All Things Shipping | May 03, 2022

Top 5 Small Business Shipping Tips to Cut Costs and Grow Profits

Hasan Nabulsi

Coming up with a small business shipping strategy can be tough. Pair this along with all the other areas of running a small business like legal, operations, staffing, marketing, and fulfillment, and it’s easy to see how shipping can get lost in the shuffle.

But, providing a quality shipping experience to their customers can make or break a small business’s success.

According to a recent survey, 77% of consumers have abandoned their online purchases because they were unhappy with the shipping options. On top of that, 39% completely stopped shopping from an e-commerce business solely because of a bad shipping experience.

But how can small businesses compete with major online brands on shipping without breaking the bank?

In honor of National Small Business Week, we’ll explore ways that SMBs can ship better while also saving money. We’ll detail a few tips on how to cut costs on your small business shipping strategy and use that to grow profits.

Compare Rates Before Purchasing A Shipping Label

According to our most recent State of Shipping Report, over half of e-commerce merchants said the cost of shipping was the biggest challenge for their business. One of the biggest parts of shipping costs comes from the shipping label itself.

One aspect of shipping you’ll notice quickly when starting a small business is that shipping rates will differ almost every time you go to send an order.

That’s because shipping costs are determined by three main factors:

  • The weight of the package.
  • The overall size of the package.
  • The distance that package has to travel.

However, even though each carrier you choose is going to take these three aspects into account, they will not always offer you the same shipping rate. The cost of USPS shipping can be significantly cheaper than UPS shipping under the right circumstances and vice versa.

For example, let’s say you are shipping out a package from Austin, Texas to Atlanta, Georgia and the size dimensions are 8 inches long, 6 inches wide, and 6 inches tall and the package weighs two pounds. Using Shippo’s web app you’ll see some of the following rates:

Cheapest USPS Shipping Rate Cheapest UPS Shipping Rate
USPS Parcel Select – $8.22 – 7 days UPS Ground – $8.95 – 3 days

As you can see, USPS offers the cheapest shipping rate in this example. However, for a small amount extra, your shipments can arrive at your customers four days sooner.

In another example, let’s say you’re sending to that same address only this time the dimensions of your package measure 12x12x12 and the package weighs 40 pounds. The lowest cost shipping rates you’d see would be the following:

Cheapest USPS Shipping Rate Cheapest UPS Shipping Rate
USPS Parcel Select – $63.16 – 7 days UPS Ground – $30.41 – 3 days

By simply comparing rates across different carriers you’d be able to save $32.75 on this shipment alone. Add that across all of your shipments and that could be a lot more money your business could put into other functions.

With Shippo, you can compare shipping rates from over 85+ carriers while also getting discounted rates from some of the nation’s top carriers such as USPS, UPS, DHL, and even apply for discounts with FedEx.

Avoid Shipping Surcharges When Possible

Shipping surcharges can come as a shock to new business owners and can be a difficult challenge to navigate for small businesses. Some of the most common surcharges are:

  • Fuel Surcharge: An additional fee on top of your postage to account for rising costs of fuel.
  • Residential Surcharge: An additional fee on top of the cost of your shipping label to account for delivering products to customers’ doorstep.
  • Peak Surcharge: An additional cost that’s added to your shipping labels during times of massive activities on part of the carriers, namely the holiday season.

Another common surcharge that you may encounter is that of Over Maximum Limits. This could be from delivering a package that weighs or measures beyond the stated limits of the carrier. To avoid these surcharges you’ll need to practice the philosophy of “measure twice, ship once.”

Each carrier has different size limits so the USPS surcharges and UPS surcharges could come into play in different scenarios. Having a strong carrier mix will allow you to choose a service level that doesn’t include a surcharge for your package. For example, what might be classified as an over maximum limit for one carrier, might not be for another.

With Shippo, you can avoid common UPS surcharges such as fuel and residential as well as certain peak season surcharges.

Choose Proper Packaging

Another cost of small business shipping comes in the form of packaging. While it may seem like cardboard, packing tape, and infill are cheap, the amount you spend on these supplies adds up. There are several aspects of this process you need to consider when choosing packaging that saves you money.

Get Free Boxes If Possible

The first way to eliminate some of these costs altogether is to get them free of charge from the carrier you plan on shipping with. For example, you can order free boxes and envelopes from the USPS Store. They’ll even deliver the supplies to your business for free as well. You’ll need to use the service level associated with the boxes you order, so be sure to look at the boxes’ measurements to confirm your products will fit.

UPS account holders can also order free packaging supplies as well as FedEx account holders.

Choose The Right Size Box

No matter where you get your boxes, you’ll want to make sure that you get a size in which your products don’t have too much open space to move in. If you have a box that’s substantially larger than the product itself, you’ll be charged more for a shipping label based on the size of the box alone, plus you’ll be putting your product more at risk to get damaged during transit.

Choose Low-Cost Infill

Figuring out what type of infill to put in those boxes will also be important. There are pros and cons to each infill method, but you’ll want to choose a method that completely protects your products. For example, Air pillows are affordable and can be made in-house, but they won’t protect irregularly shaped or pointy objects. In those cases, you can use shredded cardboard which can also be made on site.

Alternatively, if your products already come in boxes themselves, there may not be a need for infill at all.

Minimize Shipping Insurance Cost

While shipping insurance may seem like an additional shipping cost you can avoid, it is actually a service that can save your small business money. One in 10 products shipped in the US arrives damaged. If your product falls in that 10%, it could eat away at your profit margin.

When looking at a cost-benefit analysis of shipping insurance, consider the following example.

Let’s say you sell guitars at $150 dollars each and you sold 10 of them in a week. Shipping insurance per shipment is $1.50 which adds up to a total of $15 in insurance for that week. If just one of those guitars ends up damaged in transit, and you didn’t have insurance, your business would be out $150 plus the cost of returns and additional postage. However, with shipping insurance, you’d still be making $135 on that guitar ($150 for the original sale minus the total cost of insurance for the week.)

With that in mind, carriers like USPS, UPS, and FedEx all offer shipping insurance for any products valued at $100 or less. This will be enough for many small business shipping needs. But, for bigger ticket items, carriers will ask for a fee to have them insured.

However, other options for low-cost shipping insurance do exist. With Shippo’s partnership with Shipsurance, small businesses can get shipping insurance at up to half the cost of getting it from a carrier themselves.

Getting shipping insurance will be key to protecting your small business from any losses and doing it at half the cost will help you maintain a healthy profit margin.

Reduce Chance Of Returns Pre-Purchase, Promote Exchanges

While we’d like to believe that customers will love your product at first sight, the truth is returns are all part of running any type of business. But this is especially true for online retailers.

In a recent survey conducted by the National Retail Federation, they found that the average rate of returns for online purchases was as high as 20.8%.

For small online businesses, returns can put a damper when it comes to maximizing your true revenue. You do have the option of shifting the cost of returns onto your customer, however, this could deter them from making the purchase in the first place.

As highlighted in our 2022 E-commerce Returns and Exchanges Report, 96% of consumers reported they are more likely to make a purchase if free returns are on the table.

In order to limit returns, you’ll want to take action before the sale is ever made. Some common steps include providing high-resolution photos of your product, videos of your product in use, detailed product descriptions, as well as crafting a customer-friendly return policy.

You’ll also want to make sure your fulfillment team is packing the right items according to the order, and that they are stuffing the packages in a way that will help to avoid any damage.

But, one of the best ways to make sure you cut down on the cost of returns is to promote and incentivize customers to make exchanges as well. A resounding 83% of consumers would be somewhat or very willing to exchange their return if they were incentivized with an extra $10 to shop with.

The Results

By practicing all of these small business shipping techniques, you can cut down on most of the major costs associated with delivering your products. This will allow you to make the most of every sale and in turn, allow you to grow and scale your business.

Hasan Nabulsi is the Content Marketing Manager at Shippo.

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