When you start your own eCommerce business, there are a lot of expenses. One cost that will be ongoing, of course, is shipping. Unfortunately, shipping is also one of the most costly expenses you'll need to take on. Shipping costs will vary based on the following:
Before you jump into changing carriers or tweaking your packaging, it helps to know exactly where your money is going. A simple shipping cost audit can reveal quick wins that you might otherwise miss.
Take a close look at what you’re using to ship each order: boxes, mailers, tape, labels, and protective fillers. Are you paying for premium materials when a more affordable option would work just as well? Are you using boxes that are much bigger than the products you’re shipping? Mapping these details out will show you where you can trim costs without sacrificing protection.
Shipping costs aren’t just about postage. They also include the time your team spends picking, packing, printing labels, and handing packages off to the carrier. Track how long a typical order takes from start to finish. If your process is slow or inconsistent, that’s a hidden cost that can add up quickly as your order volume grows.
Next, review your carrier invoices over the last few months. Look for patterns in surcharges, residential delivery fees, weekend delivery fees, and address corrections. You may find that a few simple changes to how you pack, label, or schedule shipments could significantly reduce these extra charges. Once you know where the money is going, you can use the rest of the tips in this article much more effectively.
Many small eCommerce businesses assume they don’t ship enough to qualify for carrier discounts. But, it’s important to know that you don’t need to be shipping packages like Amazon do get a better rate! Discounts can often be negotiated with your carrier if you’re making as few as 100 shipments per month by contacting their contract shipping services department and speaking with a representative about your business. When you do this, be sure you or your shipping manager know your numbers: shipping needs, volume, and projections. That will get UPS, FedEx and other carriers to pay attention.
Also, be sure to negotiate with multiple carriers to get the best deal. If one carrier knows you're considering switching, they may be willing to play ball to reduce shipping costs and keep your business.
The bad news: According to Multichannel Merchant, in 2019 more Than 6% of FedEx and UPS parcel shipments were late. The good news: Their Money-Back Guarantee policies state that you are entitled to a full refund on that shipment, even if it’s only minutes late! The catch, of course, is that they make you initiate the refund process and many companies don't bother (or don't know about it).
Yes, monitoring your account can be very time-consuming, however, if you're doing a lot of shipping, requesting credits for service failures, overcharges, weight discrepancies, and more can really add up and significantly reduce your shipping costs. It's also important to note that you have a window of 15 days from the date of invoice to claim those refunds, so you don't have to be on top of it daily.
You’re already busy—why spend more time and gas money making a trip to your carrier’s location to ship your products? Look for a carrier that will make pick-ups and deliveries at no cost to save you time and money. You’ll be locked into their pick-up schedule, but it just may be worth it!
You may know that shipping labels can be printed at home, but did you know you can also print postage at home? Of course, different carriers have different rules about printing postage for packages.
However, once you understand them, you can save money by printing them right from your computer. Some carriers also offer special software that integrates with your own to make the process even easier.
Manually checking rates, typing addresses, and printing labels one by one might work when you’re just starting out. As your order volume grows, though, that approach can become slow, error-prone, and expensive. Shipping technology can help you automate routine tasks, avoid mistakes, and consistently get better rates.
Modern shipping tools can pull in real-time rates from multiple carriers so you can see your options side by side. Instead of guessing which service will be cheapest or fastest, you can choose the best option for each order in a few clicks. Over hundreds or thousands of shipments, automatically selecting the right service can result in significant savings.
Good shipping software doesn’t just print labels; it also helps you avoid costly errors. Automatically generating labels from your order data reduces the chances of typos or incorrect information. Built-in address validation can catch mistakes before a package goes out the door, saving you from returns, delays, and extra fees for address corrections.
When you centralize tracking information in one place, you gain visibility into how your shipments actually perform. You can see which services consistently hit their delivery windows, which areas are most expensive to serve, and where delays keep happening. That data lets you refine your shipping strategy, adjust your carrier mix, and decide when it’s time to partner with a fulfillment center that can help you scale more efficiently.
While some packaging materials are necessary, especially when you’re shipping something that’s fragile, the costs can quickly add up. Of course, while branded packaging is great and adds to the customer experience, it may need to be something you put off until you’re generating more revenue. Instead, purchase plain, traditional packing materials such as boxes, bubble wrap, air pillows, and more in bulk to cut your shipping costs.
Choosing affordable materials is a great first step, but how you use those materials matters just as much. Optimizing the size and weight of your packaging can dramatically reduce dimensional weight charges and make every shipment more cost-effective.
If you often ship products in boxes that are much larger than they need to be, you may be paying for empty space. Review your most common order types and create a small set of box sizes that fit those orders snugly. The less unused space you ship, the more you can keep dimensional weight, and your shipping bill, under control.
For soft, non-fragile items like apparel or accessories, consider swapping heavy boxes for lightweight polymailers or padded envelopes. These still protect your products but add less to the total weight of the package. Over time, consistently shaving off a few ounces per shipment can make a big difference in what you pay carriers.
Look back at your order history and identify the sizes and combinations of items you ship most frequently. Then, design your packaging strategy around those patterns. A small, well-planned set of box and mailer sizes will simplify your packing process, reduce waste, and make your shipping costs much more predictable.
One way UPS, FedEx, and other carriers make their money is by overcharging customers for insurance costs. If you’re shipping valuable items, you probably know that insurance can get pricey. Carriers generally charge approximately 80 cents for every $100 of insurance. However, there are other third-party companies like Parcel Insurance Plan (PIP) and U-PIC Shipping Insurance that charge a fraction of this, usually about 45 cents per $100. That can save you almost half!
Applying dimensional weight to shipments is fairly new for carriers, and many small businesses don't know what it's all about. Here's how it began. About five years ago, carriers noticed they were losing money on large – yet light – items. These large items took up a lot of space on their trucks, but netted them little money. So, they’ve begun applying this “theoretical” weight to packages based on how much volume the package occupies, charging for whatever earns them more money – the actual weight of the package or the "dimensional weight."
If your packages tend to weigh less than the dimensional weight, the cheapest way to ship oversized packages will most likely be to find a carrier that doesn’t follow this practice.
When you use your own packaging, it’s possible to incur the aforementioned dimensional fees if your box exceeds the size regulations of your carrier. When you use your carrier’s packaging—even if it’s just to put your own package inside of theirs—these fees can often be avoided.
Before you bill customers, be sure that you’re factoring in all shipping fees. Carriers have more than 75 special charges, such as fuel surcharges, signature fees, and weekend delivery fees. Unless you’re trying to offer your customers a sweet deal, be sure to include these costs in your pricing structure so you don’t wind up absorbing them yourself.
Once you understand what shipping truly costs your business, you can start using your shipping options strategically. Instead of seeing shipping only as an expense, you can turn it into a marketing and sales tool that encourages larger orders and keeps customers coming back.
If you tend to ship orders that fall into similar size and weight ranges, flat-rate shipping can simplify things. By charging a flat fee at checkout, you make costs more predictable for both you and your customers. In many cases, you can align your flat-rate offer with carrier flat-rate options to keep your margins healthy while still promoting simple, transparent pricing.
Customers love free shipping, but offering it on every single order can quickly eat into your profits. A smarter approach is to set a minimum order value that unlocks free shipping. This encourages shoppers to add a little more to their cart, which raises your average order value and helps offset your shipping costs.
Another way to improve your shipping economics is to send more value in each box. Create product bundles, kits, or “buy more, save more” offers that reward customers for ordering multiple items at once. When you can ship several products in a single package, your cost per item goes down, even if you’re still offering attractive shipping options at checkout.
Are you offering free shipping and finding it to be too expensive? Up the price of your product and continue to offer free shipping! This may seem counterproductive, but remember customers like the simple pricing structure of a free shipping model. They may not notice that the product costs more. Instead, they’ll be attracted to the free shipping angle. In fact, the Wharton School of Business shows that free shipping that saves a customer $6.99 is more appealing than a discount that cuts the purchase price by $10. Again, it comes to simplicity and not having to do any calculations.
Often, busy shippers will simply choose a single carrier strategy and negotiate a reasonable rate. This streamlines decision-making, as there’s no need to research rates online or request a spot quote. While a single carrier strategy is a time-saver, using multiple shipping carriers offers a number of benefits of its own.
Shipping zones are the geographical areas that various carriers ship to. For example, there are nine USPS shipping zones. The more zones your package crosses in transit, the more you're charged for shipping. Major carriers allow you to enter your zip code of origin and destination to determine the number of zones your package will be crossing – which you can use to calculate your shipping rates (USPS Zones Pages | UPS Zones Pages | FedEx Zone Pages).
If you do this and see that most of your orders are coming from across the country, you may want to consider using a fulfillment center that's closer to your customers to reduce the number of zones your product crosses and the amount you spend on shipping.
A third-party logistics (3PL) partner such as The Fulfillment Lab can also save you a bundle, offering low-cost shipping for small businesses! When you work with us, we will ship your product from one of our locations that are closest to your customer to avoid excess zone charges and pass some of our negotiated carrier shipping discounts on to you.
Because we do bulk business with all major carriers, we’re also able to obtain favorable shipping rates. This way, there’s no negotiation needed on your part. Of course, that’s not all we do (we can get you that customized packaging for less!). Check out our blog, 10 Reasons to Use a Fulfillment Center for Your Ecommerce Shipping, and then contact us to learn more.
At a minimum, it’s a good idea to review your shipping costs once or twice a year, and any time your order volume or product mix changes significantly. Regular reviews help you catch new surcharges, rate increases, and inefficiencies before they have a big impact on your margins.
Not necessarily. Free shipping can be a powerful sales driver, but it needs to be structured carefully so it doesn’t erase your profits. Many small businesses see better results by offering free shipping over a certain order value, or by building part of their shipping cost into product pricing rather than offering free shipping on every order.
Flat-rate shipping means customers pay a fixed amount based on simple rules you set, such as a standard fee for all domestic orders. Real-time rates reflect what carriers are actually charging for each shipment at the moment of checkout. Flat rates are easier for customers to understand, while real-time rates can be more precise, especially if your orders vary widely in size and weight.
Better packaging doesn’t just mean cheaper materials. It means choosing the right size box or mailer, reducing empty space, and keeping shipments as light as possible while still protecting your products. When you optimize both size and weight, you’re less likely to trigger dimensional weight charges and extra fees from carriers.
If you’re handling all fulfillment in-house, shipping software can be essential. When you partner with a tech-enabled fulfillment center, much of that work is handled for you. Your 3PL’s systems will typically manage rate shopping, label generation, tracking, and reporting, so you can still enjoy the benefits of automation without having to manage the tools yourself.
A fulfillment partner can ship from locations closer to your customers, use established relationships with carriers to secure better rates, and apply proven packing and shipping processes at scale. That combination helps you reduce zone charges, cut down on wasted materials, and keep shipping costs predictable as your business grows.