How To Cut Shipping Costs To Improve Profit

Customers are becoming more demanding as online ordering becomes the default option, and that sets a challenge for your business in terms of providing a fast and efficient delivery service without eating into your profit margins or charging too much and losing out to a rival business.

Here is a look at some of the best strategies for cutting your shipping costs and streamlining the process so that you can deliver on your promises and get the goods delivered to your customers quickly at the lowest possible shipping cost.

Negotiating with carriers

You might face a potential dilemma when negotiating rates with a partner carrier and nailing down a great rate for your shipping costs, as the best deals are often heavily influenced by volume.

In simple terms, the more packages you are looking to ship, the lower your rate is likely to be.

Even if you are a small business and you are not currently shipping large volumes of parcels daily that doesn’t mean you can’t try to negotiate a keener deal than the first price offered to you.

If you get quotes based on current and projected future volumes from at least two or three carriers, this not only gives you a chance to compare the prices and choose the best one, but you can also point out that a rival is vying for your business and see if they will better the rate offered.

When shipping perishable or hazardous items, you will need to negotiate a solution for safely transporting these items.

In general, terms, whatever it is you are shipping, and even if you are still building up a volume that gives you greater buying power, you should be able to negotiate a lower price if you pitch a couple of carriers against each other and challenge them to beat the other on price.

Use your suppliers to boost the numbers

Another useful strategy that will help keep costs down is encouraging your suppliers to use your shipping account number.

There are two distinct advantages to working with your suppliers in this way.

Firstly, it helps to increase your shipping volume, which can drive the price down overall. Secondly, it gives you much closer control over suppliers’ shipping costs and helps ensure that you are not overcharged by your supply partners.

Getting your suppliers to work with you in this way can give you tighter control over all aspects of the shipping process, including costs and administration.

Flat-rate is a good solution

You will find that all of the major carriers all offer a flat-rate shipping option, and this is well worth considering for your business.

One of the obvious benefits to your business is that you are fixing a cost for shipping across a wider number of shipments which can potentially reduce your shipping costs by as much as 15%.

Many carriers will provide flat-rate boxes at no extra cost, which increases the savings when you spend less on packaging materials. Experiment with different sizes to see which option works best for the type and size of products you are shipping, then strike a fixed-rate deal based on what sizes and delivery zones are relevant to you.

Upfront savings

Another cost-saving idea that should be on your radar is considering prepaid shipping.

How this works is you agree to buy a specific quantity of shipping labels upfront at a discounted rate as opposed to paying for each package as you send it out.

It is not uncommon to be able to slash as much as 20% off your shipping costs by paying upfront in this way. This option tends to work best when your shipping requirements are fairly standardized, and you regularly send out parcels of a similar weight and size.

Shop around for insurance

The shipping add-ons can often eat into your margins, and insurance is a classic example of that.

Carriers charge an average of about 80 cents or so for every $100 of insurance coverage they provide. You need that insurance to cover lost or damaged items in transit, but you can often find an alternative insurance quote that is not built into the shipping fee that might be anywhere up to 50% cheaper.

Don’t take the carrier’s insurance deal as the default option until you have checked whether you can get a better deal elsewhere.

If you follow some of these strategies, you should be able to cut your shipping costs and offer a keener deal to your customers. Plus, remember your customers are also keenly assessing their experience with your business after delivery i.e. your post-delivery follow-up and brand promise.

Sebastian Holloway has learned how to cut costs in his business. He started out working from his kitchen table at home, before expanding into a smaller, then more giant, warehouse. He shares his tips on shipping, packaging, websites and more in his articles.