Statistics have shown that approximately 73 percent of online shoppers expect their orders to be delivered quickly - and at affordable rates. It can be really tempting to offer your customers the lowest available shipping rates, but in doing so, you may also negatively impact your profit margin. That’s why it’s more important to be able to reduce your shipping costs.
In this guide, we’re showing you how to lower and effectively manage your shipping costs and in turn, pass the lower costs on to your customers without hurting your bottom line.
How Do I Calculate Shipping Costs?
Before you look at our shipping cost calculator and start thinking about reducing your shipping costs, let’s take a look at some of the factors that determine how much you spend on shipping packages to your customers.
From package dimensions to weight, destination, value, and shipment type, there are several factors to consider. Here are some of the variables you should be thinking about as you get ready to ship.
Factor #1: Package Dimensions
All the major carriers use a unique pricing technique - called dimensional weight, or DIM weight - to calculate the shipping rates for each package. This technique considers the size of a package in order to determine its shipping cost. The calculation of the shipping costs is done by multiplying the length, width, and height of the package and dividing the figure by a standard DIM divisor.
Factor #2: Package Weight
With this variable, the cost of shipping is determined by how heavy your package is. If this number is higher than the DIM weight, the carrier will use it to calculate your shipping costs. Obviously, the heavier a package is, the more expensive it is to ship it.
Factor #3: Shipping Destination
Another factor that determines how much carriers charge to ship a product is its destination. The calculation is made by calculating the package’s pickup point and its recipient’s location. In the U.S., these locations are known as zones and range between Zone 1 and Zone 8. The higher the shipping zone, the more you can expect to pay.
Factor #4: Value of Package Contents
In eCommerce shipping, the value of your package’s content also plays a huge role in the amount you’re charged for shipping. For those who ship high-value products, you will always need to insure your packages, and this quickly increases the cost of shipping. Although it adds to the cost, it protects you in case of theft, lost, or damage in transit.
Other factors that go into the cost of shipping packages include delivery times and unexpected problems.
How to Reduce Shipping Costs
One of the biggest expenses that many online retailers have to deal with is shipping costs. However, many savvy eCommerce merchants are finding ways to reduce the amount spent on shipping packages. Some strategies include:
Tip #1: Use Reputable Shipping Companies
This is where Easyship can help you. As a reputable company, Easyship goes the extra mile to offer smart shipping solutions. We offer retailers access to 250 courier shipping solutions with discounts of up to 70 percent off shipping rates. Retailers can also connect their courier accounts and use their own pre-negotiated shipping rates. The result? You can always find the best, most cost-effective shipping method and pass the savings on to your customers.
Tip #2: Liaise with Suppliers
Many online merchants have figured out that liaising with their suppliers can help them reduce shipping costs. For example, suppliers can ship products to you using your own FedEx account number. This increases your shipping volume and in turn, gets your cheaper rates. Additionally, it eliminates the need to pay extra shipping costs for each of your consignments.
Tip #3: Negotiate with Multiple Carriers
This is one of the major reasons why Easyship offers you access to over 250 shipping solutions. Every shipping company has its own unique pricing schedules which are mostly based on the volume of shipments. If you ship often, try negotiating lower rates with multiple carriers and see which one works best for cost savings for your business.
Tip #4: Make Use of Free Packaging
Another great tip for how to lower shipping costs is to use free packaging and shipping supplies. Most of the major carriers offer free boxes to their customers, so it’s for you to get access to these. As well as saving your money on packaging, using your own boxes could see you having to pay additional dimensional fees if your packages exceed size regulations. You could save up to 20 percent with this strategy.
Tip #5: Get Third-Party Insurance
There’s one very simple reason for this tip. Third parties will charge you less to insure your shipments. While carriers charge merchants about $0.90 for every $100 of goods insured, third-party firms charge about $0.55 per $100 of goods insured. This means that if you ship large volumes or more expensive items, these minimal savings can actually add up quickly and save you a lot of money over time.
Tip #6: Use Regional Carriers
This is another great way to reduce the costs associated with eCommerce shipping. These regional carriers offer the same services as major carriers like UPS and FedEx but at significantly reduced prices. The only difference is that - as their designation implies - their delivery network is limited as they only operate within a small geographic area. For example, you can partner with OnTrac in the West, LoneStar in Texas, and Spee-Dee in the Midwest. This can be a good option if your deliveries are within their region.
Tip #7: Don't Use Too Many Carriers
It makes sense to try out multiple carriers when you’re first starting out. But once you find one that suits your shipping needs, stick to it. This is because trying out too many carriers at once will reduce your bargaining power since you’ll be shipping a lower volume with each carrier. Stick to just one or two carriers to capitalize on your bargaining power.
Tip #8: Understand Your Shipping Destination
One of the major keys to reducing shipping costs is having a clear understanding of the location you’re shipping your packages to. If you consistently ship to a particular region, understanding this area will help you negotiate good rates with a regional carrier.
Tip #9: Know All Your Shipping Fees
Make sure you don’t lose money (or customers) by factoring in all your shipping fees before you bill your customers. There are over 75 charges that could apply to each of your shipments, including Saturday delivery fees, fuel surcharges, and signature fees. If the shipping cost is on your customer, make sure this is included on their final bill or you’ll be forced to absorb them.
Tip #10: Know Your Package Sizes
Our shipping cost calculator takes into consideration factors like package weight, size, and destination. That’s why it’s crucial that you use boxes that are exactly the right size for your shipments. If you use large boxes for items that could have fitted perfectly well into smaller boxes or even bubble mailers, you will end up spending more and eating into your profit margins.
Tip #11: Try Hybrid Services
With hybrid services like FedEx SmartPost and UPS SurePost, you can actually slash the cost of shipping your packages by up to half. The main downside of hybrid services is that they have restrictive weight, volume, and size policies. Also, delivery times can be longer than using standard shipping options with the same carriers.
Tip #12: Make Online Pyaments
We’ve got one last tip for how to save on shipping costs. Did you know you can save more by making your shipping payments online? With Express Mail, you can save up to 60 percent; with Priority Mail, you’ll save up to 16 percent. Those savings will add up and save you big bucks over time. Plus, when you pay online, there are also free pick-up services, delivery confirmation, free or discounted shipping supplies, and other perks.
Reduce Your Shipping Costs Today!
One of the major factors that determine the success of your online business is the extent to which you reduce expenses. If not carefully monitored, shipping costs can quickly escalate. And, at the end of the fiscal year, you’ll find they’ve put a serious dent in your profit margin.
Easyship offers online merchants access to discounted courier rates and many shipping options around the world. With our shipping and logistics company, you can save up to 70 percent with over 250 shipping solutions. Plus, you can add your own couriers to your Easyship account and use your own pre-negotiated rates. Sign up with Easyship today and let us help you to reduce shipping costs and increase your profit margins.