Reducing shipping costs is a critical concern for new online retailers striving for profitability and competitive pricing.
As Statista highlights, shipping constitutes nearly 90% of total order fulfillment expenses in e-commerce, with last-mile delivery representing the lion’s share. This last-mile component has seen its share of total shipping costs rise to over 50% between 2018 and 2023.
Furthermore, product dimensions significantly impact handling costs, adding another layer of complexity to managing shipping expenses.
For nascent online businesses, implementing effective strategies to mitigate these costs is not just about saving money. It’s about building a sustainable and scalable operation that can attract and retain customers in a competitive digital marketplace.
This article will explore key strategies that new online retailers can employ to reduce their shipping expenditures, ultimately contributing to a healthier bottom line.
Negotiate Shipping Rates with Carriers
Even as a new online retailer, you can negotiate shipping rates with carriers to reduce costs. While large businesses benefit from bulk discounts, many carriers offer special programs for small businesses. Start by researching and comparing rates from different carriers to identify the most cost-effective option for your shipping needs.
Talk to carrier reps about getting discounts for shipping more. Even if your order volume is low, committing to a projected shipping volume can help secure better rates. Many carriers also have small business programs that provide reduced rates without requiring high shipping volume.
Building a relationship with your carrier can also offer additional benefits, such as faster pickups and insights into optimizing your shipping strategy. Regularly reviewing your rates and exploring third-party shipping software can further enhance savings and efficiency.
Use Small Parcel Shipping for Lightweight Orders
Small parcel shipping is a cost-effective solution for lightweight packages, making it ideal for new retailers shipping individual orders. This method allows businesses to minimize costs while ensuring reliable and timely deliveries. Major carriers offer specialized small parcel services, helping e-commerce brands optimize shipping expenses.
According to Innovative Warehouse Solutions, combining next-day air (NDA) shipping with an effective small parcel fulfillment strategy can create a competitive advantage. This approach is especially valuable for premium product lines or VIP customers, ensuring speed and accuracy for high-priority shipments.
Optimize Packaging to Reduce Dimensional Weight Fees
Optimizing packaging is a crucial strategy for retailers aiming to minimize dimensional weight fees, a significant contributor to shipping costs. Carriers often calculate charges based on package volume in addition to weight, making efficient packaging paramount.
Selecting appropriately sized boxes that closely fit the product and minimizing unnecessary void fillers are essential steps. Employing lightweight yet protective materials further reduces overall package weight, directly impacting shipping expenses.
Innovation is also happening in this area. For instance, according to Deloitte, some Dutch e-commerce companies utilize packaging automation machines to pack items with minimal air. Furthermore, a global e-commerce giant has invested in machine learning to optimize box space, considering product mix and layout constraints.
The advanced solution has reportedly reduced per-shipment packaging weight by 36% and eliminated packaging equivalent to over two billion shipping boxes. By adopting similar principles, even on a smaller scale, new retailers can significantly decrease their shipping costs and enhance sustainability efforts.
Offer Multiple Shipping Options to Customers
Offering customers a range of shipping options is a valuable strategy for managing costs and enhancing customer satisfaction.
According to a McKinsey & Company survey of US consumers, a significant 90% are willing to wait two to three days for delivery. This is especially true if it means avoiding shipping fees. Conversely, a similar percentage are likely to abandon online shopping carts due to high shipping costs for standard items, highlighting price sensitivity.
While speed isn’t always paramount, reliability is crucial, with consumers valuing on-time delivery within the promised window. Furthermore, the survey indicates a demand for optionality in delivery and returns. Over a third of consumers are willing to pay a small premium for more sustainable shipping practices.
By offering varied shipping options, retailers can tap into these preferences, optimize their shipping costs, and improve the overall customer experience.
Take Advantage of Technology and Automation
Modern shipping technologies provide powerful tools to help new online retailers manage costs and improve efficiency. Shipping management software automates key aspects of the fulfillment process, such as rate comparison, label generation, and carrier selection. By analyzing factors like destination, package size, and delivery speed, these tools help retailers identify the most cost-effective shipping method for each order.
Additionally, last-mile delivery software is revolutionizing logistics. According to Future Market Insights, the global last-mile delivery software market is expected to grow from USD 14,186.8 million in 2024 to USD 47,733.5 million by 2034. This growth reflects a CAGR of 12.9% over the forecast period. This rapid expansion highlights the increasing reliance on technology to streamline final-stage deliveries.
Consider Flat-Rate and Regional Shipping Services
Flat-rate shipping options can be more affordable for specific destinations. This pricing structure allows retailers to predict shipping costs more accurately, making it easier to budget and set prices for customers. Additionally, regional carriers may offer competitive rates for local deliveries, which can be advantageous for businesses targeting specific areas.
FAQs
What are the main differences between small parcel shipping and freight shipping?
Small parcel shipping is used for lightweight packages. Freight shipping is for larger, heavier shipments, often transported on pallets via trucks, ships, or planes. Freight offers bulk cost savings, while small parcel shipping focuses on speed and flexibility.
What are the benefits of using fulfillment centers?
Fulfillment centers help businesses reduce storage costs, streamline order processing, and improve shipping efficiency. They offer inventory management, faster delivery through strategic locations, and access to bulk shipping rates. Additionally, they handle returns and customer service, allowing retailers to focus on growth while enhancing customer satisfaction with reliable order fulfillment.
How can small online retailers compete with large companies offering free shipping?
Small retailers can compete by implementing strategic shipping policies, such as setting free shipping thresholds, negotiating carrier rates, and optimizing packaging to reduce costs. Focusing on efficiency and smart technology can help level the playing field.
The most successful businesses view shipping not as an unavoidable expense, but as an opportunity to differentiate themselves in a crowded marketplace. With careful planning, technological integration, and a willingness to innovate, online retailers can create effective shipping strategies. These strategies not only delight customers but also help protect their bottom line.
