If there's one thing that can hold small businesses back (by a reasonable amount), it's shipping costs. Why you ask? Try imagining this: you add a product to an online store, and as you check out, you see that shipping costs are even more than your actual product. Quite a turnoff, isn't it?
In fact, no one would even care to buy items from a store that charges absurd rates for shipping. This is why small-sized businesses must reduce their shipping costs and stay competitive amongst their larger counterparts. Let's go over how exactly small businesses can manage to do so.
What are Shipping Costs?
Basics before everything. It's essential to know the different factors that add to the final shipping cost.
To explain in simple terms, your final shipping cost is determined by mainly the costs carriers have to face along with their own sub charges.
For the most part, carriers only need to bear the cost of fuel, and other factors subsequently join in to add to your bill, which we'll cover next.
How are shipping costs determined?
Now that the topic of shipping costs is clear, it's time to dive into how each factor affects shipping price. To begin, the very first factor is the weight of the shipment involved.
Light-weighted objects are easier to transport, while larger ones take more effort and time to deliver. Hence, it adds a good amount of value to the subtotal. Next is the dim weight. In easier words, it's the volume of your package.
A package that takes up more space will cost more than those that don't. Fuel charges are probably self-understood for most, but to make things clear for beginners, it's the amount of money carriers spend on fuel to deliver your product(s).
The final factor to add up is the delivery zone. The larger the radius of destination from the point of origin, the more value it adds to the overall cost.
11 Ways to Keep Shipping Costs Low
For every business, optimising all costs to bring fruitful profits is crucial and, in many cases, the ultimate goal.
Overall, several facets of businesses can be controlled and managed to minimise additional expenses. We'll focus on some of them today and explain how you can reduce your shipping costs with each one.
1) Compare various carrier rates
Before choosing a carrier for shipping your products, it's crucial to explore their prices and compare them. Each carrier has different rates appropriate for domestic shipping, international shipping, quick delivery available with tracking, covering more pin codes etc.
After researching, you'll find that some carriers are best for heavy shipping items, whereas others offer a cheap rate for lightweight packages. Overall, every carrier has its perks for specific locations or countries, so it's best to check them.
2) Reducing box dimensions and weight
Two factors that affect the shipping rates are the dimensions and weight of the parcel. This is why businesses should keep them small, and there are many tips to ensure they do, for example:
- Opt for smaller boxes for lightweight items
- Make sure the box is sufficiently filled, or box space is well occupied
- Avoid using boxes for small items to reduce costs
- Fill the box with multiple items/products
Lowering the dimensions can genuinely cut down on unnecessary costs, but if boxes are needed for your product, buy fitting box sizes that can easily carry your product and have a low rate.
Shipping costs follow a simple principle; heavy items are more expensive to ship. Also, various carriers offer affordable options for shipping packages.
For instance, USPS is the best carrier for items that weigh less than 16 ounces. In short, the shipping rate will undoubtedly vary due to the weight and dimension of the package; thus, minimising them is the best way to lower the costs.
3) Keep Business Local
While growth is vital for every business, it's important to note that the more your outreach increases, you'll have to bear shipping costs to far zones and other countries, too, eventually.
If you cannot afford to handle the shipping costs of international transport, it's best to keep your business at a domestic level and scale up once you see better profits. Domestic shipping can also help you pick from different delivery options.
4) Get discounted rates from carriers
One of the best things about doing business with carriers directly is that they provide discounts when shipping a certain amount of orders.
You don't need to be shipping thousands of products every month to be eligible for these discounts. It's never a bad idea to try and negotiate prices with carriers in exchange for being loyal to solely hiring them.
5) Choose countries with cheap shipping costs
If you've gathered enough funds to grow more and handle international shipping costs, research the cheapest regions first. This will allow you to get a good headstart on expanding your business.
Look for countries with the lowest shipping rates and gain customers from there. When you start with countries that have lower shipping costs, you can make more profits since your customer base increases and costs remain low. After a while, you can also be capable enough to take on shipping costs from any location.
6) Hybrid services
A unique way to ship orders is a hybrid service. Just like the name suggests, you'll have more than one shipping carrier involved here.
Once a carrier picks up the order from your doorstep, they pass it on forward to another carrier who is better suited to make the final delivery.
This process is more cost-effective and efficient than a single carrier doing all the work alone.
7) Reuse packages
A simple way for small businesses to avoid high shipping and packaging costs is to reuse them. However, ensure the previous labels have been safely removed or appropriately hidden.
Also, try utilising the packing materials provided by the carrier itself. If you are shipping non-fragile items, consider lightweight bubble mailers that do not take up much space compared to boxes.
8) Pay online for shipping
Another effective technique to get discounts or cheaper rates for postage shipping is by paying it online via shipping software.
The main benefit is the commercial price discount you receive if you ship a good amount of products throughout the year.
Paying online is also way more time-saving than going to the postage office and making the necessary transaction.
9) Prepaying for the shipping labels
Opting for prepaid shipments with your carrier can be beneficial for small businesses. Top carriers like FedEx or USPS give up to a 20% discount on the total cost, which is a great offer, but there are some things you should know before going for this option.
Buying them beforehand can surely give you discounts, but the product weight and dimension should be constant. This is only possible when orders for a particular product flood you.
10) Check out eCommerce or other marketplaces for offers
This method works best for those using an eCommerce platform such as Shopify to open their online store.
These platforms can have additional plugins for order fulfilment services and even features such as live carrier price rates to assist you in reducing your shipping cost. An excellent example of this is the famous eCommerce platform Shopify.
Shopify has an app store that lets you install third-party applications that improve to smoothen your business operations. Of course, this also includes shipping apps such as AfterShip.
11) Implement a last-mile delivery service
Last-mile delivery is the final stage of delivering a product to its destination. Here, shipped goods are taken from a transportation hub (warehouse, etc.) and delivered directly to the intended address.
If you can find such a service in your area, you can save up a good amount on your overall shipping costs.
12) Offer standard shipping duration
We've all been spoiled by getting our products delivered on the same or the next day. Although, the companies that send you the order face quite a good amount of charges.
Similar to weight, the equation for time is simple too; the faster the delivery, the more expensive your shipping cost will be.
Small businesses can adopt the idea of offering only standard shipping, which may take around 3-5 days for the package to reach the customer.
Although, it should be noted that this method is more of a double-edged sword. The reason being that it can affect customer satisfaction while assisting you to save up on your overall fee.
To wrap up, reducing shipping costs for small businesses can help drive investments in other aspects such as customer service and increase net profit margin. If the main factors such as box dimensions and package weight are optimised, it will significantly curtail shipping costs to your liking.
Also, small business owners can explore several local carriers that can provide decent discounts on shipping rates. Overall, try to keep the shipping costs lower than the actual product since it can be a dealbreaker for the majority of customers.