As 2023 wraps up, we find ourselves at the precipice of another holiday season. This year has been a challenge for many as people all over the world contend with sticky inflation and higher costs of living. Still, life goes on. It’s challenges like these that encourage creative solutions. For enterprising business owners with eCommerce stores, that means finding ways to keep costs down without sacrificing service and product quality or passing those costs on to the customer.
While we’ve already written a guide on saving money on commercial shipping costs, we wanted to explore strategies that cater specifically to the eCommerce crowd. Whether you have your own brick-and-mortar business or operate completely online, if you’re a one-person outfit or a sprawling national company, these are some tried-and-true strategies to consider if you want to minimize shipping costs.
Before we dive into that, let’s refresh on what factors into online shipping costs.
Understanding the Basics of eCommerce Shipping Costs
eCommerce shipping costs, much like commercial shipping costs in general, all depend on the logistics and shipping companies you decide to work with. No matter who you choose, these are a few universal factors that can affect costs:
- Volume and Weight
- Cargo Type
- Mode of Transportation
- Fuel Costs
- Tariffs and Customs Fees
Though these are important factors to keep in mind, most eCommerce store owners focus primarily on distance, volume and weight, how fast the shipment needs to get to its destination, and — if it’s an international shipment — any customs fees that go with it.
You can learn more about each of these in our commercial shipping guide.
Strategies for eCommerce Stores to Save Money on Shipping
As we mentioned, owning a business in economically chaotic times like these presents a great opportunity to hone your creative problem-solving skills. While our primary focus is on shipping costs, it’s important to take a holistic view on your entire online business model. For instance, in addition to finding the best shipping rates, considering everything from the packaging you use to what you’re selling and how you sell it all factors into how much you spend on shipping.
The following strategies will give you examples from a few angles to get you started as you examine your own processes.
Choose the Best-Sized Package for the Product You’re Shipping
Did you know that most eCommerce shipping costs are calculated by volume rather than solely by physical weight? Also called dimensional weight (or dim for short), carriers like FedEx, UPS, and the United States Postal Service realized that calculating their costs based on physical weight alone hasn’t been an effective model since horse-drawn carriages. Moreover, in an effort to become more sustainable, it didn’t make sense to charge much less for very light shipments that took up a ton of space compared to heavier shipments that were very compact. And so, dimensional weight was introduced in the mid-2010s to address this.
What this means is that you should find the best packages for whatever you’re shipping. Instead of shipping large boxes with a very small item inside, choose a box that best fits the product. In some cases, you might not even want to use a box at all! For things like clothing, stationary, or smaller objects like keychains or plastic supplement bottles, you might opt for a padded envelope.
If you’re unsure what to choose, we have a helpful guide on packaging materials for you to consider your options.
Bundle Smaller Products with Larger Ones
Even if you’ve chosen the right package for your products, shipping something small cross-country can become expensive very quickly. If the shipping cost is so high that it affects sales, you’re forced to deal with any extra costs to give the customer a better rate — which, unfortunately, isn’t sustainable.
Instead of selling these small one-off products by themselves, consider bundling them with larger ones. Here are a few ways you can do that:
- If you sell something like commemorative coins or collectible miniatures, consider selling them as a set instead of individually.
- Use these small products as an upsell or cross-promotional item that are a part of a larger purchase.
- Offer these products as a special bonus after the customer buys a certain amount of items in their order or spends a specific amount of money. They can also be offered as a customer loyalty reward; if you have multiple small products of the same type, you can let the customer choose which bonus they want.
By adding these options, any one-off purchases for these smaller goods can be offset by encouraging larger, more cost-efficient orders.
Consider Offering Free Shipping
Though this seems counterintuitive, offering free shipping after a customer’s order reaches a certain value threshold is a great way to incentivize purchases. For example, if 1-4 shirts fit in the same-sized padded envelope you use for shipping, encouraging customers to buy four shirts and offering free shipping can increase your sales revenue with shipping costs remaining mostly the same (though this depends on both dimensional and physical weight along with your carrier’s rates).
Strangely enough, free shipping is a useful customer psychology tactic. Even if the customer buys more, there’s a feeling of satisfaction when seeing discounts and savings at the checkout screen.
A word of caution: if you decide to offer free shipping, be sure to calculate some different purchasing scenarios to choose the right threshold and situations to apply this discount. If the goal is to save money, it’s crucial to find the right balance to encourage sales without cutting too deeply into your margins.
Focus on Regional Sales
Even if you want to serve customers wherever they are, if shipping costs are a major issue, it might be beneficial to focus on customers closer to home. That isn’t to say you should give up on customers farther away. Rather, turn some of your marketing efforts toward customers that are near your fulfillment centers. In other words, continue marketing to your usual audience, but consider a few smaller specialized campaigns to entice those local buyers.
By increasing your efforts towards customers closer to where you’re shipping your products, you’ll enjoy the dual benefit of increasing potential sales revenue while saving money on shipping costs related to distance. Moreover, nearby customers can be served quicker, speeding up shipping times and boosting customer satisfaction in the process. Finally, by putting more emphasis on those local wins and the extra money from them, you can start expanding back out when you’re able to handle higher shipping costs for customers further afield.
Avoid Overpaying on International Customs Fees
If you’re a Canadian eCommerce brand trying to sell to American customers, you can avoid extra customs fees by setting up fulfillment on the U.S. side. You can also minimize your shipping costs by shipping in bulk to your American warehouse. This means fewer trips across the border — and less customs fees with less crossings — instead of shipping directly to American customers from Canada.
If this fulfillment center processes returns, refunds, and replacements, you can further eliminate extra border crossings. Refunded items can then be either shipped back in bulk or, if they’re broken, properly disposed of on the American side.
Delegate Your Fulfillment Process to Professionals
If you own a small business, it’s often tempting to try and do everything yourself. However, as a business owner, your primary job is to grow your business and take the reins of its strategic direction. As your eCommerce store becomes more successful, you might struggle to produce, process, and ship orders to match demand. Of course, this doesn’t account for the other roles you fill: accounting, marketing, sales, and development to name a few.
Unless you’re well-versed in logistics, you might also miss out on good opportunities to improve your shipping and fulfillment processes by not knowing how to find the best rates or effectively managing your time and resources. After all, time is your most precious resource; money can always be made but time is always finite. With that in mind, your time as the owner is best spend on finding opportunities to grow your customer base.
By partnering with a third-party logistics company to handle fulfillment for you, you can free up your time to play to your strengths while leveraging the strengths of others. While this might be another cost upfront, it’s a worthwhile investment if it means better shipping times, handling quality, and service options than you can provide on your own. With the time you save, you can reinvest that into growth projects, researching new markets to get into or reinforcing your position in your current niche. However, you decide to use your time, having an ample amount of this precious resource gives you an advantage against competitors who haven’t found that balance yet. And in the world of eCommerce, any advantage in a never-ending sea of competing brands can come in handy.
Take your eCommerce Store to the Next Level with UCanTrade
Despite the challenges of 2023, you don’t need to shoulder them alone. UCanTrade is here to help you every step of the way. Reach out to us to learn more about how we can help you save money on shipping costs, improve your fulfillment processes, and serve your customers better.