How to reduce shipping costs

10 Proven Strategies on How To Reduce Shipping Costs & Ship Smarter


By Komal Puri | June 6, 2023

Shipping costs can be a significant expense for businesses, especially those that rely on e-commerce or rely on shipping goods to customers. Therefore, it is crucial for businesses to find ways to reduce their shipping costs while still providing quality service to customers.

Businesses can enhance their profitability by implementing a handful of efficient tactics that help minimize shipping expenses. In this guide, we will explore several strategies for reducing shipping costs, including negotiating with carriers, using a shipping platform, optimizing packaging, using regional carriers, consolidating shipments, offering free shipping on orders over a certain amount, and using real-time carrier rates.

Businesses have a multitude of options available to them for decreasing their shipping expenses. Here are 12 effective strategies:

1. Negotiate with carriers:

Reducing shipping costs is a crucial aspect of managing business expenses. By implementing effective strategies and considering various factors, businesses can negotiate better rates with carriers, ultimately minimizing their shipping expenses.

To reduce shipping costs, it is essential to begin by thoroughly understanding the specific shipping requirements of the business. This includes factors such as average package size, shipment volume, and destinations. Having this knowledge empowers businesses to negotiate more effectively with carriers, enabling them to secure favorable rates.

Leveraging shipping volume is another key approach to achieve cost reduction. Businesses that ship a high volume of packages can negotiate discounted rates with carriers. Carriers often strive to attract and retain high-volume shippers, making them more inclined to offer discounts in exchange for volume commitments. By capitalizing on this leverage, businesses can significantly reduce their shipping costs.

Additionally, agreeing to use specific shipping services offered by carriers can lead to cost savings. For instance, a business may opt to exclusively use a carrier's ground shipping service in return for a discounted rate. By committing to a particular service, businesses help carriers maintain a consistent flow of business, leading to potential rate reductions.

Shopping around for the best rates and negotiating with multiple carriers is another effective strategy to reduce shipping costs. By exploring different carrier options and comparing their rates, businesses can identify the most favorable terms available. This proactive approach ensures that businesses secure the best rates possible and avoid overpaying for shipping services.

It is important to note that reducing shipping costs requires ongoing effort. As business needs evolve, it is crucial to periodically reassess shipping expenses and renegotiate rates accordingly. By staying proactive and continuously optimizing shipping costs, businesses can maintain competitive pricing and improve their bottom line.

2. Use a shipping platform:

A shipping platform is a valuable tool for businesses aiming to reduce shipping costs. These platforms enable businesses to aggregate their shipping volumes and negotiate better rates with carriers, ultimately leading to significant cost savings.

One of the primary advantages of utilizing shipping platforms is their ability to help businesses reduce shipping costs through discounted rates. These platforms consolidate multiple carrier rates, allowing businesses to easily compare and select the most cost-effective option. By leveraging the negotiated discounts offered by shipping platforms, businesses can achieve considerable savings on their shipping expenses.

In addition to cost savings through rate comparisons, shipping platforms contribute to reducing shipping costs by streamlining the shipping process. These platforms integrate with e-commerce platforms, simplifying the shipping workflow and eliminating manual data entry. By automating tasks like creating shipping labels, shipping platforms minimize errors and associated costs, ensuring a more efficient and cost-effective shipping process.

Moreover, shipping platforms often offer supplementary features that assist businesses in reducing shipping costs. For instance, package tracking and delivery confirmation functionalities help mitigate the risk of lost or damaged packages, averting the need for costly claims and replacements.

Furthermore, employing a shipping platform enables businesses to consolidate their shipping data, leading to improved visibility into their shipping costs. This enhanced visibility allows businesses to identify areas where they can reduce shipping expenses. For example, they can identify opportunities for consolidating shipments or negotiate better rates with carriers based on their shipping data analysis.

In conclusion, utilizing a shipping platform is an effective strategy for businesses aiming to reduce shipping costs. By leveraging discounted rates, streamlining the shipping process, and gaining better visibility into shipping expenses, businesses can optimize their shipping operations and achieve substantial cost savings. Exploring different shipping platforms and selecting one that aligns with the specific needs of the business is crucial in attaining these cost-reduction benefits.

3. Optimize packaging:

Optimizing packaging is a crucial strategy for businesses aiming to reduce shipping costs. By focusing on reducing the size and weight of packages, businesses can effectively minimize their shipping expenses. This can be achieved by using appropriate packaging materials, choosing the smallest possible box, and considering custom packaging solutions.

One effective way to reduce shipping costs is by utilizing lightweight and durable packaging materials. By selecting materials that are both strong and lightweight, businesses can ensure the protection of their items during transit while minimizing the overall weight of the package. For instance, opting for envelopes or lightweight poly bags for smaller items can significantly reduce the weight and dimensions of the package, ultimately leading to cost savings. Additionally, using packing materials like bubble wrap or packing peanuts can provide adequate protection without adding excessive weight.

Another essential aspect of packaging optimization is using the smallest possible box. By choosing appropriately sized boxes that closely match the dimensions of the items being shipped, businesses can avoid unnecessary empty space and reduce shipping costs. For instance, shipping a small item in a large box not only incurs higher shipping fees but also increases the risk of damage during transit. By selecting the smallest box that accommodates the item securely, businesses can minimize shipping costs while ensuring the safety of the package.

Furthermore, considering custom packaging options can further reduce shipping costs. Custom packaging allows businesses to design packaging solutions that precisely fit the dimensions of their products. This tailored approach eliminates the need for excess packaging material and ensures a snug and secure fit, reducing both weight and dimensions. As a result, businesses can experience significant cost savings by optimizing their packaging to meet the specific requirements of their products.

In conclusion, businesses can effectively reduce shipping costs by optimizing their packaging strategies. By utilizing appropriate packaging materials, selecting the smallest possible box, and exploring custom packaging options, businesses can minimize the weight and dimensions of their packages, ultimately leading to substantial savings in shipping expenses.

4. Offer free shipping on orders over a certain amount:

By offering free shipping for orders surpassing a specific amount, businesses can incentivize customers to increase their order sizes, thereby offsetting shipping costs. However, it is crucial for businesses to diligently calculate the threshold to ensure it remains profitable.

5. Use real-time carrier rates:

Real-time carrier rates can help businesses save money on shipping by automatically selecting the cheapest shipping option for each order.

6. Use flat-rate shipping boxes:

Using flat-rate shipping boxes from carriers can help businesses save money on shipping costs. These boxes have a fixed cost regardless of weight, so they can be cost-effective for heavier items.

7. Take advantage of USPS Priority Mail:

USPS Priority Mail is often cheaper than other carriers for smaller packages and can be a cost-effective option for businesses. It's important to compare rates across carriers to determine the best option for each shipment.

8. Use hybrid services:

Hybrid services that combine different shipping methods, such as ground and air, can help businesses save money on shipping costs by using the most cost-effective method for each shipment.

9. Use third-party logistics providers:

Third-party logistics providers can help businesses save money on shipping costs by leveraging their existing relationships with carriers. These providers can often negotiate better rates and handle logistics and transportation for businesses.

10. Evaluate shipping costs regularly:

Regularly evaluating shipping costs can help businesses identify areas for improvement and make adjustments as necessary to reduce costs. This can involve analyzing shipping data, comparing rates across carriers, and making changes to packaging and shipping methods.

What are the key considerations for calculating shipping costs in online selling?

When selling online, determining accurate shipping costs is essential to ensure that customers are charged the correct amount and that the seller is not losing money on shipping. Here are some steps to determine shipping costs when selling online:

  1. Determine the weight and dimensions of the product: The weight and dimensions of the product are key factors in determining shipping costs. You can use a digital scale to measure the weight of the product, and a tape measure to determine its length, width, and height.

  2. Choose a shipping carrier: There are several shipping carriers to choose from, including USPS, UPS, FedEx, and DHL. Due to variations in rates and shipping options among different carriers, it is essential to conduct thorough research and compare the costs and services provided by each carrier.

  3. Calculate shipping costs: Once you have determined the weight and dimensions of the product and selected a shipping carrier, you can use the carrier's shipping rate calculator to determine the cost of shipping. Most carriers provide online calculators that allow you to enter the origin and destination zip codes, package dimensions and weight, and shipping service to calculate the cost of shipping.

  4. Consider shipping materials: The cost of shipping materials, such as boxes, envelopes, and packing materials, should also be factored into the shipping cost. Some carriers offer free shipping supplies, while others charge for them.

  5. Offer shipping options: Depending on the product and customer's needs, offering different shipping options can be beneficial. For example, offering expedited shipping for an additional cost can be appealing to customers who need their product quickly.

  6. Update your online store: Once you have determined the shipping costs, make sure to update your online store to accurately reflect the shipping options and costs available to customers. Engaging in such research and comparisons will effectively prevent any potential confusion or disputes with customers regarding shipping costs.

How can FarEye help in reducing the shipping costs ?

FarEye is a comprehensive delivery management platform that empowers businesses to optimize their delivery process, enhance efficiency, and ultimately achieve reduced shipping costs. With features such as route optimization, real-time visibility, data analytics, automation, and delivery experience, FarEye offers a comprehensive solution to reducing shipping costs.

Route optimization is a key feature of FarEye, which uses AI and machine learning algorithms to find the most efficient route for delivery. Implementing such measures can effectively decrease fuel expenses, enhance delivery times, and ultimately result in reduced shipping costs. Real-time visibility is another feature that enables businesses to identify inefficiencies in the delivery process and take timely interventions to avoid delays, further reducing shipping costs.

Additionally, FarEye's data analytics capabilities provide valuable insights into delivery performance, which can help optimize the delivery process and reduce shipping costs over time.

In summary, FarEye provides a diverse range of features that enable businesses to minimize their shipping costs and enhance their delivery process.

Learn how you can reduce shipping costs
Komal puri

Komal Puri is a seasoned professional in the logistics and supply chain industry. As the Senior Director of Marketing and a subject matter expert at FarEye, she has been instrumental in shaping the industry narrative for the past decade. Her expertise and insights have earned her numerous awards and recognition. Komal’s writings reflect her deep understanding of the industry, offering valuable insights and thought leadership.

Komal Puri

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