two days. In addition, the two locations reduce eCommerce shipping costs by lowering the shipping zones for most orders.
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 is able to pass on 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 handle 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. You aren’t locked into a lease on your own warehouse. 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. As mentioned above, 3PL services companies may have reduced shipping rates. In some cases, they may be able to pass on these discounts to you. Order fulfillment warehouses also buy boxes and other packing materials in large 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 is enough to fill all your orders without tying up too much capital in your inventory.
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.