6 Tips to Reduce Shipping Costs for Small Businesses

How can a small business compete with the likes of Amazon when it comes to shipping?

Every year our shipping rates increase, but it seems like the big brands get better shipping discounts.

Shipping is one of those unglamorous-but-crucial things that every ecommerce company has to deal with. No matter what size you are, you want to do it well for yourself and for your customers.

We get that. Which is why this guide will help you reduce shipping costs, so you can provide a better customer experience and earn more profit in your business.

Know your shipping basics

One challenge every online store comes across is shipping. It can be a bit intimidating: you do the work to make, pack, and mail your products once a sale comes in. But once you hand it over to a shipping carrier, it’s out of your hands. It’s the carrier’s job to deliver your package on time and in pristine condition.

If the package comes damaged, or never comes at all, it could leave a bad impression on your customer.

Shipping fees are the cost used to ship items to a customer. They include:

• Boxes, packaging, tape, and stickers
• Labor for sending an item
• Courier costs for collecting and delivering item
• Import/export fees when shipping internationally

As a merchant, you have to determine and disclose ecommerce shipping costs on your website. Some of the most common questions you’ll get as a store owner will be related to shipping.

To combat this, merchants create a shipping policy that sets expectations for customers about shipping times and costs. It’s also a reliable asset when customers have complaints or questions about their orders.

Shipping costs influence whether a shopper buys your products, or not.

In fact, ecommerce research group the Baymard Institute found that nearly half of all online shoppers abandon their carts because extra costs (like shipping and taxes) are too high. While you can’t change the local sales tax on your product, there are some ways you can reduce shipping costs in your online store.

If you haven’t determined a shipping strategy yet, read Shipping Strategy: Get Packages to Customers WIthout Cutting Into Your Bottom Line.

How to reduce shipping costs for a small business

Now that you’ve had a little refresher on what shipping costs are, let’s look at some easy ways to reduce shipping costs in your store:

• Reduce weight of packages
• Choose the right-sized packaging
• Use flat-rate shipping when possible
• Use Shopify Shipping to cut carrier costs
• Know when rates change
• Offer local delivery or pickup

Reduce the weight of packages

When it comes to shipping packages to customers, weight is money. The heavier the actual weight or dimensional weight, the more it’s going to cost to ship.

While it may only be a few cents per package, think about that few cents over several hundred packages. This is why lightweight packaging is good for reducing shipping costs and improving profit margins.

Some ways to reduce package weight include:

• Pack products in corrugated boxes. Corrugated boxes are a type of ecommerce packaging that’s stronger and lighter than regular cardboard boxes. They have rows of small air-filled grooves between the inner and outer layer of the box.
• Use lightweight packing material. There are many types of packaging material to choose from, some heavier than others. Some lightweight options to try are air pillows, packing paper, bubble wrap, foam inserts, Versa Pak wadding rolls, and excelsior. The goal is to keep items packed tight and lower their weight.
• Design a custom shipping package. The closer your shipping package matches the shape and size of your items, the less packing material you’ll need. If you have a product that sells in high volume, the expense of producing a custom container may offset rising shipping costs quickly.

If you are shipping very heavy items, check and see the rates that are available if you were to use carrier-provided Flat Rate packaging. It offers the same rate no matter how much the value of the package is.

Lightweight packing practices can save you a few ounces each shipment. Over time, this could lead to sizable gains in profit margins and return a good investment on your time and resources.

Choose the right-sized packaging

When thinking about cutting shipping costs, one thing you can do is change your packaging.

It’s easy to buy or get packaging that is a little bit bigger than what you’re actually sending. For example, you could use a poly mailer instead of a box, or even a padded envelope if you need a little bit more protection.

Your shipping cost is dependent on the size of the package and the weight of the package. Cardboard is heavy, and anywhere you can trim down weight will help you win over time.

And if you’re paying for your packaging, a bit of research could save you some money. Many carriers give away free packaging.

For example, the USPS offers packaging of various sizes it gives away for free when you pay for shipping under specific mail classes. UPS and DHL Express also offer free packaging.

Whether you’re getting your packaging for free or ordering custom packaging, knowing what types and sizes of packages you use most often can also save you money.

Start by measuring your products and figure out how many you typically send at one time. That will help you see what size packages will work for the orders you ship most often. If you're selling one item at a time, versus several, just look at your order history to figure it out and order packaging that would fit with your normal orders.

Use flat-rate shipping when possible

Shipping container geometry and pricing are always changing, and not for the better of your bottom line. It may even be hard to keep up with all the changes.

In 2021 alone:

• UPS increased rates by an average of 4.9%, with larger increases for oversized and heavy packages.
• The United States Postal Service (USPS) increased rates ranging from 2% to 4.95% or more, depending on size.
• Fedex increased freight shipment rates from $0.10 to $0.35

Due to rate hikes, online brands are looking toward flat-rate shipping to decrease shipping costs.

Flat-rate shipping means the shipping costs are a single rate, regardless of weight, shape, or size of the item. The immediate benefit of flat-rate shipping is converting variable costs into fixed costs. So if you plan to ship 10 items within the specified weight range, you know in advance exactly how much it’ll cost.

You can set up shipping rates in the checkout area for customers in your Shopify store.

You can create flat shipping rates for any order within a shipping zone or orders that meet a specific price or weight range. For example, in a shipping zone for the United States, you could set a flat rate of $5 and another flat rate of $3 for orders over $50. You have control over what a customer is charged at checkout.

Use Shopify Shipping to cut carrier costs

Shopify Shipping makes it faster and easier to fulfill orders. You can buy shipping labels in Shopify, print multiple labels at a time, and get orders out the door quickly. Merchants can save up to 88% on shipping costs in the U.S. and send products around the world with confidence.

Shopify Shipping has allowed our business to grow. We’re not buried in fulfilling orders—we’re able to concentrate on thinking about where our business can go long term.

Shopify Shipping gives you pre-negotiated discounts with shipping companies such as:

• USPS
• UPS
• DHL Express
• Canada Post
• Sendle

The best part? You don’t need to pay a monthly subscription fee for a shipping solution. Shopify Shipping is already available in your dashboard, so you can manage products, customers, inventory, and shipping all in one place.

Leverage the discounts available with Shopify Shipping in your shipping strategy and make it easier to offer free or flat-rate shipping to customers at Checkout. You can also reach international customers easily with automatically generated customs forms and discounts on international shipping.

Learn more by reading Shopify Shipping Services: Offer Affordable and Convenient Shipping for You and Your Customers.

Know when rates change

Stay on top of pricing changes so they don’t cut into your bottom line. Shipping carriers review their pricing each year and adjust rates due to higher costs like labor and fuel. New prices are implemented every January and can also occur during the year.

Not sure what the latest rates are? Read How to Prepare for Shipping Rate Changes in 2021. We update the article every year, so shippers can optimize their shipping strategy and reduce shipping charges.

Offer local delivery or pickup

One way to reduce shipping costs is not to use a carrier at all. A recent trend coming out of the COVID-19 pandemic is people shopping through local, independent businesses. According to our consumer trends data, nearly a third of buyers say they’ve bought something online and had it delivered locally during the pandemic.

As an online store, local delivery lets customers buy your products online and have you deliver it to their homes. You could also allow customers to come pick up their online order from your store. Local delivery and pickup are alternatives to shipping with a carrier and can save you money.

Offering local delivery services also helps you:

• Connect with your local community by making it easier for locals to shop with your brand
• Improve customer experience by saying goodbye to shipping delays and variable costs
• Increase sales through 25% higher cart sizes and average order value

Giving customers the option to get local delivery removes the barriers to purchase, which impacts your bottom line. It also gives you the chance to lower shipping costs and build customer loyalty.

Creating cost-effective shipping strategies for your ecommerce store

There’s no doubt about it: the cost of shipping can eat into your profit margins fast.

Use these cost-effective tips to reduce shipping costs in your business today. Make sure you use Shopify Shipping to get the best rates available, whether you’re shipping domestic or international. And try to offer local delivery when possible. This will help create better experiences for shoppers, lower rates and delivery times, and increase revenue for your store.

Illustration by Luca D’Urbino