How to Reduce Shipping Costs

By Cameron McCool on June 1, 2017

An entrepreneur is surrounded by packaging and shipping items. She holds up a box that is ready to send to a customer.

If your business sends physical products to customers, your profit is linked to how much—or how little—you spend on shipping.

We scoured the internet and asked some of the entrepreneurs we work with here at Bench for their best advice on reducing shipping costs. The result: a comprehensive guide full of strategies and discounts you can use to reduce shipping expenditure.

1. Optimize Your Shipping Strategy

First up, are you using the best shipping strategy for your business model? Amazon and Zappos shaped consumer expectations around shipping to such an extent that free and one-day shipping are proven to drive an increase in online sales.

If you can offer free shipping to customers—do it. If you can’t afford it, or if your profit margin is too low, there are some alternative shipping strategies you can consider.

Free Shipping: Conditions Apply

One way to offer free shipping without breaking the bank is to include stipulations on which orders ship free. Here are some ways you can do this:

  • Free Shipping for Domestic Orders. Paid Shipping for International Orders.
  • Free Shipping—for orders over a certain order amount
  • Free Shipping—for a minimum number of items purchased

Say you offer the second option—free shipping for orders over a certain amount—make sure you outline the terms of the deal prominently across your site. For example, add a banner or hello bar on your homepage site that states “Free Shipping on Orders over $150” to encourage higher levels of spending per order.

Flat Rate Shipping

Apply a “flat rate for shipping on all orders,” and promote the fact that shipping remains the same no matter how big the customer’s order. This can incentivize customers to buy more, increase your business’s average order size, and make customers feel better about paying shipping costs.

Free Shipping for Return Customers

Want to encourage pre-existing customers to buy again? Add a “free shipping discount code” to their first invoice. Alternatively, send a free shipping offer out to your subscribers. It’s a great way to boost sales during slower periods.

Charge Full Postage

Easily the least-popular option on the list. Customers are more inclined to accept paid shipping on international orders, or when they’re buying from smaller online businesses . If you charge full postage, consider incentivizing customers to purchase with your store by discounting the total order cost in some other way (e.g. 10% off coupon).

Adjust Your Product Pricing to Reduce “Stated” Shipping Costs

Customers are more inclined to buy when they feel they’re getting a good deal. If shipping is as expensive or more expensive than the price of your product, you’ll have a tough time selling higher volumes of product.

To bring your “stated” shipping costs down and give customers the impression that they’re still getting a great deal, Etsy seller and part time Canada Post worker Jacquie Vintage suggests adjusting the price of your product.

“If your selling price is $10 and your stated shipping cost is $8.00 (total $18.00), [customers] are less likely to buy than if your selling price is $14.00 and your stated shipping is $4.00,” she says.

“The total spend, $18.00, is the same. The buyer perceives a better deal with $4.00 shipping and is more likely to buy.”

“In my own shop, I try to keep my stated shipping costs under $10.00 for the US, where it’s possible for me to do so. If it actually costs me more in postage, I add the difference into my selling price. It may not be possible for all sellers to do it this way, but it’s worth exploring.”

2. Compare Shipping Rate Calculators

Calculating shipping rates ahead of time allows you to plan shipping costs effectively and avoid additional fees at the post office. Bookmark these shipping rate calculators, and compare rates periodically to make sure your business is getting the best deal.

3. Batch Process As Much As You Can

Etsy Seller and Bench Marketing Creative Kendra Murphy recommends batch processing everything you possibly can in order to save both time and money.

“Making one trip to the post office to send 20 orders is more efficient and cost-effective than making 20 trips to the post office to send orders individually,” she says.

Buy stationery in bulk to save making multiple trips to the store. Create an assembly line in your home to expedite the packaging process. Make a stamp of your return address to save yourself from having to write it on every envelope. Create shipping labels that display your logo and print them in bulk from home. The more you batch process, the more time and money you’ll save on shipping.

4. Cut Down Packaging Costs

Here are some strategies and hacks to help you reduce expenditure on shipping materials.

Negotiate Bulk Discounts

Always buy shipping materials in bulk and don’t be afraid to ask retailers for a bulk discount.

Buy Packaging from Discount Suppliers

Uline have a ton of variation (over 1,300 sizes of boxes, bubble mailers, and cushioning). Value Mailers is a great source for affordable packaging, and they offer free shipping. And you can use Ebay to find the lowest price on shipping materials. Search for your product with the ‘BUY IT NOW’ filter and then sort results using “Lowest to Highest Price.”

Reuse and Recycle

Wherever possible, reuse packaging. If you get a product in the mail, why not reuse the bubble wrap rather than pull out a new batch? Whatever can’t be reused, recycle it. This will save on garbage costs and you’ll get karma points from Mother Nature as well.

Experiment with Mailers

Try Polymailers for products that don’t require boxes; they are inexpensive, light, and come in a range of sizes.

5. Ask Your Competitors for Advice

The owner of Mayer Fabrics told UPS Compass that he often reaches out to competitors to ask how they manage and optimize their shipping process.

“If you can find people who have done something similar before, it’s good to find out where their failures were, or where they missed an opportunity,” he said.

Fire off an email to one of your competitors and ask them if they’d be willing to trade advice on shipping strategies. You never know who’ll say yes, and you might gain some invaluable new tactics to reduce your shipping costs.

6. Dig Around for Shipping Rate Discounts

Do you depend on one shipping company more than any other? Give them a call and ask if they offer any discounts that your business can leverage (e.g. loyalty discounts). To get you started, here’s a list of the best carrier-specific shipping discounts we found for sellers who ship from within the U.S.

USPS Discounts

Regional Rate Priority Mail is a low-cost shipping alternative for commercial and online customers who currently use Priority Mail. This option includes up to $50 of insurance with most shipments, includes USPS Tracking, and there are no fuel surcharges. Also, you’ll get free Package Pickup service at your home or office.

Media Mail is a USPS mail class restricted to delivery of books, film, and recorded media. Generally the cheapest way to ship heavy items up to 70 lbs, Media Mail is commonly referred to as the “Book Rate” among book sellers. However, you need to be careful that the contents of the package actually meet Media Mail requirements or you run the risk of the package being sent back to you along with a fine.

USPS Business Solutions offers discounted shipping rates and free USPS tracking.

ShipStation Partnership Discounts

ShipStation is a web-based software that helps e-tailers process, fulfill, and ship their orders. ShipStation customers have access to discounts with a range of shipping solutions, including USPS, FedEx, DHL, and Stamps.com.

UPS Discounts

SurePost is the UPS starter service for bulk shipping. There is no minimum shipment required per month, and the prices are based off weight. You do need to sign a Commitment To Ship agreement to get these prices.

UPS Connect is UPS’ small business postage solution. They currently offer a 20% discount on air and international shipping for new subscribers.

FedEx Discounts

Use FedEx Save Now, and get up to a 16% discount on select FedEx Express services, and 8% off select FedEx Ground services.

7. Use Hybrid Services for Bigger Shipping Discounts

ShipStation recommends using hybrid services when you’re shipping low-weight residential packages. You can save as much as 50% with this method. UPS SurePost and FedEx SmartPost are hybrids between UPS and USPS, and FedEx and USPS, respectively. Here’s how hybrid services work:

FedEx or UPS picks up your package and eventually drops it off at a USPS sorting facility near your customer. Delivery times are longer, but if that’s not a problem for your business model, the savings make it an option worth investigating. Talk to your shipping carrier if you’re interested (hybrid services are only available by contract).

8. Use Warehousers for International Shipping

If you ship goods overseas, you can reduce international shipping costs by using a third party logistics company. Also known as Warehousers, these companies can save you 35-40% on shipping costs. The only hitch is that Warehousers do tend to work with larger businesses that have a high volume of goods to ship overseas.

If you’re still a small or mid-sized operation, one solution is Shipwire—a Warehouser for growing businesses. They have warehouses in the US, Canada, Europe, and Asia. You can setup an account for free, and you’ll start paying for their service once you’re storing or shipping product from one of their international warehouses. Pricing varies by the amount you’ll be storing and shipping. Use the Shipwire calculator to determine how much you’ll pay to see if it’s the right fit for your business.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.

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Cameron McCool

Cameron writes for Bench, the online bookkeeping service for entrepreneurs.