Shipping is a large cost that cuts into e-commerce businesses’ profits. Whether you’re just starting out or a titan in the industry, you’re always going to be looking for cheaper ways to ship. From negotiating better rates to discovering new shipping services, there’s always going to be a more efficient option.
1. Don’t Buy Postage From the Post Office
This one is a bit self-explanatory. When you go to a post office to purchase postage, they’re going to charge you retail rates. If you use a shipping software like ShipStation or Stamps.com, you’ll get access to Commercial Base Pricing. These rates are offered at a greater discount. Ultimately, if you run an e-commerce business, there is no reason you should not be taking advantage of these CBP rates.
2. Don’t rely on Flat Rate Packaging
USPS Flat Rate is a very commonly used shipping service. The USPS loves this service because the boxes are compact and rarely reach their 70 lbs threshold. Because of this, Flat Rate packaging is also a good way for the USPS to make more money. These services typically cost more than standard Priority Mail packages. Along the lines of “Don’t buy postage from the post office,” usually the clerk at the post office will suggest this service Knowing when Flat Rate options offer the best rate and when standard packaging or Regional Rate boxes offer the best rate is important.
3. Use Multiple Carriers
Using multiple carriers is beneficial beyond having a broader range of services to choose from. (Most parcels under about 11 lbs are going to be most cost-effective with USPS, but FedEx and UPS start offering competitive rates for heavier, larger parcels.) The added bonus of using multiple carriers is that you have more leverage when negotiating rates—particularly with UPS and FedEx. These carriers will try and restrict you to their services by offering shipping services like UPS WorldShip or FedEx Ship Manager. However, if you use multiple carriers, carriers realize that they don’t have as large of a portion of your shipping. If you have a large enough volume, they’ll try to reel you back in by offering discounted rates to create a competitive advantage over other carriers. Shifting 10-30% of your shipping away from your preferred carrier is a good negotiation tactic.
4. Use Consolidation Services
Consolidation services like UPS SurePost and FedEx SmartPost and Mail Innovations are economical ways to get parcels to your customers. They generally take a few days longer than Priority Mail or Ground services, but they are ideal for shipping parcels that are not time sensitive. These are frequently services that need to be authorized by either UPS or FedEx, so negotiating better rates with carriers can also lead to being offered more cost-effective consolidation services.
5. Understand Cubic and Dimensional Pricing
Cubic Pricing
Cubic pricing is good if you sell small, heavy items. The way it is determined is if a parcel is under 20 lbs, and has 0.5 cubic feet volume or fewer (with no dimension longer than 18”). The way you determine cubic volume is with this formula:
Length x Width x Height / 1728 = Cubic Feet
Cubic pricing is broken into 5 categories, ranging from 0.1 to 0.5 cubic feet.
Dimensional Weight
Dimensional weight is the opposite of cubic pricing. It is for large, lightweight parcels that raise the price of a shipment. Weight is usually the biggest factor in how rates are calculated. But, space is also a precious commodity for carriers. As e-commerce continues to drive up the amount of larger parcels being shipped, carriers raise prices to help accommodate the more in-demand amount of space.
The formulas in which Dimensional weight is calculated is below:
Carrier |
Dim. Weight Formula |
UPS |
(LxWxH)/139 |
FedEx |
(LxWxH)/139 |
USPS |
(LxWxH)/166 |
The lower the divisor, the higher the cost. Because of this, USPS offers the best dimensional weight rates.
