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Reducing Shipping Costs for Your SMB

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Last editedApr 20222 min read

High shipping costs can easily put customers off a purchase and lead to checkout abandonment. For this reason, it’s crucial to know how to keep shipping costs as low as possible. In this guide we’ll offer some tips for minimizing shipping costs low, so that can keep your customers happy and ultimately see more sales.

How are shipping costs calculated?

Understanding how costs are calculated can help you know how to minimize shipping costs. Typically, the following 4 factors influence the overall cost of shipping:

Package weight - the more a package weighs, the more difficult it is to move to its destination. This inevitably drives up costs.
Package dimensions (height, width, length) - the larger a package, the more space it will take up, making it more expensive to transport.
Amount of fuel required to transport it
Distance the package has to travel - this is divided up into zones by shipping carriers. Zone 1, for example, is for packages being delivered within a 50-mile radius of the location it's shipped from, while zone 8 is for parcels being delivered over 1800 miles away from the place of origin.

How can small businesses reduce shipping costs?

1. Add shipping onto customer orders

A very straightforward way to reduce shipping costs for small businesses is to get customers to foot the bill. However, bear in mind that if this is a particularly high sum proportional to the cost of their purchase, the customer is highly likely to change their mind and abandon checkout. So, even if you decide to go down this route, it’s worth checking out the following steps to ensure the shipping is still as cheap as possible.

2. Compare prices of different shipping carriers

When it comes to how to lower shipping costs, shopping around for the lowest price shipping carriers can be a good shout. Some of the most well known carriers include UPS, FedEx and DHL, but the cheapest option for you will depend on how your business operates and where you deliver. For instance, some carriers may offer cheaper rates for domestic deliveries but get pricey when shipping overseas. Others may be the exact opposite. Do your research and make sure you opt for the carrier which can give you the lowest rates.

3. Opt for regional carriers for local deliveries

Linked to the point above, if you only deliver locally or within a 50-mile radius, it may be cheaper to go with a smaller, regional carrier rather than big, national companies like FedEx.

4. Use packaging provided by your carrier

It often works out cheaper to use packaging materials offered by the shipping carriers themselves rather than purchasing your own. You can also lower costs by reusing packaging — but make sure you remove any old labels and addresses.

5. Reduce Package Dimensions

As mentioned above, the package dimensions have an impact on the overall cost of shipping. To keep costs to a minimum, try making sure your parcels are as small as possible. Ways to do this include:

Using smaller boxes
Placing multiple items in a single box

6. Make packages as light as possible

As discussed, the higher the package weight, the higher the price so it’s imperative that you do what you can to keep the weight of the parcel down. Some ways to do this include:

Using lightweight packing materials
Spreading goods out over multiple parcels
Using foam inserts

However you decide to reduce shipping costs, just remember that shipping details should be included in your purchase order so that your customers have full visibility into the order.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.