How to Reduce Shipping Costs for eCommerce Businesses

7 Tips to Reduce Shipping Costs for eCommerce Businesses

We have stated this around a dozen times already, but we just can’t stress the fact enough- running an e-commerce business is a complicated affair. There are multiple factors to keep track of- oftentimes simultaneously, ranging from returns management to pricing and marketing. 

One such important facet is shipping strategy. When planned well, shipping can help your business soar to new heights. At the same time, it can also help it plunge to new lows when not done right.

In short, shipping can make or break a business. Therefore it is more than essential to hit the sweet spot- to keep shipping costs low for customers, all the while generating a stable and sustainable profit.

What do Shipping Costs Entail?

First things first? What exactly are shipping costs? One can probably infer from the name it refers to the cost it takes to ship a product to the customer’s doorstep, but what exactly does it comprise of? Some of the major constituents of shipping costs for e-commerce businesses are as follows:-

1) Packaging Materials

The way you pack your products plays a huge role in shipping costs. Higher quality materials, while satisfying to the customers, can also drive up costs.

In such cases, it is better to use materials or packaging methods that are considered ‘good’ but still do not burn a hole in your pocket. There is no need to go overboard and use extravagant packaging materials if you are not selling any luxury items.

2) Safety Precautions

Before products are allowed to leave the warehouse, they are tested extensively for safety checks. Multiple checks such as the drop test and weight test are conducted.

While it is advisable to keep costs low, that doesn’t mean you should compromise on the safety of your products, which would spoil the experience both for you and your customers. There is no need to flout safety norms just for the sake of minimising costs.

3) Product Dimensions

The weight, size, and dimensions are actually very significant factors in deciding the final shipping cost of a product.

Courier partners usually decide their prices on the basis of the size of the package, and so it is necessary to optimise for all such constraints. Generally speaking, the heavier or bigger the package, the more expensive it is to ship it from one location to another.

4) Geographic Distance

Speaking of shipping from one location to another, perhaps the most obvious constituent of shipping cost is the distance. The more distance covered, the more the courier partner will charge for shipping.

There are different means of transportation as well- land, air, and sea; therefore, prices can often vary. This is a reason why international shipping is so expensive.

Tips to keep Shipping Costs Low

The above-mentioned points are the main factors that the shipping costs of an e-commerce business comprise. Moving forward, let us look at some tips that would help us to keep costs low while maintaining a sustainable revenue supply.

1) Use Cost-Friendly Packaging

As we have stated before, there is absolutely no need to go overboard and use extravagant materials while packaging if you are not selling any luxury items. At the same time, however, that does not give businesses a free pass to use flimsy, low-quality, or unattractive packaging.

There needs to be a fine balance between quality and cost, and one should not compromise on huge quality issues just to save a few bucks. Another way you can save money is by getting supplies at a discount from USPS, UPS, FedEx, etc. Buying packaging materials in bulk can also keep costs low.

2) Reduce Package Dimensions

In most cases, the package size and dimensions contribute a large amount to the overall shipping costs. Large items are naturally more expensive to transport. Some businesses make the mistake of using sizeable outer packaging even for otherwise smaller products.

This drives up costs exponentially. To reduce the burden, it is advisable to use smaller boxes that are custom-made to fit your products, as well as to reuse and recycle old shipping materials. Not only is it sustainable and eco-friendly, it also eases the load on your pocket!

3) Reduce Shipping Distance

Shipping products over long distances costs a lot of money, so it would be helpful to optimise properly- set up fulfilment centres all throughout your regular delivery areas, expand your shipping network, and set up ties across different delivery zones, and anything you can to reduce the cost of transportation.

While warehousing alone might not be as expensive as transport, it can still add up to a large amount when taken in total.

4) Diversify your Courier Partners

Another point to add on to the above is that while many delivery partners provide extensive nationwide coverage, not all of them do. Some are hyperlocal carriers who operate in a particular region, while others offer some specialised services that you might need.

In order to take full advantage of all facilities and services offered by various carriers, it is important to negotiate with them and ensure diversity among them- such that even if one of them performs poorly, others are immediately available to provide backup.

This eliminates a lot of unnecessary hassle and headache with regard to shipping and also brings down costs significantly.

5) Bundled Shipping

A neat little cognitive bias trick that many e-commerce platforms use to drive sales up is to bundle the shipping costs in with the price of the product. Many customers would add a product into their cart and go to check out only to back off after seeing the extra delivery charges added on to the final amount.

To mitigate this problem, some businesses started the practice of bundled shipping- a significant margin of the shipping costs is added to the price of the product itself. So instead of a toothbrush costing 100 rupees with a delivery charge of 20 rupees, the price of the entire product would be 120 rupees.

Such practices are somewhat controversial, but their effects are undeniable, and they have even helped some failing businesses to regain ground and expand operations.

6) Outsource Operations

When or if the pressure gets too much and the costs get too high to handle, some businesses turn to the final option- outsourcing. Oftentimes, there are several highly rated third-party logistics platforms and aggregators that would be all too happy to take the load off your hands.

They make use of technology and API to automate most operations and maintain transparent records of everything that goes on within the company.

Of course, it is necessary to negotiate with them and ensure that you are really getting a good deal, deriving the right value from their services, and cutting down on shipping costs.

7) Purchase Insurance from Third Parties

While no one is denying that shipping insurance is of the utmost and vital importance, especially when it comes to fragile, expensive, or luxury items.

However, it is also hard to ignore the fact that next to product packaging, it is perhaps the most expensive component of shipping costs. Fortunately, there are some ways through which you can slightly cut down on insurance costs.

If you absolutely have to, it is advisable to buy insurance from third-party platforms and not from your dedicated carriers. Third-party insurance companies are drastically cheaper, sometimes costing about half as much as carrier insurance. Thus, you could end up with significant savings.

Summing Up

Today, we took a long and detailed look at the shipping costs for e-commerce businesses. We learned what the contributing factors that make up the shipping costs are and why keeping shipping costs low is beneficial for your business.

Next up, in what is the main focal point of today’s article, we noted seven helpful tips that could help e-commerce businesses to cut down on their shipping costs  We hope you took away some essential realisations and lessons as to how to best apply these tips to the unique context and delivery structure of your own business.