As shipping costs continue rising, e-commerce businesses struggle to deliver affordable products to their customers. Shipping companies like Pitney Bowes have increased their shipping costs by as much as 20%, creating challenges for the companies that partner with them.
For most businesses, shipping costs comprise the lion's share of their contracts with 3PL logistics companies. Finding a way to lower costs is crucial, especially since the shutdown of Pitney Bowes' global e-commerce business.
That's why so many businesses are working with QuickBox today. QuickBox helps manage shipping challenges and keep their shipping costs low. By creating innovative, intelligent solutions and shipping cost strategies that meet real needs, QuickBox allows businesses to stay competitive and offer the best possible service to their customers.
The Components of Shipping Costs
Shipping costs are complex and include several factors many may not be aware of.
Base Rates
Base rates are the standard fee charged by the shipper or carrier. Many shippers calculate base rates according to package size, weight, and distance carried. The U.S. Postal Service uses a system of "zones" to help determine the rate for package delivery. UPS uses a similar zone system, and so do many third-party logistics solutions.
Fuel Surcharges
Many shipping companies charge a fuel surcharge that reflects the energy cost used to transport packages by air, land, or sea. The price is frequently adjusted to match the changing cost of fuel. Changes in global oil prices, for example, will impact the fuel surcharge.
Delivery Fees
Shipping companies usually offer order fulfillment options like overnight delivery, expedited delivery, and delivery at a fixed time. 3PL companies typically charge delivery fees in return for these services.
Insurance
Often, carriers can provide insurance for shipped items for a fee. The insurance cost reflects the value of the item.
Handling Fees
"Handling" is a broad term that refers to all the work that goes into preparing an item for shipment and delivery. Packaging fragile items, for example, is part of the handling process. It's also a key element of e-commerce fulfillment.
Customs Fees
When you ship items internationally, you may incur customs fees. This depends on the country of destination, the item being shipped, and the size of the shipment.
Seasonal Surcharges and Market-Driven Fluctuations
Shipping companies often charge a surcharge during high-volume, high-demand periods. The holiday season, for example, is a busy period for shipping companies. Many charge additional fees to cover costs like hiring seasonal workers and renting additional facilities.
Market fluctuations, like changing fuel prices, supply chain issues, and rapid changes in demand, can also impact shipping costs and lead to extra charges.
Hidden Costs: Dimensional Weight Pricing and Mismanagement of Returns
Shipping includes some hidden costs. Returns are a key example of hidden costs since customers tend to expect free shipping on their returns. This creates a significant cost for shipping companies, especially when returns are frequent.
Dimensional weight pricing can also drive up costs for companies, especially if items are packed in an overly large container or if their packaging is otherwise unoptimized.
Factors Impacting Shipping Costs
Beyond the charges discussed above, several other key factors determine shipping costs.
Package Size and Weight Optimization
Shipping companies factor in a package's dimensional weight when determining cost. Dimensional weight, or DIM weight, refers to the amount of space a package takes up.
Larger packages occupy more cargo space and cost more to ship, even if they aren't heavy. Weight optimization lowers costs by using the smallest possible package for each item, instead of packing lightweight objects in large boxes.
Importance of Strategically Placed Fulfillment Centers
Fulfillment centers, often run by 3PL fulfillment services, are locations that warehouse, prepare, and ship packages to customers. Having fulfillment centers in multiple locations keeps your shipping cost lower by ensuring your items don't need to travel as far to reach your customers.
Carrier Fees: Zones, Service Type, and Shipping Speed
Factors determining carrier fees include:
- The distance a package is shipped
- The shipping speed chosen by the customer
- The extra services requested by the customer
For example, shipping an expedited package will cost more than other mail. Shipping a package across multiple zones will be pricier. Likewise, extra services — like insurance or certified delivery — will drive up the cost of shipping.
Customer Expectations Impact Costs
Today's customers demand fast, reliable delivery, free returns, and dependable service. All of these expectations can drive up costs for e-commerce businesses. To stay competitive and earn customer loyalty, retailers have to provide the kinds of services that customers have come to expect. In particular, customer expectations for fast shipping increase business costs.
What's the best way to solve this problem? Fortunately, businesses can follow several strategies to lower costs while still providing their customers with fast, reliable shipping.
Actionable Strategies to Reduce Shipping Costs
Here are some of the best approaches to lowering the cost of shipping to optimize shipping expenses.
Optimize Packaging
We've seen how using the wrong packaging drives up costs. Reduce shipping fees by using the correctly sized packages every time.
Shipping companies use DIM weight to calculate charges, which refers to the ratio between a package's size and weight. Ideally, you should have the lowest possible DIM weight. You can reduce DIM weight by packing items in the smallest possible box to fit their size. You can also add packing peanuts to fill the space in your package — since this does not increase weight relative to package size much — while protecting your items from damage.
Using lightweight packaging can also lower your shipping costs. Eco-friendly, sustainable packaging is often a good idea since it tends to be lightweight. As an added benefit, eco-conscious consumers appreciate the use of sustainable packaging.
Leverage Technology
Modern digital tools can help lower shipping costs, even in challenging circumstances.
Shipping software makes it easy to calculate a package's DIM weight so that you can adjust and optimize your packaging. You can also use shipping software to compare carrier rates and track shipments.
The right software can automate processes like labeling packages, updating inventory, and sending customer notifications.
The right software can also facilitate integrations between your inventory and shipping management tools. This allows you to maximize operational efficiency throughout the shipping process. It will lower costs for your whole organization and free your employees to focus on other challenges. It's a great way to leverage e-commerce logistics solutions.
Negotiate with Carriers
Many carriers will agree to provide discounted shipping to high-volume customers. Even if shipping companies don't make the offer up-front, it's a good idea to negotiate with your carrier to see whether such an offer is available.
Of course, negotiations can be time-consuming, and they demand a level of experience. Getting the best possible price from a carrier is not always easy.
That's why many organizations choose to collaborate with QuickBox for pre-negotiated competitive carrier rates. QuickBox has built long-term relationships with carriers, which is why QuickBox fulfillment customers have access to some of the lowest rates in the business.
Utilize Hybrid Shipping Services
You can reduce your overall shipping costs by cutting down on last-mile delivery expenses. Depending on your shipment, that could mean using regional carriers or national services.
QuickBox can provide you with our expertise in this area. QuickBox always shops for the best possible carrier rates in every location based on price and past performance. This ensures can deliver the reliability and speed your customers demand without sacrificing your budget.
Strategically Placed Inventory
Having strategically placed fulfillment centers can make a huge difference in shipping costs. Centrally located warehouses and fulfillment centers allow you to ship items shorter distances and leverage the best carrier options.
Partnering with QuickBox can make a massive difference in this respect. You can leverage QuickBox's many facilities to reduce the shipping zones your package passes through. Using QuickBox's convenient facilities also ensures you can provide your customers with the delivery times they request.
Similarly, using a distributed inventory management strategy lets you store inventory for easy access so you reduce inventory shipping costs. You'll also save time you'd normally spend waiting for inventory to become available.
Implement Shipping Minimums
Sometimes, it's a good idea to pass along some of your shipping costs to customers. One way to do that — without overcharging your customers — is by implementing shipping minimums.
Set a minimum fee and offer customers free shipping when they exceed that purchase level. This also encourages customers to make larger orders, which helps offset shipping costs and also increases your average order value.
Some companies prefer to create a tiered shipping system with different shipping prices at each spending point. This provides customers with a greater level of flexibility.
How QuickBox Can Help Reduce Shipping Costs
Partnering with QuickBox gives you access to industry-leading expertise, knowledge, and data-driven decision-making to help you save money and improve processes.
Cost-Efficient Fulfillment Services
QuickBox maintains fulfillment centers in carefully selected central locations so customers benefit from low shipping costs and timely deliveries. Optimized packaging, carried out by experienced personnel and leveraging state-of-the-art software, also saves money for e-commerce businesses.
Today, many retailers offer their customers subscription boxes, a model that provides convenience and cost savings for customers. It also offers a recurring stream of revenue for retailers. QuickBox helps keep shipping costs low for companies that offer subscription boxes. Proper packaging minimizes shipping costs and ensures boxes always arrive in good condition.
Using our centralized fulfillment centers means subscription boxes never have to travel very far. Costs are kept low, delivery is always timely, and any perishable items stay fresh.
Integrated Solutions
QuickBox's technology streamlines inventory, shipping, and order tracking. The result? Greater operational efficiency and lower costs, which you can pass on to your customers to build brand loyalty.
QuickBox also offers tailored solutions for businesses shipping 500 or more orders per month. That makes it easy to scale your business without worrying that shipping costs will stand in your way.
Competitive Shipping Rates
QuickBox has long-standing relationships with carriers around the world. Leverage QuickBox's partnerships with carriers to get discounted rates. Take advantage of QuickBox's institutional knowledge and expertise to gain insights into the best carriers for your needs.
Accessing competitive shipping rates also makes the returns process easier. Cutting down on shipping costs means that you can offer your customers the return process they expect, without overspending on shipping.
QuickBox always considers price and performance when recommending carriers, so you get balanced advice about which service is best for you.
Customer-Centric Approach
QuickBox offers a customer-centric approach and personalized fulfillment services that build on data from customer preferences and purchase history.
QuickBox's services optimize customer experiences by ensuring fast, reliable delivery with plenty of different options available to the customer. Efficient logistics and in-depth knowledge also ensure that customers get their orders in the best possible condition.
QuickBox's multiple locations can also process returns in the center closest to the customer. This speeds up the returns process and improves customer satisfaction. It's a great way to build a strong relationship with customers that will last for years to come.
Final Thoughts
E-commerce continues to grow in popularity. As of 2024, e-commerce was a 16% share of the retail market, up from the previous quarter. In the second quarter of 2024, e-commerce revenue reached above $291 billion in the United States.
As online retail continues to grow, finding an affordable shipping solution is of greater importance than ever. The increased competition means customers expect fast, reliable deliveries at the lowest possible cost. To stay in business, e-commerce companies must find a way to provide great delivery services without overspending.
Partnering with QuickBox is a proven way to access scalable, cost-saving logistics solutions. QuickBox delivers low-cost shipping options, convenient fulfillment centers, and expert packaging solutions — minimizing surcharges and ensuring timely delivery.
Ready to get started lowering your shipping costs and improving your customer service? Visit QuickBox today and start your journey to reliable, low-cost shipping.