How to Reduce Shipping Costs for Small Business

‍Introduction

Shipping is an integral cog in the machinery of businesses, but depending on your industry, can be a significant cost driver. In a world where precision-driven deliveries are essential, and high-value goods demand on-time shipment, knowing how to navigate and optimize shipping costs can significantly impact the bottom line.

Revolution Trucking, a trusted name in the industry, with an elite 99.3% on-time service level, sheds light on the nuances of shipping costs and how businesses can effectively manage them.

Understanding Shipping Costs

How do you determine shipping costs?

Determining shipping costs is more than just a straightforward calculation. It's an intricate process that factors in various elements. The package's weight is an obvious starting point, as heavier items tend to be more expensive to ship. However, the package's dimensions also play a critical role, especially when dealing with bulky items that occupy more space. The destination, both in terms of distance and whether it's domestic or international, will significantly influence the final cost.

Additionally, the chosen shipping method (standard, expedited, overnight) can affect the price. For eCommerce businesses, understanding these nuances is not just about cost-saving; it's about offering competitive pricing without compromising profit margins. It also involves considering additional services like tracking, insurance, and signature requirements, which could add to the overall shipping fees.

Is shipping cost determined by weight or size?

The cost of shipping is a blend of both weight and size, with neither being mutually exclusive. While the weight of a package is undeniably influential in determining costs, the concept of "dimensional weight" or "volumetric weight" has become increasingly prevalent in the logistics world. This method calculates shipping costs based on the package's volume, especially for larger items that might be lightweight.

For instance, shipping a large feather-filled pillow might cost more than a small, dense package of books, even if they weigh the same. Carriers introduced dimensional weight pricing to ensure they're compensated for the space an item occupies in their vehicle, not just its weight. Therefore, businesses must be astute in understanding how carriers determine costs and consider strategies like efficient packaging to minimize shipping expenses and determine their average shipping cost.

How do I calculate my shipping costs?

To accurately calculate average shipping costs, one must account for several variables. Begin by determining the weight of the package, either using a scale or estimating based on the product's weight and packing materials. Next, measure the package's dimensions - length, width, and height. Most major carriers use these metrics to compute the dimensional weight.

Once you have the package's physical attributes, consider the shipping destination. Is it local, national, or international? Each range has its pricing structure.

Moreover, the chosen shipping speed (standard, two-day, overnight) will adjust the cost. Thankfully, in our digital age, several online tools, calculators, and shipping software platforms can automate these calculations. By inputting the necessary details, businesses can obtain quick, precise estimates, helping them make informed decisions about shipping methods and pricing strategies.

Strategies to Reduce High Shipping Costs

Slim down package weight

One of the most straightforward yet effective ways to reduce shipping costs is to reduce package weight. Even the slightest reduction in weight can lead to significant cost savings, especially when you're shipping a considerable volume.

Beyond the product itself, it's essential to evaluate the actual weight of your packaging materials. Are they adding unnecessary heft? Remember, every ounce counts, especially in the world of shipping. Efficiently packaging your items without compromising on safety can lead to a win-win: different shipping fees and an eco-friendlier approach by using less material.

Use Packages Given by Your Carrier

Leveraging resources provided by your shipping carrier can lead to tangible benefits. Many shipping companies offer free or at least discounted packaging materials to their clients. These aren't just cost-saving but are specifically designed to fit seamlessly into the shipping carrier's logistics process. Utilizing these materials doesn't just save money on packaging costs but can also lead to optimized shipping rates, including flat rate shipping.

Think of it this way: these carriers have designed these packages for their system, ensuring that they're the right size and weight, helping you avoid any additional shipping charges.

Decrease the shipping distance

The longer the distance, the higher the shipping cost—plain and simple. One of the most efficient ways to tackle this is by using fulfillment centers located strategically closer to your predominant customer bases. This not only cuts down on transit times but can significantly reduce shipping costs.

Moreover, quicker delivery times can enhance customer satisfaction, bolstering customer loyalty. It's a strategy that pays off not just in cost savings but also in building a solid reputation for prompt delivery in the online community.

Find discounted supplies

Often, businesses overlook the cumulative cost of packaging materials. These seemingly minor expenses can add up over time, especially for ecommerce businesses with a high shipping volume.

By sourcing packaging supplies like shipping labels in bulk or looking for discounted deals, businesses can make noticeable reductions in their shipping expenses. It's all about being proactive and always on the lookout for cost-effective solutions, from tapes to boxes and cushioning materials.

Opt for Hybrid Services

Hybrid services, which utilize a mix of local and national carriers, can often provide cost savings, especially for shipments that don't need expedited shipping.

In the dynamic world of shipping, hybrid services have emerged as a boon for businesses looking to strike a balance between cost and efficiency. These services blend the strengths of both local and national carriers, ensuring that shipments are cost-effective without compromising on delivery times. It's all about finding that sweet spot between speed and expense.

Consider Regional Carriers if you Need Cheaper Shipping Solutions that Do Local Delivery

Major carriers, with their vast networks and comprehensive services, often dominate the shipping landscape. However, regional carriers, often overlooked, can be a game-changer for businesses looking to optimize local deliveries.

These carriers might not boast the extensive reach of their national counterparts, but when it comes to specific regions, they're often the more economical choice. Additionally, they're typically more flexible and can offer tailored solutions for local delivery, ensuring your packages reach their destinations promptly and without breaking the bank.

Staying Updated with Shipping Carriers

Know when rates change

Shipping carriers, whether they are large carriers like the United States Postal Service (USPS Priority Mail) or smaller regional entities, frequently update their shipping rates. This can be due to various factors, such as fuel surcharges, changes in shipping zones, or overall shifts in the logistics industry. As an ecommerce business or any entity that relies heavily on shipping, staying abreast of these changes is crucial. By understanding when and how these shipping cost changes occur, you can adjust your shipping strategy, ensuring that you maintain your profit margins and meet customer expectations without any unforeseen expenses.

Stay on top of shipping carriers pricing changes

Beyond just the basic shipping rates, carriers often roll out new pricing strategies, promotions, or shipping discounts aimed at attracting or retaining their clientele. These can range from seasonal promotions to discounts for online shoppers who use a specific shipping label. Regularly checking in with your preferred shipping company or utilizing modern shipping software can aid in keeping you informed.

By tapping into these opportunities, you can harness savings and potentially offer free shipping, enhancing loyalty and boosting your online store's appeal.

Can you negotiate shipping costs?

Absolutely! If your business is shipping packages frequently or in large volumes, you're in a prime position to negotiate. Carriers are often willing to offer discounts to businesses that can assure a consistent volume of shipments or those that use their services exclusively.

By establishing a rapport with your shipping carrier, understanding their pricing structure, and demonstrating the volume of your shipments, you can potentially negotiate reduced shipping rates. Remember, every dollar saved to reduce shipping costs directly impacts your online store profit margins.

Insights on International Shipping

What should I know before shipping internationally?

Treading into the realm of international shipping can be daunting, but it's a vital expansion strategy for many an ecommerce store. There's a labyrinth of factors to consider. From customs documentation and regulations to understanding the nuances of shipping rates, it's a different ballgame.

Furthermore, it's essential to be well-informed about potential tariffs, taxes, and import duties that may apply to your shipped items. Also, each country has its own set of regulations, and understanding the shipping company's process for each destination will ensure a seamless shipping experience, avoiding delays and added costs.

What is the best way to ship international packages?

Shipping packages internationally isn't a one-size-fits-all solution. The optimal method largely hinges on various factors: the destination country, the package dimensions and weight, the urgency of delivery, and, of course, the delivery costs involved.

Larger carriers usually have comprehensive international services that cater to a wide range of needs. However, sometimes, niche or specialized international carriers might have unique offerings that provide better rates, faster delivery service times, or specific shipping services tailored to certain regions or types of goods.

What is the cheapest way to ship things internationally?

If savings are your primary concern when shipping internationally, there are strategies you can employ. One such approach is consolidated shipping. In this method, your cargo is bundled with other shipments, leading you to reduce shipping costs. Additionally, it's always a wise move to compare rates across various carriers.

While expedited shipping can be pricey, opting for standard or economy services can considerably lower shipping costs. Moreover, understanding the intricacies of package weight, dimensions, and other factors can further aid in optimizing your international charges.

Shipping Solutions for E-commerce

What is the best shipping method for ecommerce?

Navigating the complex world of ecommerce shipping costs can be a challenging endeavor for and ecommerce business. With the rise of online shoppers and their varying demands, it's pivotal for online stores to provide a spectrum of shipping options. While some customers might be willing to pay a premium for expedited shipping to receive their items swiftly, others might be scouting for the cheapest method, even if it takes a bit longer.

Offering a diverse range of shipping options, from ground shipping to priority mail, allows an ecommerce business to cater to a broader audience and meet varying customer expectations. Moreover, leveraging shipping software can aid in determining the most efficient and cost-effective methods, ensuring that the shipping strategy aligns with the business's goals and customer demands.

Insurance and Other Cost-Related Aspects

Get Shipping Insurance with a Third Party

Shipping insurance is an integral aspect of the shipping process, especially for high-value items or international shipments. While most large carriers offer their own insurance, third-party insurance providers often present a compelling alternative. Not only can these third-party options be more cost-effective, but they often provide a broader coverage range.

Additionally, their claims process might be more streamlined and user-friendly compared to traditional shipping carriers. By securing third-party shipping insurance, an ecommerce store can ensure that they're protected against unforeseen circumstances without incurring excessive shipping costs on their average order value.

Are shipping costs included in cost of goods sold?

An area of frequent confusion, especially for a budding store, revolves around how to treat shipping costs in financial statements. While shipping costs are undeniably a significant expense for online stores, they aren't typically integrated into the cost of goods sold unless the store offers free shipping and absorbs that cost. In such scenarios, the shipping cost becomes a part of the product's overall cost, influencing margins and the product price presented to the customer.

Shipping Costs and Financial Records

Where do shipping costs go on a balance sheet?

The balance sheet, a snapshot of a company's financial health, categorizes various expenses to provide clarity. Shipping costs, given their operational nature, typically find their place under "Selling and Administrative Expenses." This categorization ensures that when year-end financial statements are prepared or when tax season approaches, businesses have a clear and organized record of their shipping expenses, aiding in accurate financial reporting.

What type of expense is shipping cost?

Shipping costs, a vital cog in the ecommerce machine, are classified as operational expenses. These expenses are directly linked to the core activities of the business, which, in this case, revolves around selling products and ensuring they reach the customer. As ecommerce stores expand their reach, shipping becomes even more integral, influencing customer loyalty, impacting profit, and playing a pivotal role in the overall business strategy.

Conclusion

Being able to manage and reduce shipping costs can transform a business's bottom line. In today's competitive landscape, where customers demand both fast and affordable shipping, understanding, and optimizing these costs is more crucial than ever.

With the strategies and insights provided, businesses can navigate the often complex world of shipping, ensuring goods reach their destination without breaking the bank. Revolution Trucking remains committed to assisting businesses in this journey, ensuring timely, reliable, and cost-effective logistics solutions.