E-commerce businesses have experienced unprecedented growth in recent years. This surge has brought increased competition, higher shipping costs, supply chain challenges, and a growing demand for free or low-cost shipping with 1-2 day delivery.

So, how can you cut costs without compromising quality or taking on unnecessary risks?

This guide provides practical, cost-saving strategies you can apply to reduce shipping expenses, enhance profit margins, and deliver greater value to your customers.

Tip 1: Get discounts with long-term contracts or pay upfront

Shipping companies may offer special discounts to businesses that commit to larger volumes or longer-term contracts.

Pay in Advance:

If your shipping volumes are steady throughout the year, consider paying for a full year’s shipments upfront to secure a discount. Kristina Lopienski from ShipBob notes that “prepaid shipping can save you up to 20% on shipping costs with UPS and FedEx by purchasing a set number of shipping labels in advance.”

Opt for Long-Term Contracts:

Similarly, you might receive discounts by agreeing to longer-term contracts. While these contracts often come with shipping minimums—which can feel risky—they also provide substantial discounts in return for a commitment to ongoing business. This approach can also help you lock in current shipping rates, which could be beneficial if you expect prices to rise in the near future.

Tip 2: Use your historical shipping data to negotiate better rates with couriers

To negotiate better shipping rates based on volume, you must be prepared to back up your claims with concrete data.

Gather your data: Analyze your historical shipping data to build a compelling case when discussing rates with a courier. Keep in mind that most volume-based discounts start after reaching several thousand orders.

Shop around: A classic cost-saving strategy is to obtain quotes from multiple carriers. Once you have several offers, see if any shipping companies are willing to beat the lowest quote. The goal is to find those ready to compete for your business with lower rates.

Negotiate surcharges: Some shipping companies apply fees after a package is delivered, often based on factors that aren’t clear until delivery. These fees can be unreasonable and are often open for negotiation.

Tip 3: Reduce insurance rates

Packaging Digest reports that, on average, 2% of shipments suffer some form of damage. Such damages can lead to extra costs in insurance premiums, returns, and refunds. However, there are ways to cut costs through smart insurance strategies.

Avoid double-insurance: Many carriers automatically provide insurance for shipments valued under $100. If you’re already purchasing third-party insurance, you might be insuring your packages twice.

Compare third-party insurance rates: Most businesses use the insurance provided by carriers, but these are often retail rates. Third-party insurance providers can frequently offer more competitive rates.

Tip 4: Optimize logistics

The farther you are from your customers, the higher the shipping costs to deliver items to their doorsteps. However, there are several strategies to reduce these expenses on a larger scale.

Partner with multi-location third-party fulfillment centers:
Working with multiple fulfillment centers across different regions, such as separate providers for each coast or for international versus domestic orders, can help minimize shipping distances. This can lead to significant savings in both time and shipping costs.

Cut last-mile delivery expenses:
Last-mile delivery is the costliest part of a shipment’s journey, accounting for up to 53% of total shipping costs. Therefore, it’s crucial to find ways to reduce these expenses. Here are some tips:

• Choose the most cost-effective last-mile delivery service: In the U.S., USPS is often the most affordable option.
• Offer flexible delivery options: Not all customers need their orders in one or two days. Allowing customers to select longer delivery windows can save both them and your business money.
• Promote in-store pickup: Provide customers with the option to pick up their orders at the nearest location to get their items faster, reducing shipping costs.

• Introduction
• Tip 1: Get discounts with long-term contracts or pay upfront
• Tip 2: Use your historical shipping data to negotiate better rates with couriers
• Tip 3: Reduce insurance rates
• Tip 4: Optimize logistics
• Tip 5: Decrease the size and weight of packages
• Tip 6: Increase order volume to make shipping cost-effective
• Tip 7: Audit your shipping data regularly
• Who is AfterShip?

Number of Pages:

• 12 pages

Pricing: 

• Free