Every eCommerce business, regardless of its niche, size, or experience, has one thing in common: shipping. Whether the company sells tech gadgets or fashion accessories, it always has to consider shipping. After all, that is the only way your customers will receive the product they ordered.
Unfortunately, shipping is among the biggest and most significant expenses in eCommerce. Therefore, it is an area you must optimize to keep at par with the intense competition in the eCommerce world. High shipping costs affect client satisfaction levels and your business's profit margins. As an eCommerce business owner, you must know how to reduce shipping costs.
In this post, we'll discuss the strategies eCommerce store owners can use to reduce shipping costs.
Related: An Overview of eComm Shipping Best Practices
Impact of Shipping to an eCommerce Store
You cannot mention eCommerce without mentioning shipping. It is a crucial aspect of the business and significantly influences online purchasing trends. For instance, free shipping is the top reason why people buy items online. Also, more than 50% of consumers below 25 years state that same-day shipping is why they buy from an eCommerce retailer.
For that reason, many eCommerce business owners encounter a flurry of inquiries about their shipping policies ranging from duration to costs. A shipping policy outlines crucial details about shipping when customers place an order online. It includes all details a customer needs to know, from available shipping options to shipping costs. The shipping policy may also include additional information, such as returns and exchange policies, to create a comprehensive resource for customers before purchasing a product.
This information helps bridge the gap between the brand's growth and customers' concerns and enables you to mitigate any issues that may emerge without disrupting other business operations. Displaying shipping costs on your shipping policy protects you from complaints regarding incurred charges and saves time since customers won't have to contact the support channel for that information.
While a shipping policy has immense benefits to an eCommerce business, you must craft a good one; otherwise, you risk losing money or customers to competitors whose shipping options are more appealing. With the right shipping policy, clients feel like they are getting the best deal by purchasing from you, and your business will grow.
But how can you provide an incredible shipping policy without taking a hit on your profit margins?
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Ways to Reduce Shipping Costs
Consider a Multiple Carrier Strategy
Many eCommerce businesses negotiate a reasonable rate with a single carrier and use them for all their shipping needs. While this may be a time saver since you don't need to request spot quotes or research rates online, your shipping costs are likely to be higher when you use a single carrier than when you have multiple carriers. A multi-carrier strategy gives you more options, and you can go for the best deal maximizing your ROI.
In addition to the reduced shipping costs, you will also be safe when service goes badly with one carrier. A diversified carrier pool allows you to switch to one of your other resources in case a carrier discontinues service to some areas, faces weather-related challenges, or ups their rates. If you don't have a plan B, you might have to keep up with unexpected price hikes, which will hurt your bottom line.
Another reason you should consider a multi-carrier strategy is the service difference that comes with each carrier depending on your job. Some carriers will serve you better for different shipment types, e.g., oversized, domestic vs. international, etc. A multi-carrier shipping approach allows you to choose one that is best suited for each particular shipment.
Reduce Dimensional Weight
Carriers won't only look at the package weight. They also consider dimensional weight when determining shipping costs. Dimensional weight is a calculation that incorporates size into the price structure. Therefore, you'll incur unnecessary extra fees when you use a large box for a lightweight product since it leads to a considerable dimensional weight. Optimize dimensional weight by using packaging that makes the product more snug fit instead of rattling around.
Ship to Countries with Affordable Rates
One of the best aspects of eCommerce is allowing you to reach an international audience. However, shipping costs vary depending on the shipment's origin and destination. Therefore, when you start shipping products to customers, you'll find it may not be profitable to ship to some countries or regions.
You can save on costs by selling to countries with more affordable shipping fees. Choose the audience in the geographic locations you want to ship your products on your marketing platforms.
Canada is a close shipping destination for US-based eCommerce businesses and has a First-Class Package International Service rate starting at $14.25. The United Kingdom's starting rate is $16.25 — only two dollars more. Therefore, a US-based business may find extending its reach to the UK advantageous.
Consider Outsourcing Fulfillment
Outsourcing fulfillment is one great way to reduce eCommerce shipping costs. Fulfillment partners can offer low-cost shipping to your business. They ship your products from one of their locations closest to your customer, thus evading excess zone charges, and pass some of their negotiated carrier shipping discounts to you. Outsourcing fulfillment has many more benefits that can help save on cost while increasing your ROI.
For example:
- Fulfillment centers have flexible warehouse spaces, thus allowing you to increase or reduce the amount of shelf space you pay for according to your needs.
- They also have packaging staff with experience in handling different types of products. Your shipment reaches the destination in perfect condition, lowering return shipping and re-shipping costs. Also, since fulfillment centers purchase packaging materials in bulk, which is cheaper, they allow you to save on packaging costs.
- Fulfillment center managers can offer expert inventory management assistance helping to stock optimally such that you don't tie too much capital in inventory.
Optimize Shipping Routes
eCommerce businesses can utilize a route planner to map various delivery addresses and drop-off points for customers. These significantly optimize delivery and lower shipping costs. A route planner lets your business strategically generate orders with shipping addresses from purchases.
After that, you can determine the most cost-effective and efficient route to deliver a product from the source to the final destination. Route optimization may not always focus on taking the quickest way but reducing the overall travel time when you make several visits while considering variables such as vehicle load capacity, traffic congestion, hub location, and delivery time windows.
Get Third-Party Shipping Insurance
Anything can happen to a package during delivery, from getting lost, damaged, or stolen. However, shipping insurance from a third party covers the cost of these losses. Shipping insurance would be a wise investment if your business ships valuable items.
Getting shipping insurance from third-party companies is usually better since they charge less than carriers. For instance, every $100 insurance costs about $0.55 with a third-party insurance company, while a carrier charges around $0.85 for a similar insurance value. The savings you get with third-party insurance companies mean a lot when shipping items of significant value.
Switch to Longer Delivery Windows
eCommerce consumers are getting used to instant gratification as many eCommerce platforms offer same-day delivery to gain a competitive advantage. However, not every online shopper requires expedited delivery. Many have no problem waiting a bit longer, provided they get a perfect product.
The service costs are higher if a carrier has to deliver a shipment faster. Therefore, giving a carrier more time to deliver a package may mean a lower shipping fee. Whether trying longer delivery windows is viable depends on your business and whether the customer satisfaction levels would reduce with such an approach.
Let your customers know that delivery may take a while and provide them the option to pay for faster delivery themselves. You can set a longer delivery window in your policy but deliver the goods early. Customers won't complain when you get the shipment faster.
Related: FCL vs. LCL Shipments: Complete Guide for eCommerce Sellers
Use Packaging Given by Your Carrier
Another way to lower your packaging costs is by using the packing materials from your shipping carrier. Using your own packaging may subject you to additional 'dimensional fees' if the box exceeds the set size regulations.
You can reuse packaging materials, such as shreds, bubble wrap, etc., to lower your shipping costs. However, when reusing packaging, ensure you remove the old address labels altogether or put your own generated labels above them.
Reduce Package Weight
Heavier packages cost more unless you're using flat-rate shipping. Therefore, reducing package weight will ultimately minimize shipping costs. Of course, you will not be reducing the items' weight but rather slimming down the packaging and infill. Here's how to do it:
- Try to use a bag instead of a box.
- Find the lightest corrugated cardboard boxes that can protect your items during shipping. These box types are great since they come in different thicknesses.
- Try matching boxes to the items. Ensure the products in the order fits in the box without leaving a space that will require a lot of infills.
- Cut down the weight of the infill. You can perform trials to evaluate the weight of a standard order when you use different types of infill to establish the lightest option.
- Reduce packaging around the product. Product packaging is a critical part of branding but may also add weight. Therefore, consider creative ways to convey the branding without adding too much weight to your orders.
Consider Prepaid Shipping
With a prepaid shipping arrangement, you purchase several shipping labels upfront and affix them to your products as needed instead of paying for every package you send. This way, you can get discounts. This arrangement works best when you can establish the shipping cost in advance and send out similar weight packages repeatedly.
As discussed above, there are numerous ways eCommerce retailers can trim their shipping costs and keep their clients happy. A good shipping policy is a catalyst for the growth of an eCommerce business.
Reducing Costs is Easy
As you can see, there are various ways to reduce shipping costs while adding value for your customers. Reducing shipping costs affects your bottom line and increases customer satisfaction and retention.
