10 Levers to Cut Shipping Costs for Your Online Store

For e-commerce merchants, shipping costs contribute a significant portion of expenses. Moreover, the logistics of fulfillment are sometimes rather complex.

Shipping costs have grown substantially. Consumers often think that shipping is just sending a package from point A to B. But the reality is more complicated because multiple factors are involved. These include fuel prices, delivery speeds, geopolitical situations, and packaging materials among others.

Why Is Shipping So Expensive?

Have you ever thought about why shipping can get so expensive?

Most people in the e-commerce industry have.

Before we dive into levers to reduce shipping costs, let’s first unpack why it can get so expensive.

Increase in Online Shopping

A key culprit in the ever-rising shipping charges is the sheer popularity of online shopping. Shipping rates have increased because of the overall high volume of online shopping people are doing.

Fuel Costs

Fuel prices have increased significantly, so shipping rates have had to rise accordingly.

Higher Wages

The minimum wages have also increased due to inflation. This means logistics companies must pay the drivers and dock workers more to keep the trucks on the road. Ultimately, consumers have to bear all these expenses in the form of shipping costs.

New Regulations

As governments pass new regulations aimed at improving safety and reducing pollution, carriers must spend more money, which contributes to the shipping expenses.

Shortage of Containers

There has been a severe shortage of containers because of uneven global trade flows and port congestion. Due to the lack of containers, the cost of renting or buying containers has also increased.

Extra Shipping Fees

Carriers charge more for home deliveries and for handling oversized packages. These extra fees add up, leading to higher shipping costs.

Trade Issues

Geopolitical tensions have made shipping goods along certain routes difficult and more expensive.

Shipping vs. Delivery: The Key Differences

When tackling last-mile logistics, it can be tricky to understand the difference between shipping and delivery. Please see the table below to get clear definitions.

Shipping	Delivery
Definition	Moving goods from the warehouse to the carrier
Starting point	The warehouse or distribution center
End point	Shipping carrier's local hub or distribution center
Responsibility	Typically handled by shipping companies or freight carriers
Timeframe	Can take longer, especially for international shipments
Tracking	From the warehouse to the carrier

Trends That Impact Shipping Costs

Certain trends have taken the shipping industry by storm. These trends also have the potential to increase or decrease shipping costs.

A Boom in E-Commerce Sales

There’s been a significant increase in online sales for e-commerce.

This means that companies now have to ship more packages every day. And if you keep walking on this track, this means spending more on shipping. However, this is good, too, as shipping companies will offer discounts to secure bigger orders.

This can be a win-win for the online merchant and the shipping companies.

Oil and Fuel Costs Rising

Ongoing conflicts between countries can cause oil prices to go up. When oil prices go up, it costs more for companies to transport goods because fuel gets more expensive. This means shipping costs get higher too.

Sustainability Rractices

There’s a big effort to make shipping more eco-friendly.

The EU has an organization called the Emission Trading System (ETS). It makes shipping operators buy carbon credits, encouraging them to be greener. Companies are using electric vehicles for deliveries, finding the best fuel-saving routes, and using packaging that breaks down easily. All these steps help reduce the impact on our environment.

Last-Mile Innovations

There have been some innovations in last-mile delivery.

Companies are now using drones and self-driving vehicles. This is best for delivering in busy locations where speed is important. These new technologies help deliver packages faster and more efficiently.

Overcapacity and Rate Fluctuations

More cargo space is expected on big ships to meet the demand for larger shipment volumes. This extra space means more room for cargo and lower shipping prices because of competition between shipping companies.

10 Levers to Reduce Shipping Costs

If you’re running an online store, reducing shipping costs is essential or your profits will sink. Here are 10 levers you can pull to minimize shipping costs.

1. Negotiate Lower Rates With Carriers

Building relationships with multiple carriers can give you leverage to negotiate better rates. Even as a small business, demonstrating consistent shipping volumes can help you secure discounts.

Pro tip: Consider collaborating with local drivers through crowdsourced services for your deliveries. This is a more accessible and cost-effective way, especially for small businesses.

2. Use Last-Mile Delivery Software

Invest in self-fulfillment to save money in the long term. Especially if a large portion of your orders are local shipments, you can build your own logistics operation by investing in trucks and reliable last-mile delivery management software. This way, you control every part of your shipping process and can optimize costs on your own.

3. Optimize Packaging

Packaging plays an important role in the shipping process. Fragile items can easily get damaged, which will spike the rate of returns and overall costs. Especially if you outsource orders to a third party, you can’t always ensure proper loading and unloading, so make sure you use reliable packaging.

Pro tip: If you fulfill your own orders, you can use the load optimization features of your last-mile delivery software. This way, you can minimize the rate of damaged items while also ensuring that packages are loaded in the most efficient order as per your delivery routes.

4. Combine Multiple Orders Into One

Combine multiple orders into one shipment whenever you can. This means fewer packages and lower overall costs, especially if the orders go to the same area.

Consolidating orders also improves load management and simplifies handling. You can offer incentives to buyers for placing bulk orders and even advertise free shipping on orders exceeding a certain number of items.

5. Offer Local Pickup Options

Encourage local customers to pick up their orders from your store or a designated pickup point. This not only brings the shipping costs to a minimum but also improves your order fulfillment speed.

Pro tip: Consider offering discounts on pickup orders. Doing so will help you lower shipping costs while contributing to greater customer satisfaction in the long run.

6. Use Flat-Rate Shipping

If you must outsource some or all of your shipping, especially larger, bulkier items, consider using flat-rate shipping options. Flat-rate shipping allows you to ship anything that fits into a box for a fixed price, no matter how much it weighs. This can save you money on heavier items.

7.Use Prepaid Shipping

Some carriers offer discounts if you prepay for shipping. Buying shipping labels in bulk can reduce per-shipment costs.

8. Review Shipping Zones

Update your shipping policies to minimize travel distance and offer incentives for local or regional customers. This way, you can also boost your self-fulfillment operation by securing more local orders.

Pro tip: You can also approach this from the angle of sustainability and green deliveries as local shipping makes it possible to use “greener” options like cargo bikes, electric vehicles, and local pickup.

9. Outsource International Fulfillment

Hire third-party logistics companies to use discounted rates for international shipping. This will make your order fulfillment more efficient as you’re expanding your reach abroad.

10. Monitor and Optimize Returns

Last but not least, offer a clear returns policy. Even if you pack your items securely and deliver them in excellent condition without damage, a portion of orders will get returned because this is the nature of e-commerce and online shopping.

Having a clear returns policy helps you manage and minimize your reverse logistics costs.