11 Ways to Reduce Shipping Costs for Ecommerce in 2024
Shipping isn’t cheap.
Carriers raise their shipping rates every year. Demand in the ecommerce sector leaves a shortage of everything from truck drivers to warehouse space. Amazon only makes small business shipping more challenging by continuously raising the bar for faster free shipping — all of which becomes increasingly more expensive to replicate for small businesses that fulfill orders from home. So this begs the question, how can I reduce my shipping costs?
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11 ways ecommerce stores can reduce shipping costs right now
Shipping costs involve many variables. There are also plenty of hidden costs when handling fulfillment in-house. Here are some ideas that can potentially lower your average shipping cost.
1. Understand shipping zones
Many brands pay high shipping fees when they ship to destinations that are far away. Shipping zones are the geographical areas that carriers ship to, spanning from Zone 1 to Zone 8 for domestic shipments in the United States. Zones measure the distance a shipment travels, with the point of origin located in Zone 1.
The farther away the shipping destination is, the higher the zone and more expensive and slow it is to ship. If you can eliminate shipping to higher zones, you can save a lot of money over time and benefit from better shipping options with lower rates — more on partnering with companies that have multiple fulfillment centers shortly!
2. Weigh your packages and reduce dimensions
Unless you’re using flat-rate shipping, then shipping heavy items cost more. If you’re printing labels and shipping from home, consider investing in a postage scale to better predict costs and purchase the right shipping labels. In addition to weight, carriers consider dimensions of the package when calculating shipping costs.
If you’re using too big of a box for a lightweight item, you will pay more than you should because of the space the package takes up. Larger boxes can lead to larger dimensional weight, which in turn will lead to more expensive shipping costs.
To reduce package weight (and ultimately reduce shipping costs), try the following:
- Create custom packaging with smaller dimensions that are tailored to your product to optimize your dimensional weight (i.e., make it a more snug fit as opposed to having items rattling around in a box, which leads to you essentially paying for air in the box).
- Use “ships in own container” (SIOC) packaging, meaning your product packaging is what you add a shipping label to, so you don’t add a box on a box.
- Reuse old boxes. If you’re shipping something to friends or family members, there’s no reason you can’t reuse a sturdy box over again (and packing materials).
TLDR: Avoid shipping more air than what is necessary.
3. Find discounted supplies
Shipping companies such as USPS, UPS, and FedEx may provide small businesses certain boxes and envelopes for free or at a discount for certain packing supplies. You can also purchase packing supplies like boxes, dunnage, bubble wrap, airfill, and poly mailers in bulk to save money.
Don’t let the higher investment upfront scare you off — you won’t run out right away and you’ll also reduce your average per-shipment cost. You may even find some free shipping supplies.
4. Get discounted shipping rates
All shipping companies have pricing discounts available based on shipping volume, and you don’t have to be shipping hundreds of thousands of orders a month to get these discounts. There’s no harm in attempting to negotiate volume discounts in exchange for loyalty to one shipping carrier. Of course, the more packages you ship, the better rates you can get.
Ecommerce store owners should seek lower shipping costs, as long as the service for the lower costs does not affect the shipping solutions or extend delivery times.
5. Check out offers from the platform(s) or marketplace(s) you sell on
See if the ecommerce platform your store is powered by or the marketplace you sell on offer any bulk discount shipping services or programs. They may have features that provide real-time carrier rates, shipping apps, built-in features, and integrations with fulfillment software that can provide you with better rates and fulfillment services.
6. Insure with third parties
One way to save on shipping costs is to cut extra services, which, depending on the value of the product you’re shipping, could be shipping insurance. If you do need shipping insurance for your orders, third-party package insurers are usually cheaper than going with your shipping carrier — in some cases nearly half the price. Of course, this is most applicable to high value items.
7. Go prepaid
Prepaid shipping can get you up to 20% off shipping costs from UPS and FedEx simply by purchasing a certain number of shipping labels upfront. You don’t need to affix them to a box until the individual order needs to go out. This not only saves costs but time as well.
Note: This really only works when you consistently ship orders containing the same weight and dimensions or know this information ahead of time to ensure accurate shipping costs.
8. Switch from boxes to poly mailers
If you sell small, non-fragile products like clothing, shipping orders in a mailer envelope or poly bag can be far more cost-effective than boxes. The dimensions are smaller, taking up less room on a delivery truck, and using them also requires less packing supplies like tape and bubble wrap to save even more money.
If your orders contain different combinations of products, consider different sized poly mailers.
9. Look into hybrid services
Hybrid shipping services like UPS SurePost and FedEx SmartPost pick up your orders and then work with other carriers like USPS to transport your packages to a sorting facility or post office location, where it is then shipped to a residential area for last-mile delivery. This can cut costs as much as 50% in some cases. However, the tradeoff is often a slower delivery.
Note: There are specific volume, weight, and dimension requirements.
10. Stay on top of shipping carriers pricing changes
Every year, the major shipping carriers increase their shipping rates as part of the annual general rate increase (GRI). These increases vary by carrier, service level, weight, and other variables, but generally equate to about a 5% increase on average (though we’ve seen higher during the pandemic).
Additionally, carriers may implement surcharges at various peak times (such as the holidays and Q4 or what we saw happen during the early days of the COVID-19 pandemic), when there is a surge in packages being shipped. They also implement other surcharges annually, ranging from large package surcharges to signature required surcharges.
Unfortunately, there is no way to reduce shipping costs for these rate increases and surcharges, and you’ll either have to bake them into the shipping fee you charge your customers, eat the costs, or offset them some other way.
11. Encourage your customers to place orders early
During peak season or any high volume events or periods for your ecommerce business (e.g., heading into Halloween for brands that sell costumes or Thanksgiving for businesses that sell turkeys), it is wise to over-communicate by when your customers need to place orders online to ensure they get delivered on time.
The carriers have their own set of cutoffs for each service during the holidays to help prevent gifts from arriving late. For customers who want to reduce shipping costs, this will involve placing orders at the earliest cutoffs to avoid paying more for expedited shipping.
On top of running out of time as dates approach, there may be additional considerations that impact cutoffs, such as labor shortages, weather events that prevent carriers from shipping, shutdowns from COVID outbreaks, federal holidays that close down operations, and other factors.
If you work with a 3PL, be sure to pay attention to not only their specific carrier cutoffs, but their inventory receiving cutoffs, holiday turnaround times, any SLA extensions, and general holiday schedule. Any logistics company needs to make many strides over the months leading up to the holidays to prepare for peak season, and any brand needs to pay close attention to relay this information to their customers.
5 questions that can help save money on shipping
Not all of the tips above are going to be applicable to your business or improve your bottom line. Thinking about your current ecommerce shipping process, answer the following questions to get an even better sense of what you can do to cut or recover shipping costs.
1. How are you charging for shipping?
Regardless of how much you’re spending on shipping, the amount you charge customers can also affect your margin.
The psychology of online shopping and consumer preferences is fascinating. You can present shoppers with two scenarios where they would pay the same total price, yet they would abandon their cart for the one that has a higher shipping cost.
As long as they’re getting a perceived deal or the best value, they are more likely to buy.
Customers don’t want to pay for shipping, but it’s a major expense for a small business. Consider the following ideas to implement to make up your shipping costs:
- Adjust the product price to absorb the shipping cost and offer free shipping (only if you sell expensive products).
- Charge customers a reduced shipping cost while only slightly increasing the product price (e.g., charge customers half the price of shipping but bake the other half into the product price).
- Offer a flat rate shipping fee to all customers using a blended average shipping cost across all of your orders.
- Require a minimum amount of money to be spent on your store (that’s greater than the average order value) in exchange for free or fast shipping.
- Put parameters in place for orders that meet different criteria to more accurately reflect the true cost of shipping (e.g., charge different shipping fees for orders going to different countries, one shipping fee for orders that are over a certain cart value, etc.).
- Monitor your return rate and revisit your ecommerce returns policy to see if you should make customers responsible for covering return shipping costs.
2. Have you tried another carrier?
If you have allegiance to one shipper/carrier just because they’re closest to you, it might be worth looking into other options. Depending on the areas you ship to, different carriers may offer cheaper rates than what you’re currently paying. Use the following sites to dig deeper into your specific shipping costs:
3. Are you using the right packaging?
Many small businesses make common packing mistakes that increase their costs, like using too big package dimensions or extra package weight. Others use boxes when they could use a poly mailer or padded envelope to decrease the weight and dimensions.
If you use custom branded boxes, inserts, and other fancy packing supplies like shredded paper filler or custom tissue paper, and you are struggling to keep shipping costs down, you could probably save money by ditching those.
If you insist on using branded boxes, make sure they don’t have dimensions that fall outside of standard box sizes major carriers use, or you may face additional fees.
If your product packaging can be manufactured so it’s ship-ready, you can save on shipping costs by simply slapping a label on it.
4. Where are your orders shipping to?
Understanding patterns in shipping destinations can help to identify where you should be shipping from. If you’re shipping internationally and it’s costing you a lot of money, you may want to reconsider or instead work with an international fulfillment provider like ShipBob that operates locations across the globe.
For domestic orders, you can’t control or always predict shipping destinations, but you can control where you fulfill orders from. Working with a third-party logistics (3PL) company, you can utilize their ecommerce warehouses to store your inventory and ship from locations that are closer to your customers.
This can significantly reduce your average shipping cost when you multiply out those cost savings across all orders.
“We partnered with ShipBob to scale up operations in the US, and we’ve seen a reduction of 70% on shipping costs. Now, we can comfortably assign a shipping cost to each order by pinpointing the product weight and destination zip code. In comparison to shipping products to the US from Canada, which can be extremely variable in cost, fulfillment by ShipBob is much easier to estimate.”
Greg MacDonald, CEO & Founder of Bathorium
5. Have you tried using a shipping or fulfillment partner?
Companies like ShipStation and Stamps.com have free trials for small businesses managing shipping themselves.
Another big money and time-saver is outsourcing order fulfillment to a 3PL company that stores inventory, packs orders, and ships packages for you.
“Last July, Prymal reached $40,000 in revenue. After switching to ShipBob just four months later in November, we are reaching $160,000 a month in revenue — that’s 300% growth. We’re also saving $8,000 per month in fulfillment costs.”
Courtney Lee, founder of Prymal
In addition to obvious direct costs like postage, outsourcing shipping and fulfillment means you have new time to focus on areas of your business that drive sales, unlike packing boxes and running to the post office as orders come in everyday.
How outsourcing fulfillment to ShipBob reduces shipping costs
Sometimes, the best way to reduce shipping costs and scale is to partner with a professional fulfillment company. ShipBob provides inventory management, warehousing, and other ecommerce fulfillment services, and also helps brands compete with big retailers.
Bulk shipping discounts
With thousands of customers, ShipBob is able to negotiate bulk discounts from shipping companies such as UPS, USPS, FedEx, and DHL to provide better rates to customers for expedited shipping, 2-day shipping, international shipping, and other speeds and services.
“We were hesitant about leveraging ShipBob’s transportation management system at first – but it’s actually been really great. Before we were manually choosing rates for orders coming out of our warehouse, but now ShipBob’s WMS automatically selects the best delivery method for us so it costs us less and our customers get faster shipping.
We’re saving hundreds of thousands of dollars per year, just in postage. When we first got started, we estimated over $400,000 in savings. ShipBob has helped us save 40% on total fulfillment costs.”
– Adam LaGesse, Global Warehousing Director at Spikeball
Optimize fulfillment locations to be closer to your customers
ShipBob helps ecommerce sellers choose the best location in the US to store their inventory closest to the most customers using shipping destinations from their sales history. By cutting down the distance an order has to travel, it can be delivered quicker and at less cost.
You can also use multiple ShipBob facilities to efficiently reach even more customers.
Free packaging
With ShipBob, there are no separate line items for picking, packing, or packaging supplies. We use plain brown boxes and packing materials to not overwhelm your customers with our brand, but let them focus on unboxing your product. Merchants can also send custom branded boxes, poly mailers, and inserts to use for their orders.
Offset shipping costs from additional revenue
With ShipBob’s 2-Day Express Shipping program that can be enabled for all ecommerce stores, you can meet customer expectations, get more shoppers to complete their purchases, and drive lifelong customers.
As a result, ShipBob customers have experienced an 18% reduction in cart abandonment rate and a 24% increase in their average order value.
By outsourcing retail fulfillment, you can also get time back to focus on other tasks that drive new customers to your website.
One ShipBob customer got back 50% of their time to focus on higher dollar activities, and another was able to grow their business 291% year over year.
“When I was shipping orders myself, what I paid per order is the same price now to pick, pack, and ship orders through ShipBob. It’s even much cheaper to ship to certain countries, which used to take ages and often got lost with localized post here.
Now, I have very transparent pricing, and I can easily run and plan my business. I also like that I’m billed right away. My old carrier billed monthly, which would drain a huge sum of Euros from my account at once. My cash flow has improved.”
Leonie Lynch, Founder & CEO of Juspy
Request a pricing quote from ShipBob to learn more and see how we can help.
Reduce Shipping Costs FAQs
How can I negotiate better shipping rates with carriers?
One way to negotiate better shipping rates is to consider consolidating your shipping volumes by partnering with a 3PL like ShipBob, which offers aggregated rates due to higher order volumes. Additionally, you can compare carriers and negotiate based on shipping volume, destinations, and package sizes.
What is the cheapest shipping method for a small business?
The cheapest shipping method for small businesses typically involves using ground shipping services, such as USPS First Class or Priority Mail, which offer cost-effective rates for lighter packages. For heavier shipments, consider flat-rate shipping options. You can also use a 3PL like ShipBob, which can help you access discounted carrier rates due to bulk shipping, further reducing your costs.
