7 Ways E-Commerce Companies Can Reduce Their Shipping Costs

03/22/2017 10:56 pm ET

There’s no way around it: By their very nature, e-commerce companies are burdened by major shipping costs.

Many e-commerce sellers ship overseas, which can be very expensive. More and more customers expect free or low-cost shipping from online retailers, which means the squeeze is on. Add in the challenges of shipping potentially large and unwieldy items, and shipping costs can take a major bite into online retailers’ profits. In fact, shipping can account for a whole quarter of an e-commerce company’s costs.

The good news is a few simple strategies can help e-commerce companies reduce their shipping costs and pocket the savings. Here’s how to make it happen.

Do your research.

This sounds simple. But you’d be amazed at how many retailers limit themselves to just a handful of shipping options such as FedEx or UPS.

In reality, there are a huge number of regional, national, and international carriers operating by ground and by air. It’s important to research all of your options so you know what deals are available to you. For example, USPS’ last mile delivery integrates with other carriers and allows you to promise customers speedy delivery without having to pay for air shipments. Options such as first class mail and priority mail may be more or less cost-effective depending on the size and weight of your packages. Utilizing different carriers for domestic and international shipments can help you get the lowest rate for each type of shipment.

When you’re researching, make sure you identify all the fees that a given company could levy against you. For example, some carriers will charge extra for Saturday deliveries, delivery signatures, and a number of other scenarios. Being aware of these costs up front can help you avoid getting slammed with unexpected fees and tailor your product pricing so shipping doesn’t eat up your profits.

Go to the mat.

Once you’ve researched your carrier options, it’s time to negotiate. Most carriers will be willing to offer you lower rates if you present a compelling case. Ask for discounts on any extra fees charged by the carrier (e.g. the Saturday delivery fees described above). If one company is offering a particular service for a lower rate, ask if you can get that rate or better at another company. If your company is scaling, see if you can get a volume discount. You’ll be amazed at the price breaks you can receive simply because you asked.

Be savvy about supplies.

Most major carriers will supply retailers with free shipping supplies. If you’ve opted for a regional carrier, you can save money on shipping materials by asking retailers for discounts, purchasing materials in bulk, reusing packaging, and using mailers in lieu of boxes whenever possible. Some carriers will even provide you with free software or equipment to print your own labels, weigh your packages, and so on. Before investing in equipment, ask carriers if they can offer you anything for free.

Minimize packaging.

Many carriers charge for the actual weight of a package as well as its “dimensional weight,” which is a product of the package’s length, width, and height relative to its weight. You can cut down on these fees by minimizing packaging in the following ways:

  • Use the smallest possible package for every shipment
  • Use lightweight packaging materials
  • Consider utilizing different box shapes to reduce packages’ dimensional weight

Be honest with your customers.

Today’s customers expect low-cost shipping options, and they also expect transparency from companies. By combining these two elements, you’ll be able to satisfy your customers without breaking the bank on shipping. You can provide a low-cost shipping option but make up for the cost by adding a few days onto the shipping time, and you can avoid customers’ ire by being upfront and honest about this policy.

Casket maker Willow & Werth, for example, devotes a whole page on their site to explaining their shipping policies. They promise customers free shipping but ask for a little flexibility in return: They clearly explain that it may take an extra day for shipments to arrive in certain states and that they don’t consider Saturdays, Sundays, and holidays to be regular shipping days. In this way, the company saves itself from high carrier fees while keeping its customers happy.

Purchase third-party insurance.

Carriers almost always charge higher rates for shipping insurance than third-party insurers. Switching to a third-party insurer is a simple but effective way to save money on every shipment.

Audit every invoice.

It sounds outrageous, but it’s not uncommon for billing errors to occur on every shipping invoice. This can add up to as much as three percent of overall shipping costs. An easy way to eliminate these needless expenses is to closely review every single shipping invoice that comes across your desk. If you notice an issue, call the carrier and address it immediately. You may even be able to request a discount on future transactions.

If e-commerce companies want to reduce costs and grow their profit margins, shipping can’t be an afterthought. Taking the time to reduce shipping costs via the strategies outlined above will have major ramifications for companies’ bottom lines.

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