All Things Shipping | Nov 16, 2022

7 Ways to Optimize Your E-commerce Shipping Costs

Heather Lohmann

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%. 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. Below, we give an overview of those strategies, from optimizing packaging and evaluating your carrier mix to adding insurance and accessing discounted rates through a third-party solution (and be sure to check out the full recording for a deeper dive!).

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. 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.

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.

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. 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. 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.

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, or fulfillment center. Essentially, these solutions will take over your entire physical shipping process, from storing all of your inventory 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.

Offering even more savings during this busy time of year, Shippo merchants are not subject to normal USPS Peak Season surcharges on labels purchased for any of the following:

  • All Priority Mail Flat Rate Envelopes & Boxes
  • Majority Priority Mail Regional Rate Boxes up to Zone 6
  • Majority Priority Mail Cubic rates up to Zone 6
  • Majority Weight-based shipments <10 lbs up to Zone 6

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.

Heather Lohmann is a Senior Content Marketing Manager at Shippo.

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