How To Reduce Shipping Costs: 10 Useful Tips (2024) - Shopify (2024)

Shipping costs can eat into small business profits. But with the right planning, it’s possible to compete with the ecommerce giants and offer low rates—or even free shipping.

Use these 10 practical tips to minimize shipping expenses while maintaining a good customer experience and your profit margin.

How to reduce shipping costs for your small business

Try these simple, effective methods for reducing shipping expenses for your store:

1. Use Shopify Shipping to cut carrier costs
2. Use flat rate shipping when possible
3. Calculate the right shipping fees
4. Choose the right-sized packaging
5. Reduce the weight of packages
6. Create a shipping policy
7. Know when shipping rates change
8. Look for discounted supplies
9. Use third party insurance
10. Offer local delivery or pickup

1. Use Shopify Shipping to cut carrier costs

Shipping through Shopify is probably the most effective way to cut shipping costs, no matter where you’re sending packages.

With Shopify Shipping, you get access to pre-negotiated discounts of up to 88% from major carriers, including USPS, UPS, DHL, and Canada Post.

The best part? These savings are included with a standard subscription—simply access the shipping features from your Shopify dashboard and decide whether to offer your customers free, flat-rate, or calculated shipping at checkout.

You can also use Shopify to buy and print shipping labels, including auto-generated customs forms for international shipping.

2. Use flat rate shipping when possible

With flat rate shipping, the cost of shipping is split into size, weight, or destination categories, so the price of sending a package becomes more predictable. This makes it a cost-effective, straightforward option that benefits you and your customers.

Offering flat rate shipping to customers lowers uncertainty at checkout, reducing the chances of an abandoned cart.

When sending packages, you can also take advantage of flat rate shipping options from carriers such as USPS and UPS. These carriers provide pre-determined prices for specific box sizes, making it simpler to estimate and budget for shipping costs. This is useful if you regularly ship similar-sized items—you’ll know in advance exactly how much shipping will cost.

Flat rate shipping is one of several types of shipping rates you can charge customers at checkout using Shopify. You can create flat shipping rates for any order within a shipping zone—or orders within price or weight ranges.

For example, you could set one domestic flat rate of $5 and another flat rate of $3 when orders exceed $50.

3. Calculate the right shipping fees

To avoid absorbing unnecessary costs, it’s important to accurately calculate the price of shipping. Keep track of every shipping-related expense, including:

• Boxes, packaging, tape, and stickers. Include the cost of materials needed to securely package your items—down to the rolls of packing tape.
• Labor for sending an item. Account for the time and effort spent preparing and shipping each item.
• Courier costs for collection and delivery. Take into consideration the fees charged by the courier service for collecting and delivering your packages.
• Import and export fees when shipping internationally. Be aware of any potential fees or duties associated with international shipping. (Tip: Use ePacket for cheaper international delivery from Asia.)

This applies whether you charge customers shipping fees or offer free shipping by building costs into product prices or absorbing them into other areas of your business. Either way, you’ll want to make sure that shipping costs aren’t an unexpected drain on your profit margin.

4. Choose the right-sized packaging

Shipping costs can be reduced by making smart choices about how you package orders. Here are some factors to consider:

Reduce package size

Don’t ship air! Always aim for the smallest possible package dimensions. Soft packing materials such as poly mailers or padded envelopes effectively protect items while being smaller and lighter than cardboard. Trimming down unnecessary weight on every package can lead to long-term savings.

Look for free packaging

Take advantage of free packaging options that may be offered by carriers. You could also consider reusing packaging where possible. Along with cost-savings, the choice to reuse packaging can help communicate your brand’s values.

Analyze order history

Review your order history to understand the sizes of packages you typically use. By identifying the most commonly shipped order sizes and quantities, you can select packaging that best matches your standard orders. This approach allows for streamlined packaging choices, waste reduction, and potential cost savings.

Create custom packaging

If you ship items with unique packaging requirements, consider investing in custom packaging. Initial costs are often offset thanks to optimized shipment sizes, as well as by having fewer lost or damaged orders.

5. Reduce the weight of packages

Package weight can be as, or more, important than package size. The weight of a shipment translates directly into costs, which can become extreme for very heavy packages.

Send out lightweight shipments by following these tips:

Pack products in corrugated boxes

Corrugated boxes are a type of ecommerce packaging that’s stronger and lighter than regular cardboard. These boxes feature small air-filled grooves between their layers, offering improved strength while minimizing weight.

Pack products in poly mailers

For non-fragile items like clothing, consider using poly mailers instead of boxes. Poly mailers are lightweight, cost-effective, and occupy less space, reducing packaging costs.

Use lightweight packing material

When you need to fill empty space inside a package, use lightweight materials such as air pillows, packing paper, bubble wrap, foam inserts, or Versa Pak wadding rolls. Pack items tightly while minimizing weight to reduce shipping costs.

Split orders into multiple shipments

Consider splitting large orders into multiple shipments. This can help distribute weight across several packages, potentially reducing shipping costs. Evaluate the impact on overall costs before implementing this strategy.

Use a postage scale

Invest in a postage scale to accurately measure the weight of each package. This enables precise cost calculations.

6. Create a shipping policy

Customers often have questions about shipping. Creating a clear shipping policy will help put them at ease and make them feel supported. Your policy will need to cover costs, delivery expectations, whether orders can be returned, and how customers can notify you if there’s an issue.

Creating a shipping policy doesn’t directly lower shipping costs. But it will indirectly contribute to savings by promoting transparent communication, efficient order processing, and reducing expenses related to returns.

If you need a shipping policy, Shopify’s free policy template is a great starting point. Customize it for your store:

7. Know when shipping rates change

Shipping carriers often adjust their rates, which can affect your shipping costs. It’s essential to stay informed about any rate changes to make necessary adjustments before the new rates kick in.

Most shipping carriers review their pricing each year and adjust rates based on overhead costs such as labor and fuel. New prices tend to be implemented in January but may also occur during the year. Check these pages for new rate announcements from the major carriers:

• USPS new rate announcements
• UPS shipping costs and rate announcements
• FedEx shipping rate changes

You may also be able to subscribe for email updates from the major carriers or shipping industry media to stay informed.

8. Look for discounted supplies

Finding discounted shipping supplies is a great way to reduce costs. Research online marketplaces and wholesalers like Amazon, eBay, and Alibaba to compare prices and quality. You may also be able to join industry associations and networks to access special deals negotiated for members.

Local suppliers may have surplus inventory or be open to bulk purchase discounts, and some larger carriers offer packaging materials for lower prices. Don’t be afraid to buy a large amount of packaging to secure savings—you can store materials for future orders, and you won’t run out when needed.

9. Use third-party insurance

Protecting your packages and minimizing the risk of loss or damage is a common-sense way to keep costs manageable—but shipping carriers usually have pricey insurance options that may not cover everything.

Third-party insurance providers, on the other hand, offer competitive rates and customized coverage that suits your needs. You can choose the level of protection that matches the value of your goods and enjoy lower premiums. Remember to compare different providers to find the best coverage.

10. Offer local delivery or pickup

One more radical way to reduce shipping costs is to stop using carriers when possible. If you’re shipping orders locally, you could deliver them yourself or work with local businesses to allow customers to pick up their purchases from an agreed location.

Offering a local delivery service also helps you:

• Connect with your local community by making it easier for locals to shop with your brand
• Improve customer experience by removing shipping delays and variable costs
• Increase sales thanks to lower delivery costs

💡 Keep reading: How To Ship Products To Customers

How to calculate shipping costs

As a store owner, calculating shipping costs is not just about knowing how much to pay the carrier. It’s also about deciding how much to charge your customers for shipping.

Start by finding the weight and dimensions of your most popular orders. Use a standardized packing process to keep shipping costs predictable.

Next, get to know your shipping zones. These are areas defined by carriers based on the distance from your location. The further the zone, the higher the cost. Check your carrier’s zone maps to understand how they impact your shipping costs.

Consider what shipping methods you’ll offer to your customers. Ground shipping is usually cheaper but slower, while express delivery is faster but more expensive. Your choice should depend on your customers’ needs and your budget.

Based on these factors, decide on your shipping strategy: Will you offer free shipping, charge actual shipping costs, or use a flat rate?

Free shipping can convince customers to complete their purchases, but you need to make sure your business can absorb the extra costs. Charging actual or flat-rate costs can help maintain your profit margins.

USPS shipping costs

The United States Postal Service (USPS) is typically the cheapest way to send packages within the US, especially for ground shipping.

To help compare USPS shipping costs, here’s an example. The table below shows how much it costs to send a small, one pound package from New York to Chicago using USPS’s various mailing classes:

The above represents standard retail shipping costs, and lower commercial pricing may be available. To calculate shipping costs for a specific order, use the USPS price calculator.

FedEx shipping rates

Alongside USPS, FedEx and UPS are also popular carriers for US domestic shipments.

FedEx uses dimensional weight to calculate shipping prices, which means shipping costs are based on a package’s specific size. The carrier offers a variety of delivery speeds, including ground, overnight and same-day.

The table below shows how much it costs to send a small package from New York to Chicago using FedEx’s various mailing classes:

Again, these are approximate retail rates, and lower prices may be available using a flat rate or by signing up for a FedEx account. To calculate specific shipping rates, use the FedEx rate calculator.

Don’t let shipping costs sink your profits

There’s no doubt about it: the cost of shipping can eat into your profit margins. Use these tips to manage your immediate shipping costs and develop a shipping strategy that creates long-term savings.

Shopify Shipping allows merchants to access heavily discounted rates on domestic shipments. Unlock lower costs, faster delivery, and a better shopping experience for your customers.

Illustration by Luca D’Urbino