Ecommerce Growth

25 Proven Ways To Reduce eCommerce Shipping Costs

May 31, 2024

25 Proven Ways To Reduce eCommerce Shipping Costs

Reduce shipping costs + free 24-hour shipping? Sounds impossible, right?

This news might be a relief – you’re not the only one struggling.

And it’s all thanks to a worldwide 6% bump in carrier costs.

However, shoppers still expect ‘fast and free’ shipping within 24 hours.

This is why we have studied the shipping cost reduction strategies of eCommerce giants – and devised these 25 strategies to reduce shipping costs for your small business:

How do I reduce shipping costs for my small business?

1. Find the average shipping cost – and add it as a flat-rate

2. Create tiers for flat-rate shipping costs

3. Use FOMO to charge for next-day delivery

4. Let shoppers pick and pay shipping costs on holidays

5. Use your bestsellers to recover shipping costs

6. Enable pickup for surrounding zones

7. Buy competitor orders

8. Incentivize pre-orders

9. Pack and ship multiple orders at once

10. Adjust your AOV for shipping

11. Cram more items with dimensional weight

12. Get more people on your loyalty program

13. Try lighter packaging – switch out packing material

14. Avoid stocking up on packaging

15. Charge extra for gift packaging – or similar value upgrades

16. Always get insurance

17. Choose ground shipping

18. Get prepaid labels (if you've got a smaller order volume)

19. Highlight your shipping policies better to reduce returns

20. Offer ‘hybrid’ shipping

21. Reduce the shipping distance of heavier items with fulfillment warehouses

22. Offer a discount to customers for proof of delivery

23. Make sure you're getting the documentation right for international shipping

24. Switch carriers by package size or weight

25. Open up a TikTok Shop for free shipping above $30 on repeat orders

25 Brilliant Ways To Reduce Shipping Costs

1. Find the average shipping cost – and add it as a flat-rate

Doing this helps you reduce shipping costs in the eyes of the shopper—all while allowing you to create a healthy margin.

Let's understand this with an example: each SKU of Product A costs $8 and Product B costs $30 to ship (domestic).

Calculate the average shipping cost from the cost of:

Shipping all two products at once: ($8 + $30 + $2.00 (weight surcharge) = $40)
Shipping each item individually: ($8 + $30 = $38)
Shipping maximum possible quantities of each product: ($30 + $70 = $100)
Shipping all items in the earliest delivery mode: ($40 + $260 = $300)
Shipping to other countries: ($50+ $500 = $550)

The average shipping cost here is $514.

The next step is to divide this cost – and, then add a percentage to your pricing. For example, you can add 30% of the average cost, i.e. $154 to Product A and the rest to Product B.

⚠️ Caveat: A flat calculation (like the one above) can overprice your products. This is why you should create tiers to create a more accurate pricing. 👇

2. Create tiers for flat-rate shipping costs

Shipping costs for international zones shouldn't be borne by customers ordering locally. Which is why it's a better idea to study your order history.

Find common combinations of order sizes in your store. Calculate tiers for shipping costs based on each product/location. Best practices dictate you have separate flat-shipping rates for:

Next day delivery
International shipping
Large order sizes

As per usual, once you get the average shipping cost of each tier, add a percentage of the cost to the pricing of each product.

For example, if a single product SKU costs $19 to ship domestically and $30 on next-day shipping – add $20 to the product pricing.

Then, charge $9.99 as a flat rate for next-day shipping – and FREE delivery within 3 to 5 days (domestic).

⚠️ Caveat: Limit the order quantity of high-value/oversized items to reduce shipping costs.

Tl;dr: add a percentage of average shipping costs by country or weight to your price.

FURTHER READING: Pick the right product price: 8 eCommerce pricing best practices

3. Use FOMO to charge for next-day delivery

This technique uses three psychological effects: decoy effect, FOMO, and loss aversion.

1st step: Create the decoy. Provide free shipping (but make it slow).

2nd step: Show what they will lose out on. Offer a next-day shipping charge.

3rd step: Harness the FOMO. Use microcopy like “delivering early”, “order within x to get by xx/xx”, or “free delivery expiring on xx/xx”

Here's a perfect example of this in action from Best Buy:

Best Buy offering next day delivery for a premium

FURTHER READING: 20 Powerful FOMO Marketing Ideas for eCommerce

4. Let shoppers pick and pay shipping costs on holidays

Holidays are prime time for surcharges. Sure, your packages will get delivered (but, you may end up paying a whole lot more). Also, one free 5-day shipping option won't do.

The way out? Show estimated shipping costs right from the product page. Offer multiple options and delivery speeds to enable them to choose the option that suits their budget.

You can also try opening up early sales promotions to beat shipping surcharges – and, reduce shipping costs.

⚠️ Caveat: Show clear delivery dates – but, don't show the entire costs (or else, a $140 delivery might scare them off).

5. Use your bestsellers to recover shipping costs

If you know a particular product has been selling well – why not try adding a part of the shipping costs to the pricing?

If you're worried about customers abandoning your order, simply add your cause – or similar value.

For example, you can offer a $0.99 upgrade on checkout to help with your sustainability initiative.

This helps create charm pricing, which makes customers believe they aren’t paying all that much – and are contributing to a greater cause.

⚠️ Caveat: The lower the cost added to the price, the better it is. Forecast how many bestsellers you need to sell to recover the shipping costs of your orders. Do this for all your bestsellers.

6. Enable pickup for surrounding zones

There's no meaning in offering a free 5-day delivery when a shopper lives 5 streets down your office.

This is why it's much better to enable geolocation—to allow customers to pick up their orders from your location/store.

Or, you can just use Doordash to pick up and deliver your order (like Ulta Beauty did). 😉

⚠️ Caveat: If you're sending out local orders by yourself, be sure to factor in labor, gas, and shrinkage in your costs.

7. Buy competitor orders

We aren't talking about buying an order from Amazon or an eBay store. Rather, find products from brands that offer similar products with free shipping.

Doing this will help you identify where exactly your competition is cutting down on costs.

Check their shipping labels, carrier, packaging design, and, last but not least, the product.

⚠️ Caveat: Compare packages from larger retailers like Sephora or M.A.C. Beauty and smaller brands such as Drunk Elephant.

8. Incentivize pre-orders

Pre-orders help you jump ahead of surcharges – realize the COGS (cost of goods sold), even before they have sold.

The best part – you get the luxury of planning. 🤩

You can implement this strategy if you're bringing a product back to stock – or launching a new product.

⚠️ Caveat: Don't limit yourself to pre-orders – try this strategy on products going out of stock.

FURTHER READING: eCommerce Product Launch: The Most Comprehensive Guide Ever

9. Pack and ship multiple orders at once

Sending out parcels the moment you receive them? It's time you reconsider. The only problem here is that it's not ideal for reducing shipping costs.

Thus, your best bet, as a small eCommerce store, is to increase your order volume. Which means you can break up an order into multiple shipments.

Visit your carrier – or, schedule pickups once in two days. This lets you get a handle on shipping costs and volume.

⚠️ Caveat: Make sure you don't ignore next-day delivery packages – or try to divide up the order (which can lead to delayed shipments).

10. Adjust your AOV for shipping

It's worth noting that people will abandon carts faster than a Jaguar – if your shipping threshold is way above your AOV.

We recommend that you reduce shipping costs by creating bundles out of heavier / larger items for better cost per shipment. You can also try cross-selling heavier items to get more out of your order.

This ensures that your AOV covers shipping costs – all while being able to cram more stuff.

We explain how in the next point. 👇

11. Cram more items with dimensional weight

Dimensional weight (DIM) is about the space a package takes up. Different carriers have different factors for calculating this weight.

However, there's a pretty neat way to use DIM.

All you have to do: make the dimensional weight and actual weight close.

For example, if a package weighs 3 lbs on dimensional weight, try adding in as much weight as 2.9 lbs.

This ensures you don't pay extra to ship extra items in your orders separately.

⚠️ Caveat: Make sure you've packaged each item with enough flexibility – so that the items don't get damaged in transit.

12. Get more people on your loyalty program

Upselling a membership for small premium lets you offset shipping costs by offering perks that don't require additional shipping.

It's like Amazon Prime (but cheaper).

Consider offering perks like free shipping for a period, extended warranty, community access, early access to sales, free samplers, etc.

⚠️ Caveat: You will need an exceptionally trustworthy brand value to make this strategy a success – also, your products shouldn't be a one-time buy item.

FURTHER READING: 14 eCommerce Loyalty Programs Backed By Science (Examples)

13. Try lighter packaging – switch out packing material

Poly Mailers or corrugated boxes come with lesser weight, dimensions, and lower shipping costs.

But, how exactly do you make sure that you actually reduce shipping costs? Here are some ideas:

Make sure you aren't using only 30% of the container
Try making the container/packaging as close to the product as possible
Avoid weird/irregular shapes that may end up taking up more space
Use bubble/padded envelopes for extremely light or small items (below 16 oz)

Remember: Even air has weight.

⚠️ Caveat: Avoid branding on your boxes to reduce doorstep thefts.

14. Avoid stocking up on packaging

Stocking up on packaging eventually leads it to become slow moving. While it may seem trivial, you can cut down on these costs even further.

Here are some ideas to try out for reducing shipping costs:

Use a product package that can be shipped (as is)
Reuse/recycle packages (if needed, just paint over them)
Get packaging for free from carriers

⚠️ Caveat: Cardboard boxes aren't eco-friendly – and, so aren't poly mailers. Thus, it may not be a great idea to use them, if you are supporting green initiatives.

15. Charge extra for gift packaging – or similar value upgrades

Gift packaging tends to be heavier. The extra load comes from the not-so-light cardboard notes and other decorative items.

Thus, the best way to reduce shipping costs (and reduce cart abandonment in some cases) is to charge for gift packaging.

⚠️ Caveat: Make sure you've included a short explanation along with visuals of your gift packaging in your cart or checkout page.

16. Always get insurance

Imagine this: you’re sending a surprise gift – and you’re completely unsure if the recipient will be home.

Thus, if you're paying for gifting, value upgrades like ‘require signature’ act as insurance – while helping you secure better CX.

This can lead to a surcharge (increase in shipping costs). But, you can get customers to cover those costs by offering smart value upgrades like:

Require signature on delivery
Package protection / insurance

⚠️ Caveat: Don't skimp, getting third-party insurance coverage on packages customers don’t pay for. This also ensures that there is no shrinkage cost.

17. Choose ground shipping

Ground shipping is great for reducing shipping costs – and the only way to ship, if you sell perfumes with alcohol, CBD, or vape products.

Ground shipping helps you cut down on delivery times as well as keep costs in balance. And, this is applicable across all order sizes.

⚠️ Caveat: Avoid going for the cheapest option – opt for carriers that offer better cubic rates.

18. Get prepaid labels (if you've got a smaller order volume)

As we said earlier, if you can cram it, why not do it?

Prepaid shipping labels are awesome in a similar manner. USPS, even gives up packages, for FREE, if you order em’ online.

The policy is, ‘it fits, it ships – it just can't be over 70 pounds (domestic).’

⚠️ Caveat: If the postage seems too high, consider taking quotes from other carriers as well.

19. Highlight your shipping policies better to reduce returns

Returns bite into your profit margin – especially, if they keep happening regularly. If you want to reduce costs, make sure to check for the following:

Product page: Make sure your product photos show the product in a real-world setting

Cart page: The next step is to ensure users know how to be eligible for returns (like recording an unboxing)

Checkout page: Validate addresses using geolocation on checkout (autofill some form fields)

Payment page: Reconfirm if the shipping and billing addresses are different

FURTHER READING: Reduce eCommerce Returns with Intelligent UX (+ Smart Handling ideas)

20. Offer ‘hybrid’ shipping

Weekend deliveries cost more – but, not as much as delivering to a doorstep.

Fun fact: last-mile delivery takes up more than 50% of the share of the entire shipping cost.

Why is this so? For starters, carriers have to go out of their regular routes.

This is why it’s cheaper to deliver to a parcel box near a customer’s location.

The benefits of doing this? Lower shipping costs all the way.

Remember: Shipping costs are lower across all kinds of post offices/pickup points/any regular routes.

Do read: Labor Day Marketing: 15 Amazing Ideas and Examples (2024)

21. Reduce the shipping distance of heavier items with fulfillment warehouses

More distance. More shipping.

That's the way the tale goes. This is where you should take inspiration from Amazon – ship out heavier packages to 3PL or fulfillment centers.

The result? You will be able to charge better for faster shipping – and bring down delivery costs by a lot.

⚠️ Caveat: Just make sure to cover areas you are targeting – or have gotten orders from.

22. Offer a discount to customers for proof of delivery

Security checks like “require signature” don't come standard with every shipping option. You can skip them entirely – and lower shipping costs.

All customers have to do is record that they received the package.

This lets you get a review. Create an awesome post-purchase experience. All while pushing their next purchase.

You can also get customers to start a subscription or get them started on repeat sales. This will help bring down shipping costs by creating regular shipments.

⚠️ Caveat: Make sure you’re sending with some tracking options/insurance. Or else, you stand to lose a customer and order.

FURTHER READING: 26 Brilliant Ways To Boost eCommerce Repeat Sales

23. Make sure you're getting the documentation right for international shipping

Or else, you may just as well say goodbye to your order.

If you're expediting delivery by air, make sure your packages describe what your packages contain.

This helps avoid returns by customs – and lower shipping costs, in general.

24. Switch carriers by package size or weight

Sticking to one carrier is a sure-shot way to increase shipping costs.

Try exploring options like shipping brokers for postage, packages, and carriers.

For example, shipping brokers like Pirateship will help you get the best shipping agreements for your packages.

Meanwhile, sites like stamps.com or Etsy shipping help you find postage at commercial brokered rates.

⚠️ Caveat: For this to work, get a postage scale. Calculate the actual weight as well as the dimensional weight. Depending on which gets you the better deal, buy a prepaid label.