How to Reduce Shipping Costs to Boost Your Online Store’s Profit Margins

How to Reduce Shipping Costs to Boost Your Online Store’s Profit Margins

The e-commerce industry underwent a significant change over the last few years, skyrocketing to $875 billion in sales in 2022 in the US.

Due to the low barrier of entry, it could be easy to assume that the e-commerce industry can be a “quick win” for most, but business owners need to keep a close eye on particular challenges throughout their journey.

One of the most significant difficulties digital commerce businesses can face is the increased shipping cost, which can eat into profit margins. There are several solutions that leaders can explore, such as in-house vs. outsourced shipping, to provide excellent service to their customers.

This article will discuss ways to lower your e-commerce shipping costs and increase the long-term profitability of your store.

  • Choose the Right Packaging 

When we talk about e-commerce, weight equals money, especially when large quantities of products are being shipped daily. Although optimizing your packaging might only save you a few cents per item, this can quickly add up. There are several factors you must take into account, but perhaps the most important one is lightweight packing materials.

Try to use corrugated boxes or swap to padded envelopes and bubble wraps instead of carton-based materials. If your company wants to stick with the traditional shipping boxes, design custom packages that fit your products’ exact dimensions. There might be a higher initial cost, but you will gain significant returns in the long run.

2. Negotiate with Multiple Suppliers  

It is a common myth that only large businesses can negotiate special rates with suppliers. Even small businesses with a monthly average of 100 shipments can often work out a discount with the carriers by reaching out to them directly.

Ensure you refrain from signing off on the first offer you come across. Get quotes from as many carriers as possible to find the right solution (and price) that suits your exact needs.

3. Outsource Order Fulfillment to Specialists

Managing order fulfillment in-house can get complicated quickly and can be challenging to scale up based on the demands of your business. External fulfillment providers can help you stay on top of your orders with ease. You can outsource all or select items to provide fast, reliable delivery and excellent customer experience.

Fulfillment providers can hold your stock and handle packaging and shipping at speed, so you do not have to worry about warehouse space at your premises. They can also help you to manage optimal stock levels and often have negotiated shipping rates to create significant cost savings.

With over 35 years of experience, Phase V can help you maximize customer experience and speed up your shipping time. With our conveniently located warehouses and super responsive customer support, we can offer you the best shipping prices to suit your needs.

4. Apply Flat-Rate Shipping 

Shipping prices have changed over the last few years. UPS, FedEx, and USPS have all increased their rates from 2% to 4.95% on shipping, depending on weight. Keeping track of these fluctuating prices takes a lot of work to ensure they stay within your bottom line.

Due to these changes, it is common for e-commerce businesses to introduce flat-rate shipping with a single, fixed-rate price regardless of weight or size. This can help business owners plan shipping costs and balance the market.

5. Offer Local Delivery or Pick-up

The pandemic has accelerated the trend of shopping locally, with 57% of buyers seeking out local businesses to support. Skipping carrier fees altogether can be a significant advantage for small business owners, where providing local delivery or pick-up can be a viable option.

Offering local deliveries can also help you connect with your audience and create a more personal buying experience. With 33% of buyers planning on using local delivery going forward, this option should be an easy fix if it suits the size of your business.

6. Build Shipping into Your Price

Recent surveys found that 75% of customers expect free shipping on all orders. If your business cannot afford this, try to build the cost of shipping into the price of your products.

Make sure you research how your prices compare to your competitors, and be careful not to set your prices too high. If you only offer free shipping in particular areas, communicate this clearly upfront to your customers. Building shipping costs into your prices can also lower cart abandonment since 48% of buyers tend to abandon their carts due to high shipping fees.

7. Be Selective about Where You Ship to

It is getting increasingly popular among customers to shop internationally, opening organizations up to a much wider audience. As attractive as this idea can be, selling to a global audience can take time and effort.

You need to consider several factors if you wish to expand worldwide. Conduct in-depth research, compare shipping rates, and identify the most affordable locations to which you can easily branch out. Fulfillment providers can help you easily reach a global market, taking care of everything from accurate tax documentation to shipping logistics.

8. Use Longer Delivery Windows 

The general rule in shipping is that the sooner an item must be delivered, the higher the cost of the service; thus, it may make sense to have longer delivery windows for your products. Longer timelines can save you up to $20-$40 per item, which can add to significant cost-saving.

Although some buyers are willing to put up with longer delivery times, this might only sometimes be a viable option in an environment where customers have rising expectations of how quickly goods should be delivered.

Statistically, 40% of US buyers expect 2-3 day delivery as standard, making it increasingly challenging for small businesses to keep up with demand. Offering options for expedited delivery and ensuring that orders are processed quickly might provide suitable solutions.

Final Thoughts

Managing the growing transportation costs does not have to be a difficult task. Phase V is here to help you increase your online store’s profits by providing efficient and cost-effective order fulfillment solutions.

Contact Us for a Quote Today!


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