How To Reduce Shipping Costs for Small Businesses

Brad Dorsey

4 min read ·


Customer expectations of shipping times and costs have changed dramatically. Imagine how impatient people would be today with the likes of the Well Fargo wagon! We want our stuff right now and shipped at a discount or for free. It makes shipping a challenge for ecommerce entrepreneurs. Here are some ideas on how to reduce shipping costs for small businesses. 

In an article for Modern Retailer, James Chin Moody, co-founder and CEO, Sendle, argued that in 2021, “how retailers handle their shipping will make or break their businesses.”

Some statistics to keep in mind when it comes to ecommerce deliveries:

  • “Free shipping persuades almost 80% of US consumers to shop online”
  • “Only 15% of US consumers are happy about delivery speed”
  • “More than 80% of shoppers feel regular order communication is needed”
  • “Almost 25% of online shoppers would spend more to get free shipping”

High shipping rates can keep consumers from purchasing products. In fact, 43% will abandon their carts if charges are too high. This article shares how to reduce shipping costs for small businesses. Strategies include:

  • Determine all shipping-related costs
  • Reduce shipping distance
  • Cut package weight and dimensions
  • Offer local delivery or pickup
  • Check for discounted shipping rates


Determine All Shipping-Related Costs 

​​Determine All Shipping-Related Costs

The small business shipping cost is more than the fee you pay at the post office to send that item out. You need to account for:

  • Packaging supplies (e.g., boxes, bubble wrap, tape, stickers)
  • Labor hours spent fulfilling the order
  • Carrier costs for delivering items
  • Import/export fees if shipping internationally

Each of these is somewhere you can reduce shipping costs. Cost-cutting in any of these areas will help to cut your overall shipping costs, which can increase sales!


Reduce Shipping Distance

No, we don’t expect you to open warehouses everywhere, like the retail behemoths such as Amazon or Walmart. Yet, you can cut back on the high shipping fees from shipping across many geographical zones by partnering with a company with many fulfillment centers.

You might also weigh whether advertising to the East Coast, if you’re on the West Coast, really makes sense if shipping is prohibitive. Instead, you might put more of your online marketing budget into local efforts, which will mean cheaper delivery.


Cut Package Weight and Dimensions

Choose the right size of packaging for your products. According to ShipBob, before 2015, major carriers calculated shipping costs based on the item weight and the distance it needed to travel. Then, they added dimensional weight as a consideration. “Dimensional weight is computed by multiplying length times width times height. Since the amount of space on a delivery truck is limited, dimensional weight takes into account package density.”

Therefore, it makes sense for small businesses to find ways to reduce package weight and dimensions. You might:

  • Pack products in corrugated boxes
  • Use lightweight packing material
  • Custom design your shipping package

In finding the right packaging for your product, you might prioritize sustainability too as a differentiator. The World Economic Forum estimates 36% more delivery vehicles will be driving around our cities by the end of the decade. That’s going to cause a 30% increase in carbon emissions by 2030.

Consumers care about this. According to IBM, nearly 6 in 10 consumers are willing to change their shopping habits to reduce environmental impact. 

Along with right-sizing your packages, you might look into recyclable packaging or encouraging customers to return empty product packaging, shipping items in bulk, or offering carbon-neutral shipping.


Offer Local Delivery or Pickup

Offer Local Delivery or Pickup

Offering local delivery or pickup is one way to help cut the carbon emissions around shipping. At the same time, you get an opportunity to connect with your community members and improve customer experience with a more personal touch.

Plus, you’ll appeal to the many customers who like to shop online but pick up their purchases in person. PricewaterhouseCoopers and AT Kearney research found “80 percent of customers research their purchases online, but 75 percent of consumers still prefer to buy products in a physical store.” Why? They avoid shipping fees, get the product sooner, and prefer the overall convenience. No wonder 78 percent of consumers in a CFI Group survey considered “in-store pickup of online orders either important or very important.”


Check for Discounted Shipping Rates

The big carriers often provide ways to reduce your packaging costs. If you are using the USPS, they have free packaging of various sizes for those who pay for specific mail classes of shipping. You might also be able to get free packaging from FedEx or UPS.

Additionally, you want to research discounted shipping rates. There’s no harm in trying to negotiate a bulk shipping rate or discounted rate for your small business.

Joining a carrier’s loyalty program will also typically reduce your rates. Even the USPS has a program to help small businesses save on shipping. Or, you might look at discounted shippers online, such as PirateShip, ShipStation, or Shipping Easy.

Flat-rate shipping can also be useful for the small business that wants to budget for consistent shipping costs.


Shipping Costs Can’t Be the Only Priority

Customers are looking for simple shipping with clear communication around delivery times. They want to navigate the business website easily and get emails from your company, keeping them informed. So, while reducing shipping costs for your small business, don’t skimp on your efforts to engage your customers along the way.

Brad Dorsey