Shipping can be one of the largest expenses for any business owner, and often, it’s an area where costs can spiral out of control without even realizing it. If you’re a small business, being strategic about your shipping costs is essential for keeping your bottom line healthy. Here are the common ways businesses unknowingly overspend on shipping and how you can avoid them:
1. Rate Tier: Not Optimizing Your Shipping Rates
Many business owners fall into the trap of using the default rate tiers provided by their carriers. But shipping costs can vary significantly based on the weight, size, and destination of your packages. If you’re consistently shipping within the same region or to similar destinations, you may be able to negotiate a better rate or choose a different carrier that offers more favorable terms.
In addition, some carriers offer discounts for higher volumes, so if your business has grown, it's worth revisiting your agreement and exploring options to reduce your per-shipment cost.
2. Using Bigger Boxes Than Necessary
It might seem harmless to use a larger box, especially if you're trying to protect your products, but shipping carriers charge based on both weight and volume. Using oversized packaging increases dimensional weight pricing, which is based on the volume a package occupies in the delivery vehicle. This could mean you’re paying for more space than you’re actually using.
To avoid this, consider sizing down your packaging. Always match the box size to the product you’re shipping. Not only will you save on shipping costs, but your customers will also appreciate receiving a well-packaged, sustainable product.
3. Choosing the Wrong Service Type
Each carrier offers a range of shipping options, from expedited services to ground delivery. While it might be tempting to choose the fastest, most expensive option, it’s important to evaluate whether it’s necessary for your product or if a more cost-effective service will do the job.
For example, if your customer doesn’t require overnight shipping, ground service might be more economical. Similarly, using a carrier’s economy option for larger shipments can save you a considerable amount in the long run.
4. Not Considering All Carrier Options
When it comes to shipping, sticking to just one carrier could be costing you more than you think. Not all carriers are equal in terms of service, pricing, and reliability. UPS, FedEx, and USPS each have their strengths depending on your shipment’s size, weight, and destination.
It's a good idea to compare pricing and service levels from multiple carriers to find the best match for your needs. Some carriers are also offering new ways to save, such as regional delivery services or zone skipping for faster, cheaper shipping within a certain area.
5. Using a Fulfillment Center Without Negotiating Rates
Outsourcing your shipping to a fulfillment center can be a great way to scale, but if you're not paying attention to the rates they charge, you could be overspending. Fulfillment centers often bundle their shipping fees with the cost of their services, which means you might be paying a premium without realizing it.
Before partnering with a fulfillment center, ensure that you’ve compared their shipping rates with alternatives and are aware of any additional hidden charges. Also, check if they have volume discounts or preferential rates with specific carriers that could help lower your shipping costs.
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6. Excessive Customer Returns
Customer returns can quickly eat into your profits, especially if you’re covering the cost of return shipping. If your return policy is too lenient or you don’t have an efficient return system in place, you might find that you’re paying to ship items back without gaining much in return.
To mitigate this, consider a few strategies: create a clear return policy that reduces unnecessary returns, implement restocking fees for certain returns, or ask customers to use their own return labels. This way, you’re not covering shipping costs on items that aren’t being sold again.
7. Not Using Access Points
Many carriers, including UPS and FedEx, offer access points where customers can pick up their packages rather than having them delivered to their homes. This service can lower delivery costs, especially for residential deliveries, which often come with higher fees. If you're not offering the option for customers to pick up from these access points, you might be missing out on a cheaper and more convenient way to fulfill orders.
8. Not Planning for Peak Seasons
Shipping costs can vary dramatically during peak seasons like the holidays. If you wait until the last minute to arrange shipping during these times, you may end up paying inflated prices for expedited services.
To avoid this, plan ahead. Some carriers offer discounts or better rates if you book shipments in advance or during quieter times of the year. Additionally, consider building shipping cost buffers into your pricing strategy during busy periods to absorb fluctuations in carrier rates.
9. Failure to Track Shipping Performance
Without regularly reviewing your shipping performance and costs, it’s difficult to identify inefficiencies. Tracking key metrics such as the average cost per shipment, delivery times, and customer feedback can help you pinpoint areas for improvement. If a certain carrier is consistently late or charges higher-than-expected fees, it might be time to switch.
Shipping costs are an unavoidable part of running an e-commerce business, but there are many ways you can reduce what you’re spending. By reevaluating your packaging, shipping service, carrier choices, and fulfillment process, you can lower your shipping expenses and improve your overall business profitability. Make small adjustments, monitor your spending, and always look for opportunities to optimize—your bottom line will thank you.
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