7 Ways to Optimize Your E-commerce Shipping Costs

When surveyed for our 2021 State of Shipping Report, 58% of merchants told us the biggest overall challenge for their business was the cost of shipping – and we also reported earlier this year that the average shipping cost per order between 2021 and 2022 rose by 10%. Freight cost optimization has become a key goal for merchants looking to manage these rising expenses. With these stats in mind, it’s no wonder today’s merchants are searching for any opportunity to optimize those costs and more efficiently grow their online businesses.

To help merchants solve their fulfillment cost woes, our in-house shipping experts recently hosted a webinar covering our top seven ways to save. Cutting costs is a primary motivation for seeking shipping optimization strategies, whether through optimizing packaging, evaluating your carrier mix, adding insurance, or accessing discounted rates through a third-party solution (and be sure to check out the full recording for a deeper dive!).

Effective shipping optimization not only reduces expenses but can also provide a competitive advantage for e-commerce businesses.

Optimize your packaging

It’s important to optimize each package for weight and ensure you’re not overpaying by using packaging that’s too heavy or oversized for the items you’re shipping. Reviewing and optimizing your packing process is crucial to ensure efficient use of materials and minimize shipping costs. Depending on the specific products you sell, one potential way to save may be to switch from boxes to poly mailers, which are less expensive to ship because of the reduced weight.

Evaluate your carrier mix

It’s important to understand how different carrier options are more cost-effective when shipping certain types of items, and it all really comes down to a) what you’re shipping, and b) where you’re shipping. For example, USPS is more ideal when shipping smaller, lightweight items domestically, while DHL can be a better option when shipping internationally.

Going one step further, different service levels offered by carriers are better suited for certain types of packages as well. Additionally, reviewing and negotiating carrier contracts is crucial to optimize shipping costs and ensure you are getting the best possible service.

Ultimately, the best way to save on every order is to compare all of your carrier and service-level options whenever you ship – which you can easily do simply by signing up for a free Shippo account. Using solutions that allow you to manage and compare multiple carriers helps you make better shipping decisions. Evaluating service level agreements is also essential for assessing and ensuring carrier performance.

Consider how you price your shipping

While offering free shipping on every order may not be feasible, offering this option at least some of the time can not only help improve cart conversions, it can also drive more customer loyalty. When choosing a shipping pricing strategy, it's important to consider your specific business needs to ensure your approach aligns with your operational requirements and maximizes efficiency.

Alternatively, while charging a flat rate shipping fee across every order might make your online store less competitive (depending on your product and ideal customer), it does help mitigate the cost of shipping on your business.

Another option is to offer live rates at checkout, where shipping charges are based on real-time carrier rates – as well as other factors such as the package’s weight, dimensions, and destination – to deliver a more transparent and authentic experience determined by the specific order.

With Shippo’s Rates at Checkout, for example, Shippo powers the shipping rates shown in your store’s checkout experience by calculating estimates of shipping costs based on the contents in the cart and shipping destination. Rates at Checkout are currently available to Shippo customers with Wix Stores, and we’ll be rolling out rates at checkout across our other technology partners in the near future – be sure to stay tuned.

Protect your packages with shipping insurance

One out of every 10 items shipped arrives at its destination damaged, and over 1.7 million packages are lost in the US every single day. Replacing lost or damaged packages can be costly for merchants, but luckily, shipping insurance both covers the cost of loss or damage and improves the customer's experience, inspiring conversions by delivering extra peace of mind at checkout.

Determining whether or not shipping insurance is worth it will largely depend on the items you're selling and the distance they are traveling. Generally, however, adding insurance to your outgoing orders – especially when shipping items that are large, heavy, fragile, or expensive, or when shipping internationally – can help ensure you don't have to cover the cost of any items lost or damaged in transit.

Review and analyze shipping spend data to uncover ways to save money and maximize workflows

Another way to reduce your overall shipping spend is by analyzing your fulfillment data to identify specific opportunities for savings. Regular audits of this data can help uncover billing errors and improve cost accuracy, while finance teams play a crucial role in overseeing shipping spend and ensuring budget accuracy.

By reviewing your total shipping spend or drilling into the total number of transactions over time (year over year during the busy holiday season, for example), you’ll be better equipped to understand which shifts you can make to save more on your overall shipping and fulfillment operations. Data analysis also enables informed decision making for your logistics and shipping strategies, and helps optimize resource allocation across shipping and fulfillment operations. Leveraging analytics tools can also lead to saving time by streamlining workflows and reducing manual tasks.

Know when to switch to a 3PL and move to a warehouse or fulfillment center

As your business grows, it’s important to know when it’s more cost-effective to keep your fulfillment operations in-house versus moving to a 3PL (third-party logistics provider), warehouse, fulfillment center, or distribution center. A distribution center plays a key role in optimizing delivery routes and reducing shipping times, which can significantly improve logistics efficiency.

Additionally, selecting the right facility location for your warehouse or distribution center can enhance cost efficiency and improve service delivery. Essentially, these solutions will take over your entire physical shipping process, from storing all of your inventory and raw materials to labeling and fulfilling your products.

There are a few indicators that let you know you’re ready to make this switch. For example, one indicator can be that your fulfillment costs begin to outweigh the benefit of more sales volume, while another is that customer support tickets become overwhelming for your business because you don’t have the bandwidth to tackle them all.

In both of these cases, 3PLs, fulfillment centers, and warehouses can help take the burden off of your business and optimize operations to help you save on associated shipping costs.

Access discounted shipping rates with Shippo

As mentioned above, you aren’t able to compare a mix of options when purchasing labels through a single carrier site. In addition, purchasing directly with a carrier also means you pay full retail rates for every label. By signing up for a multi-carrier shipping solution such as Shippo, however, you’ll have access to pre-negotiated Master Account rates with popular carriers that can help you save up to 90% on label purchases. These solutions are designed to help businesses achieve lower shipping costs and lower costs overall by improving efficiency and increasing transparency. For e-commerce businesses, reducing shipping costs is crucial to maintaining profitability and staying competitive.

To learn more about each of these strategies can help you save on shipping and fulfillment costs, be sure to watch the full recording of our webinar, 7 Ways to Save on E-commerce Shipping.

Understand accessorial fees and surcharges

When it comes to optimizing your shipping costs, understanding accessorial fees and surcharges is essential. These are additional charges that can quickly add up and impact your bottom line if left unchecked. Accessorial fees are typically applied for extra services—think liftgate delivery, residential drop-off, or Collect on Delivery (C.O.D.)—while surcharges often cover fluctuating logistics costs, such as fuel surcharges or peak season demand.

To reduce shipping costs, start by carefully reviewing your shipping invoices to spot where these extra fees are being applied. Sometimes, small changes in your shipping process—like consolidating shipments, optimizing packaging to lower dimensional weight, or adjusting delivery schedules—can help you avoid unnecessary charges. It’s also wise to negotiate favorable rates with your carriers, especially if you’re shipping goods frequently or in high volumes. Many businesses find that by simply asking, they can secure better terms and lower logistics costs.

Leveraging technology is another powerful way to minimize costs associated with accessorial fees and surcharges. Transportation management systems (TMS) can automate freight audits, optimize shipping routes, and provide consistent tracking of your shipping data. This not only helps logistics teams make informed decisions but also improves service reliability and reduces transit times. By maximizing efficiency in your logistics operations, you can keep costs in check and meet customer expectations for delivery speed and service levels.

For businesses looking to further optimize, partnering with a third-party logistics (3PL) provider can be a smart move. 3PLs bring expertise in carrier selection, freight optimization, and logistics network management, helping you streamline your shipping operations and reduce costs without sacrificing service quality.

Finally, make continuous improvement a core part of your shipping protocols. Regularly monitor your shipping data and performance metrics to identify trends in accessorial fees and surcharges. By proactively adjusting your logistics strategies, you can minimize costs, maximize efficiency, and maintain a competitive edge in your market.

Mastering accessorial fees and surcharges not only helps you reduce shipping costs but also enhances customer satisfaction, supports repeat business, and strengthens your overall supply chain. With the right approach, you’ll be well-positioned to optimize your shipping process and achieve lasting cost savings.

FAQ: Shipping Optimization and Reducing E-Commerce Costs

1. What is the most effective way to start reducing shipping costs?
One of the fastest ways to cut costs is to optimize packaging—using lighter materials, right-sizing boxes, or switching to poly mailers when appropriate. This helps avoid unnecessary weight charges and lowers per-order shipping expenses.

2. How can comparing carriers help me save money?
Different carriers and service levels are better suited for different package types and destinations. Comparing rates—especially through a multi-carrier tool like Shippo—ensures you choose the most cost-effective option for every shipment rather than relying on a single carrier.

3. When should a growing business consider switching to a 3PL or fulfillment center?
You’re likely ready when fulfillment costs begin to outweigh the benefits of increased sales, or when customer support tickets related to logistics become overwhelming. A 3PL or warehouse can streamline operations, reduce labor, and lower overall shipping expenses.

4. How does Shippo help reduce overall fulfillment costs?
Shippo offers pre-negotiated discounted rates—up to 90% off retail—and allows merchants to compare carriers, automate workflows, access live rates at checkout, and analyze shipping spend. These tools help merchants make data-driven decisions and minimize costs across their logistics operations.

‍