by Sam Franklin | October 01, 2022 | 10 min read
Tried and trusted ways to cut shipping costsGet funded
Last updated: October 06, 2022
Shipping is a major expense for small businesses. High shipping costs can make it harder for small businesses to compete with eCommerce behemoths like Amazon, which are able to offer free delivery. Amazon, for example, can offset the cost of free shipping with its premium subscription or the sheer volume of goods it sells daily. But small players don’t always have that option. Shipping rates are also constantly increasing in keeping with rising inflation and gas prices, putting undue pressure on small business owners.
Shipping costs depend on multiple factors like the weight of the product, the location of your warehouse, the distance a package needs to cover, and whether you are shipping standard or express. On the other hand, consumers are inundated with choices, and businesses have to compete with each other on services like free shipping. An American study found that 66% of consumers expect free shipping on their online purchases. An even larger majority of consumers (80%) expect free shipping on purchases above a certain amount. For businesses, it is a hard choice to make between free, fast, or paid shipping and their profit margins.
Many companies offer free shipping to customers and factor the cost into the product prices. But that is not a feasible solution for all small businesses as it can impact your ability to offer competitive prices. Many companies that charge shipping offer a shipping calculator that allows customers to check the shipping cost based on the area of delivery. This could be a workable solution if you have a small business and cannot afford to offer free shipping.
This article will discuss the different methods you can use to reduce shipping costs and boost your margins.
Table of contents
Effective ways of reducing shipping costs
From reducing the weight of your package to using more economical packaging, here are 12 tried and tested ways to reduce shipping costs:
1. Don't settle on the first carrier you find
A crucial fact that evades many small businesses is that they have the power to negotiate. Shipping companies want regular business from you as much as you want to use their services. You should talk to multiple carriers, compare their rates, and negotiate deals based on shipping volume. The more packages you ship, the lower the rate. After negotiations with multiple carriers, make a deal with a reliable service that offers the best value. This will not just help you in cost savings but also in building a long-term relationship with a shipping carrier.
2. Reduce the weight of your package
Shipping costs are based on a package's actual or dimensional weight. Dimensional (DIM) or volumetric weight is a pricing technique used by carriers to determine the cost of shipping a package based on its volume rather than on its actual weight. The higher the actual volumetric weight of a package, the more money you will pay for shipping. If you can cut down the volumetric weight of a package and save a few cents for each one, it can result in significant cost savings over several hundred packages. Most carriers arrive at the DIM weight by calculating the cubic size of a package by multiplying its length, width, and height. You can use this great online calculator to calculate it yourself. Cutting down on a package’s weight is an effective way to reduce shipping costs, but the question is how do you do it? Here are a few methods:
Use corrugated boxes The shipping process requires packaging that can protect your products from the elements as well as mishandling. Corrugated cardboard boxes are a good option for packaging as they are lightweight and versatile. Specially designed for shipping and widely used by eCommerce businesses, corrugated cardboard boxes also protect fragile products from damage. Comparatively, traditional cardboard boxes are thicker and heavier.
Custom packaging You can use custom packaging that is made for the kind of product you are shipping instead of using standard packaging for all products. If you have products that sell a lot, you should create custom packaging that fits the size and dimensions of the product perfectly. This will help you save money on packaging and shipping over time.
SIOC packaging Ships in own container (SIOC) packaging saves the cost of the extra box, labour, and packing material. SIOC essentially means that a product is shipped in its original packaging without an additional box added on top of it. The shipping labels are put on the original box itself. This is helpful in reducing both costs and waste.
3. Not all products need a big box
Since shipping prices depend on the weight and volume, you could explore options like poly mailers or padded envelopes for your products. This will bring down the volumetric weight of the products and reduce shipping costs. These also need fewer packing supplies like bubble wrap. If you are concerned about the environmental impact of poly mailers, you can opt for something that is eco-friendly, biodegradable, or reusable.
Want to reduce your environmental footprint? Learn about eco-friendly packaging in this blog.
4. Choosing the right protective packing material
Protective packing material is essential to secure your products from damage during transit. However, not all packing material is the same. You can use lightweight packing materials like packing paper, foam inserts, air pillows, or bubble wrap in order to cut down the weight of your package.
5. Use third-party insurance
Sometimes insurance provided by the shipping company is expensive compared to third-party providers. Going with a third-party insurer could help you reduce shipping costs significantly, especially on high-value products.
6. Ship early during holidays
Shipping companies levy a surcharge or prices generally shoot up during peak holiday season like Christmas, Halloween, or New Year's. One way to ship early is to encourage your customers to buy early.
You could run promotions and campaigns before the holiday season, and communicate to the customers that they need to buy early to receive their orders well in time. This will help you keep your shipping costs in check and you could possibly avoid using the more costly expedited shipping.
7. Consider packaging provided by the shipping company
Some shipping companies charge an additional fee if your package exceeds their size regulations. To avoid those, you could consider using the packaging provided by the shipping company.
8. Consider Royal Mail for small parcels or a regional courier
Regional carriers are a more reasonable option for your business if you are looking to lower shipping costs for your deliveries. Choosing regional carriers could also give you more negotiating power compared to big international companies.
Meanwhile, Royal Mail is more reasonably priced for small parcels. Royal Mail offers tracking till delivery point as well as same and next day delivery options. Sending packages via Royal Mail also does not imply a trip to the post office, they offer pick-up services from home.
9. Strategically-located distribution centres
The more central or equidistant your distribution centres or warehouses are from your delivery locations, the lower your shipping costs will be. It is obviously not possible to be close to all your customers but once you have been in the business for a few years, you will know exactly where your customers are. It can be beneficial to locate your distribution centres strategically close to them.
Amazon, for example, has more than 20 fulfilment and distribution centres across the UK, servicing its customers. This kind of presence is not possible for a small business but even one or two strategically located warehouses can help in keeping your delivery costs low and margins high.
10. Incentivise customers to drive up the value of their shopping cart
Sometimes companies don’t have the margins to offer free shipping. One technique that businesses use to drive their margins is to offer free shipping over a certain amount of spending. This encourages customers to drive up the value of their cart. When a business offers free shipping over a certain amount, like £50 or £100, customers are compelled to buy more and it helps businesses get better margins and offsets shipping costs.
11. Consider prepaid shipping
As a business you can safely predict the number of shipments you send every month or every quarter. If you have to ship packages that are the same weight regularly, you can use prepaid shipping. This means that you can buy shipping labels upfront and use them when you need them. This will qualify you for a discount from multiple carriers. It is an easy way to lower your future shipping costs.
12. Your suppliers can help
As an eCommerce business, you could ask your suppliers to ship your products using your FedEx account number. This will raise your shipping volumes and you will be able to negotiate better rates.
In addition to all the above-recommended methods, you should also educate your customers about shipping costs. This may not directly impact your shipping costs but it will help you shore up revenue. Did you know that nearly a third of customers abandon their carts because of added shipping costs? This is one of the main reasons that many businesses offer free shipping. A useful step to take to avoid abandoned carts is to educate the customer about shipping costs. You could display the information on your homepage or prominently on the website. If the customer knows in advance they have to pay a shipping fee, it is less likely that they will abandon their shopping cart.
What is the cheapest shipping method for a small business?
There is no single answer to this question. It depends on the volume of packages you send, the distance the parcel is going to cover, the average weight of your packages, the time taken to deliver the parcel, and more. It also depends on the kind of deal you are able to reach with the courier company. Here is a list of some shipping services you could consider for your business for reasonably-priced deliveries in the UK:
Using Royal Mail is one of the most reliable ways to ship your packages domestically as well as internationally.
What you should know:
Offers express delivery with online tracking
Standard parcel delivery for a small parcel starts at £3.35
Can be integrated into your online shop
You can qualify for a business account if you ship over 20 parcels per week
Parcelforce delivers within the UK and to over 200 countries.
What you should know:
Business accounts get better prices; up to 45% savings over standard packages
You qualify for a business account if you send an average of two or more parcels per week or one international parcel in a week
Offers fully-tracked next-day delivery
Standard two-day delivery starts at £4.80
Offers a named account manager for support
DPD Local offers a fast and reliable service with an extensive UK network and a ground-based service to Europe and Air Express for international shipping.
What you should know:
Offers next-day delivery
Insures all parcels to an item value of €520
Has online tracking
Standard two-day delivery starts at about £3.59
DHL Parcel UK
DHL delivers in the UK and internationally.
What you should know:
Offers next-day delivery and online tracking
Has over 3,500 DHL Parcel UK ServicePoints across the country where parcels can be sent, collected, and returned
Standard parcel delivery prices start at £2.79
Can be integrated with eCommerce platforms
Has international delivery to 160 countries
Offers multi-parcel discounts
Apart from these you can also consider Yodel, Evri (previously Hermes), UPS, and FedEx.
What is the shipping cost for a small parcel in the UK?
Here’s how much it will cost you to send a small parcel within the UK:
Sam founded his first startup back in 2010 and has since been building startups in the Content Marketing, SEO, eCommerce and SaaS verticals. Sam is a generalist with deep knowledge of lead generation and scaling acquisition and sales.