Shipping costs can be quite expensive, sometimes making up to 20% of our total expenses. If you opt for express shipping, that number can even jump to 30%.
Every year, courier companies raise their prices like clockwork. And why wouldn't they? Demand is sky-high, and it often feels like we have no other choice but to pay up. Trying to make a reasonable profit when shipping expenses are so high can be difficult. But there are ways to reduce your shipping costs, and in this guide, we'll show you how.
Why Is Shipping So Expensive?
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A big part of it comes down to the steps and people involved. From the moment you order something, a lot of work kicks in. Your item is picked from a shelf, packed, and then handed off to a driver. That package then travels through different centers before it reaches you. Each step costs money.
Plus, fuel prices and the need for express delivery add more to the cost. Companies also have to handle returns, which doubles the work. And let's not forget about the demand – more people want things delivered fast, which puts pressure on shipping companies to move things quickly, often leading to higher prices.
How to Reduce Shipping Costs
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Here are some effective cost savings tricks to lower shipping costs:
1) Negotiate With Carriers
Most businesses settle for the first shipping carrier they find, which isn't always the best choice. Shipping rates can change across different carriers, often decreasing as the volume of shipments increases. This means the more you ship, the less you might pay per square unit of shipping space.
It's a good idea to visit or call several local carriers to know the average shipping price. Understand your package's size, weight, and shipping route and use that information to negotiate better rates. Carriers often have various pricing tiers and special deals that aren’t advertised. Also, inquire if there are cheaper options for slower delivery times if speed isn’t a priority for every shipment.
Here are some questions to help you secure a better rate:
- What discounts do you offer to businesses like mine?
- Are there discounts for shipping frequently?
- Do you have any loyalty programs or rewards?
2) Change Your Packaging
Bulky, heavy packaging means more space and weight, which equals higher shipping fees. So, what can you do?
First, switch to lighter materials. If using regular cardboard boxes, change to corrugated boxes. These boxes have small air-filled grooves between layers which makes them lighter. If you're shipping non-fragile items like clothes, consider using poly mailers and envelopes.
Second, for packing materials, consider using lightweight options such as air pillows, packing paper, bubble wrap, or foam inserts. Don't go overboard with the packaging. Use just enough to protect your products. Every gram counts when it comes to weight.
Third, consider the size of your boxes. Use the smallest possible box to avoid unnecessary dimensions or consider using custom boxes to precisely fit the dimensions of your product.
Lastly, think about letting the courier company handle the packaging for you. Sometimes, it's cheaper to have them do it than to package it yourself since they often provide discounted shipping supplies.
3) Use Third-Party Insurance
When shipping valuable items, insurance is essential to protect against loss or damage. However, carrier insurance can be costly. Third-party insurance is often much cheaper and can save you a good amount of money in the long run. Just be sure to do your research and choose a reputable insurance provider. Check their coverage options and read reviews to ensure they're reliable.
4) Increase the Price of Your Product
If shipping costs are eating into your profits, slightly raising your product prices can help absorb those expenses. The trick is to do it carefully. You don’t want to shock your customers with a sudden, steep price hike. Plus, be transparent about why prices are going up. Many customers understand that shipping isn’t free and are willing to pay a bit more for their favorite products, especially if they value your brand and the quality of what you’re selling.
5) Use a 3PL Partner
A 3PL or Third-Party Logistics provider is a company that specializes in handling your logistics operations, including warehousing, packing, and shipping. If you're finding it difficult to manage your shipping costs by yourself, hiring one can be a good idea. They have established relationships with carriers, which means they can get better shipping rates than you might on your own.
They can also simplify your shipping process. They have warehouses in multiple locations, which allows for quicker and cheaper shipping since your products are closer to your customers. They're especially helpful when you want to reduce international shipping costs.
Additional Strategies to Reduce Shipping Costs
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Here are some additional tips and tricks to reduce shipping costs:
- Whenever possible, bundle orders together. Shipping two products together is often cheaper than shipping them separately.
- If speed isn't critical, opt for slower delivery methods. They're usually more affordable.
- If you ship large volumes, sending goods in bulk to closer shipping zones and distribution centers can save on per-package costs.
- If you're handling shipping in-house, use route optimization software to reduce distances and save on fuel costs.
How to Find Your Base Shipping Price
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To start, you'll need to gather information on a few key factors: the weight of your products, the dimensions of your packaging, the destinations you're shipping to, and the speed of delivery you're offering. Most major carriers have rate calculators on their websites, where you can input these details to get a quote on your average shipping cost.
For example, let's say you're shipping a book that weighs 2 pounds, packaged in a box measuring 10x8x2 inches. You want to ship it by standard delivery within the same country. Enter these details into a carrier's rate calculator. Do this with several carriers to find out who offers the best rate for your needs.
Remember, this base price is just the start. It doesn't include potential discounts you might negotiate or additional fees like fuel surcharges or residential delivery fees.
FAQs
What should I do if my package gets lost or damaged during shipping?
If your package is lost or damaged during shipping, first check if you purchased insurance. If you did, file a claim with the carrier or your third-party insurance provider. They will guide you through the process of receiving compensation for the lost or damaged items. If you didn't purchase shipping insurance, contact the carrier to inquire about their reimbursement policies.
How can I track my shipments to ensure they arrive on time?
Most carriers provide tracking services that allow you to monitor the status and location of your shipments in real-time. Once your package is shipped, you'll typically receive a tracking number that you can use to track its progress online or through the carrier's mobile app.
How can I ensure my packages are delivered safely and securely?
Use sturdy packaging materials and secure packing techniques. Label your packages clearly with the recipient's address and consider adding fragile stickers if applicable. Also, consider purchasing insurance to protect against loss or damage during transit.
What's flat-rate shipping and how can it benefit my business?
It's a shipping method where the cost of shipping remains the same regardless of the weight or size of the package or its destination. It can benefit your business by providing predictable shipping costs, making it easier to budget for shipping expenses.
Summary
While shipping costs can eat into your profits, there are several strategies you can use to save money and bring costs down. From negotiating with shipping carriers and changing your packaging to using third-party insurance, there are numerous ways to save on shipping.
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