Here’s How You Save Money on Ecommerce Shipping

“I paid way too much for shipping last year.”

If you’re saying that, you want to save money. And who doesn’t? Stuff’s expensive and you want your business to turn a profit.

But eCommerce shipping, when you look at it at first, it feels like something you can’t do anything about. It’s just a cost of business, a thing you have to accept. UPS or USPS or FedEx tells you that postage costs X, and that it will be X + 6% next year and that’s that.

Not so. You have more power than you think here.

In this video, we’re going to talk about how you can save money on eCommerce shipping. You’re busy, so we’re going to focus on practical tips.

My name is Brandon, here on behalf of Fulfillrite. If you need help shipping your orders, go to fulfillrite.com and request a quote. We’ve shipped for thousands of clients and we’re happy to help you ship your orders too. The quote doesn’t cost a thing, so if nothing else, you get some good information about pricing. Link in the description.

But enough self-promotion. Let’s talk about how you can save money on shipping.

Let’s start with…

How Shipping Costs Work

You can’t save money on shipping if you don’t know how the costs are calculated. So let’s start there.

The largest chunk of your shipping expenses is postage. This is what you pay shipping carriers like FedEx, UPS, or USPS for their service. This is almost always the biggest part of your shipping cost equation.

Postage rates are different for every shipment, but they’re always based on three things – the weight of the package, the size of the package, and how far it has to travel. You’ll see this reflected in different pricing structures in different ways.

Carriers have three basic pricing structures: flat-rate, weight-based, and dimensional weight pricing. Flat-rate pricing is straightforward – a fixed fee for packages up to a certain weight and size. Weight-based pricing is calculated based on the package’s weight, while dimensional weight pricing considers the package’s volume.

Regardless of whether you’re shipping in a USPS flat box or shipping by weight with FedEx, if you want to keep costs low, the same two rules apply. Keep your packages small and keep them light.

Packaging is really important here. Yes, packaging is a part of shipping costs. Boxes have a cost, as does filler material like bubble wrap and cardboard. But that pales in comparison to how packaging affects postage. Shipping a tiny item in a big box will – nine times out of ten – cost you more per unit than the box and the filler material does.

Once you understand these rules – especially the impact of packaging on postage – you can see – and often calculate specifically – ways to save money. But we’ll talk about packaging a little bit later. First, I want to talk about…

Avoiding Retail Shipping Costs

This is a really big one. Really, really big.

If you start up an eCommerce shop, it’s tempting to go to the post office or UPS store. But even if you’re shipping a single unit per week, you really shouldn’t do that. Retail postage is just unnecessarily expensive.

ShipStation. EasyShip. Even Shopify…they all will grant you access to discounted shipping rates. These platforms have negotiated rates with carriers due to their high volume, and by using them, you tap into these lower rates. It’s like buying wholesale instead of retail – the more you ship, the more you save.

Seriously, I’m not joking. I’ve personally saved up to 70% using Shopify’s built-in discount rates on UPS, and I’ve seen reports of discounts upwards of 90% off retail.

Ninety percent!

And if you’re shipping with a third-party logistics company, aka. 3PL, aka. a fulfillment center, you’ll get to take advantage of discounted shipping rates this way too. Just about every 3PL ships a large volume. They aggregate the shipping volumes of multiple businesses, securing rates that are much lower than what you’d get on your own. Which, in plain English, means they can pass on postage discounts to you.

So again – can’t stress this enough: never pay retail postage rates if you can avoid it!

OK, rant over, that’s the easiest thing you can do right now. Once you do that, you should focus on…

Optimizing Packaging

You need to do two things. Keep the package as small as possible, and protect your items. Thankfully, these two objectives are compatible, and in fact, the right sized packaging is actually better at protecting items. That’s because they can’t rattle around inside if there’s little empty space.

So here’s what you need to do. Pick the smallest box your item can fit in with an adequate amount of packaging. An inch or a couple of centimeters on each side is ideal. Custom packaging is even better because you can put cardboard inserts inside to hold the items in place. Plus, custom packaging makes the unboxing experience better, which is always great when you want to trend on Insta or TikTok.

Whether you make custom packaging or simply buy more right-sized packaging off the shelf from ULINE, and you will save a ton on void fill material, spend less on boxes, and most importantly keep postage down.

Choosing the right packaging materials is key. You want materials that are light yet sturdy enough to protect your items during transit. Options like corrugated bubble wrap or inflatable air pillows offer excellent protection without adding much weight.

I touched on this a minute ago, but it’s worth saying again – smart packaging choices can significantly reduce your return rates. Damaged goods are a leading cause of returns in eCommerce. I mean, it’s happened to everyone, right? You buy something, it shows up broken.

Quality packaging helps you avoid these costs and keep customers happy.

Speaking of returns, let’s talk about more ways you can go about…

Reducing Return Costs

Depending on where you look online, return rates in eCommerce can be as high as 30%. But even if it were a third of that, that’s huge. Every returned shipment costs about the same to bring in as it costs to send out. And do you think your customer is going to want to pay for postage? Nope! Not in 2024, they won’t!

So step one: make your returns policy crystal clear. Make sure it’s easy to find, prominently displayed, and easy to understand. This will cut down on frivolous returns and probably help you close more sales in the future since people really do check return policies before they buy.

Complement this with detailed product descriptions. Leave no room for misinterpretation. Include high-quality images from various angles, and if applicable, such as in clothing, on different body types. For items like apparel, detailed sizing charts are a must. Accurate representations help customers make informed decisions, significantly cutting down on size or expectation-related returns.

Following best practices on returns streamlines the customer experience, enhances satisfaction, and reduces the frequency and cost of returns. Less processing and fewer return shipments directly translate to more savings for your business.

Keeping 3PL Costs Low

So as a quick reminder here – 3PLs are fulfillment centers. A lot of eCommerce stores use them to manage order fulfillment on their behalf.

Now not every eCom shop needs a 3PL. As we said in a prior video of ours:

Put simply, there are two reasons why you’d want help shipping orders: time and money. That is, you either save a bunch of time by not having to ship orders or a bunch of money by either not having to pay staff to ship for you or by getting cheaper postage rates by working with a fulfillment partner. 

Usually, this happens around 100 orders per month, but that’s just a rule of thumb. 

Well said, past me.

When you need a 3PL, it’s great. But you still want to keep those costs down. To do that, you need to understand how 3PLs price their services.

It basically comes down to this: storage fees and postage. These are the two fees that you have a lot of influence over.

If you follow good demand planning practices, you can keep your inventory levels right where they need to be. That will help cut down on storage. More info on that in a video linked, I don’t know, somewhere above my head.

For postage, location is key. Yes, you can choose slower shipping, and that can save you some money sometimes, but customers are generally impatient, so try and avoid that unless your customer base doesn’t care.

If you’re picking a 3PL or working with one with multiple locations, just make sure you have inventory close to where your customers live. Here’s a map of postage zones – in this case USPS. Those zones marked 1-4 – that’s a lot, lot cheaper than any zone 5 or above. Different carriers do their zones differently, so you’ll need to do a little specific research. But point is, find where the price break is, and try to position your inventory in warehouses where you take advantage of the price break as much as possible.

And, hey, if you don’t have enough orders to justify being in multiple warehouses, that’s OK. This is something you’ll want to start thinking about once you’re shipping around 200, 300 orders per month. Don’t feel pressured to over-optimize this.

Aside from that, it’s a good idea to periodically check your 3PL invoices and make sure the prices are in line with industry standards. You don’t necessarily want the cheapest 3PL since a good one can help you retain customers and keep return costs low. Just make sure the invoices aren’t riddled with a bunch of costs that don’t make sense.

And there you have it! You can do more about shipping costs than you might think. Your packaging has a huge impact on postage costs, and if you can reduce returns by even a little bit, that will help a lot. Aside from that, if you are looking for an order fulfillment center, consider overall shipping costs as part of that (though not the whole thing – that’s a complex decision, we have a whole other video on it).

And lastly, don’t let me catch you waiting in line at the post office with your eCom orders under your arm! Retail postage rates are for private individuals – not online sellers like you.

My name is Brandon, here on behalf of Fulfillrite. If you need help shipping your orders, go to fulfillrite.com and request a quote. We’ve shipped for thousands of clients and we’re happy to help you ship your orders too. The quote doesn’t cost a thing, so if nothing else, you get some good information about pricing. Link in the description.

If you enjoyed this video, please take a moment to like and subscribe. Don’t forget to slap some postage on that bell so we can express ship new videos to you as soon as they drop. And last but not least, if you have any questions, leave a comment below. I will personally answer as many as I can.

Thanks for watching!