You know what costs way too much? Shipping. If you run an eCommerce business, shipping costs are your worst enemy.
Every dollar spent on shipping is a dollar not going to the bottom line, and that’s a problem. But fortunately, there are a lot of different ways that you can cut shipping costs, if you know what you’re doing.
In this article, we’ll talk about what causes shipping costs to be higher than they need to be. First, we’ll talk about what drives shipping costs up. Then we’ll give you some practical tips that you can apply today to start saving on shipping.
4 common reasons why your shipping costs are higher than they should be
Shipping costs are made up of a number of smaller costs, including the cost of postage, shipping supplies, and the labor hours needed to pack items into boxes. That means there are a lot of different ways for shipping costs to spiral out of control, but there are also just as many ways to get them back in check.
The single biggest expense in shipping is postage, and it’s not even close. Postage prices are set by carriers like USPS, UPS, and FedEx who, in turn, set their prices on the costs they incur shipping items across the world. So to keep your postage costs low, you need to help the carriers keep their costs low by not taking too much space in their trucks and by not forcing them to burn tons of gas on heavy items.
This is why postage prices are primarily a function of package weight and size. If your packages are heavy or bulky, you’re going to pay a small fortune on shipping. Likewise, if your items are small or lightweight, you’ll keep costs low. Even a few inches or ounces matter a lot here.
Another major expense associated with shipping is breakage. Every time an item breaks in the mail, you’re on the hook to replace it. That means paying for two items, double the postage, double the supplies, and double the labor. That means anything you can do to prevent items from breaking in the mail will also save costs.
Many eCommerce store owners pay retail prices on postage. This is a mistake. There is no reason to pay full price for postage, because retail rates for most common shipping carriers are really high. Even store software like Shopify can provide up to 88.5% discounts on postage.
Lastly, sometimes shipping is expensive because of the labor costs. Even if you do your own shipping, your time has an economic value. The simple fact is that shipping 10 orders per day can take a long time. After a certain point, it makes sense to outsource the work so you can focus on growing your business or better allocating your labor.
How to cut shipping costs
Now that you know what the most common cost drivers are, you can more easily find ways to cut shipping costs. Understanding the basic principles will help you take actions like manufacturing lighter and more compact products or pivoting your business model to focus on items that can be shipped more cheaply.
But what if you need to cut shipping costs right now without making major changes? Turns out there are a lot of things you can do right now for the well-being of your wallet.
1. Reduce package weight and size.
If you’re looking to reduce shipping costs, the single biggest thing you can do is put items in packages that are precisely the right size. That is to say, all items should be packed tightly, with no more than an inch of space on each side of the item. That remaining inch of space can be filled with bubble wrap and similar lightweight materials to cushion the items in transit.
What this will do is reduce the size of packaging to what is strictly necessary to safely ship the item where it needs to go. Then by filling up the extra space with cushioning materials mostly made up of air, you won’t drive the weight up much either.
2. Reduce the odds of item breakage.
A lot of fragile items break because they rattle around inside the box. Packing items tightly in the right-sized boxes can help reduce the risk of breakage a lot.
The other major part of reducing item breakage is by using the right “void fill.” Good void fill materials include:
- Bubble wrap
- Air cushions
- Crinkle paper
- Packing peanuts
All of these are lightweight and very effective at keeping items safe in transit. If you decide to create fancy custom packaging, then creating custom box inserts is another good option for reducing breakage.
3. Purchase discounted postage.
Another easy way you can reduce shipping costs is by buying discounted postage. If you use Shopify, you can take advantage of the deeply discounted postage already provided by the system. If you sell on Amazon, you can also receive discounted postage through Amazon as well.
Otherwise, check out Easyship and consider setting up an account. You can get discounts of up to 91% on postage.
4. Outsource fulfillment when it becomes cost-effective to do so.
Consider outsourcing order fulfillment if your goal is to save on shipping. While the additional labor costs associated with hiring a fulfillment company might sound like an additional expense, order fulfillment companies can often save you money by using discounted postage and supplies.
Also important to consider is the opportunity cost of shipping orders in-house. Even if you’re not paying workers to ship on your behalf, every minute that you spend packing your orders is a minute you don’t spend growing your business. It’s really hard to put a price on the impact of this exactly, but it’s still a cost worth considering.
When does this begin to make sense? Generally when you have at least 100 orders per month.
There are a lot of simple actions you can take today to cut shipping costs.
Using correctly-sized packages with adequate padding materials saves on postage and the cost of replacing damages. Buying postage at a discount can save even more on postage. Lastly, outsourcing fulfillment might be a good option if you feel like shipping costs are getting out of control.