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- It’s worth taking time to develop a proper shipping strategy.
- Your shipping fees should include supplies, labor, and other overlooked costs.
- Shipping software can streamline shipping and save you money.
- Flat-rate shipping offers price consistency for retailers and consumers.
- Shipping rates change, often in January, and you need to keep on top of them to maintain profit margins.
Thanks to advancements in logistics, it’s easier than ever for small businesses to ship products to their customers’ doorsteps. In 2022 alone, 21.2 billion parcels were shipped in the United States. But despite easy access to shipping, the process can still be confusing and overwhelming for the average small business owner.
In this guide, we’ll explain your shipping and carrier options and provide tips on optimizing your shipping and fulfillment.
Small business shipping 101
Shipping products can be complicated, especially for small businesses. There’s a lot to consider — costs, speed, reliability. Understanding your options for shipping solutions and carriers is a great place to start.
Shipping options
Before you even start looking at carrier options, take the time to get familiar with your shipping options — because there are lots of them. To simplify things, let’s look at the types of shipping that are most relevant to small businesses.
1. Small-volume or single-item
Small businesses typically do small-volume or single-item shipping. Most people are familiar with this type of shipping:
- A customer orders a product
- The product is boxed up and shipped out one at a time
If you run a retail shop, ecommerce business, subscription box service, or other business that ships goods to customers, you’ll likely rely on small-volume shipping options.
Packages can be sent:
- Anywhere in the country through domestic shipping.
- Anywhere in the world via international shipping.
Most small-volume or single-item shipments are handled by shipping companies like FedEx, UPS, or the post office.
2. Local
If you run a business that primarily serves local customers — like a florist or bakery — you may need a quicker delivery time than what big shipping companies offer.
Many courier services offer same-day delivery options, or you may prefer to build an in-house delivery team to ensure items reach customers as quickly as possible.
Unless you’re shipping a high-volume of items or need your goods to reach doorsteps in a flash, your business will likely rely on small-volume shipping options.
Carrier options
Just as there are many types of shipping services, there are also many different carriers that can handle your shipping needs, including:
- FedEx: Lots of shipping options, including temperature-controlled shipping for perishables. The FedEx Small Business Center has a rewards program and helpful shipping and packing guides.
- USPS: A small business-friendly and affordable option. With Click-N-Ship, you can order postage and print shipping labels online. You can even schedule package pickups to save yourself trips to the post office.
- UPS: An international carrier with a small business program designed to simplify shipping. UPS offers shipping discounts and expert help through its consulting services.
- DHL: Not as popular as other carriers, but the DHL for Business program offers discounted rates, access to shipping experts, and other perks.
While each carrier has pros and cons, most have economy shipping services that will deliver packages to customers' doorsteps in 1-5 business days. Quicker delivery options are also available from most providers. For example, FedEx and UPS offer expedited and same-day shipping options.
7 Small business shipping tips to save you time and money
Now that you understand your shipping and carrier options, let’s look at how you can optimize and improve your shipping process.
1. Create a shipping strategy
Having a solid strategy will help streamline your shipping and delivery. While every business has its own unique needs, there are a few things every strategy should cover:
Where you will sell
Will you sell exclusively through your website or a single channel (such as online marketplaces)? Or will you take a multi-channel approach?
The route you choose will ultimately impact your shipping processes.
Selling on multiple channels can lead to more sales, but at what cost? Marketplaces like Amazon, Walmart, and eBay have stringent requirements and criteria for sellers. Will you be able to meet and manage these requirements?
If you find that a multi-channel approach is your best option, you’ll need to incorporate the shipping requirements for each channel into your strategy.
How you will ship
Now that you know where you’ll be selling, you can figure out how you’ll ship.
Managing the shipping and fulfillment process is complicated. While it’s tempting to stick to one carrier to simplify things, working with multiple providers may be advantageous.
For example, you might use Priority Mail for smaller and lighter packages, and UPS 2nd Day Air for expedited shipping.
Priority Mail is fast and affordable, which makes it a great option for small packages. But when customers want speedy delivery, you may find that UPS 2nd Day Air is more reliable.
Mixing and matching your carriers allows you to offer the best shipping options to your customers.
Whether you’ll outsource shipping and fulfillment management
If you’re like most small business owners, you’re managing the shipping and fulfillment yourself. Sure, this gives you more control over the process and customer experience, but it’s also an intensive process.
Outsourcing your shipping and fulfillment management may save you some valuable time. Third-party logistics (3PL) and dropshipping are two options here.
3PLs
Storing, picking, packing, and shipping orders is an intensive process. As your business grows, tackling these tasks will become increasingly more complicated. A 3PL provider can take care of this entire process for you.
Fulfillment by Amazon (FBA) is a great example of a reliable third-party logistics provider trusted by businesses worldwide. The concept is simple:
- You pay Amazon to store your products in its warehouses.
- Amazon will handle the fulfillment and shipment of your products.
- Once the order ships, Amazon will send you the shipment status and tracking information.
FBA works for orders made through Amazon and other selling channels, including:
- Your website
- BigCommerce
- Shopify
- Wix
- Adobe Commerce
The great thing about 3PL is that it’s flexible. You can use it for all of your products or just some of them. While you’ll incur additional costs, you’ll save time and resources by offloading shipping and fulfillment to an experienced and reliable provider.
Dropshipping
If you run an online business, dropshipping may be worth considering. It takes 3PL one step further by allowing you to sell products without ever having to own, store, pack, or ship them yourself.
In a nutshell, here’s how it works:
- You promote the products through your website or other sales channels.
- Customer orders are sent directly to the dropshipper.
- They handle the fulfillment and shipping.
All of this convenience comes at a price – and that price can seriously lower your profit margins. It’s important to weigh your options carefully here to determine whether dropshipping is viable for your business.
Remember that there’s no rule saying you have to rely strictly on third-party logistics or your in-house team. Your shipping strategy should be based on your business’s individual needs.
2. Calculate shipping fees properly
Once you have a strategy in place, pay some attention to calculating your shipping fees properly, so they don’t undermine your profitability. You’ll need to consider both carrier shipping fees, and the additional costs of packaging and labor.
Carrier shipping fees are based on five main factors:
- Package weight and size: Dimensional weight and size will have a big impact on shipping costs. The larger and heavier the package, the higher the shipping costs.
- Speed: Customers prefer fast shipping, but expedited delivery will come at a higher cost.
- Shipping volume: If your business ships a lot, you may be able to negotiate lower rates.
- Destination: Deliveries to commercial properties may cost more than residential deliveries. Generally, the further the destination, the higher the cost.
- Services: Some services come at an additional cost, like tracking, insurance, or obtaining a signature confirmation.
Most carriers can help you calculate your shipping costs.
Along with the carrier’s fees, you also need to consider other shipping-related expenses, such as:
- Shipping materials. Boxes, stickers, packaging, and tape all add to the cost of shipping your products.
- Labor costs. If you handle fulfillment and shipping in-house, you must account for the time and resources spent preparing shipments.
- Import and export fees if you’re shipping internationally.
Don’t overlook these costs when calculating your shipping fees, as they can eat into your profits.
3. Leverage technology to streamline shipping
Technology can reduce costs and save time. Shipping software can help you:
- Compare rates
- Print shipping labels
- Manage orders
You’ll find software options that allow you to set strict rules, such as selecting the cheapest or fastest shipping at the time of ordering. Brands can allow customers to choose the shipping that best fits their needs with real-time checkout rates.
Automation and technology save businesses time and money while keeping customers happy.
4. Only offer free shipping with a minimum order
Over 95% of retailers offer some form of free shipping at checkout, but many companies require you to hit a certain order threshold to claim your zero-cost shopping. You’ll need to do internal testing to find your customer threshold.
For example, customers may buy more if the minimum threshold is $50, but once it hits $75, it may drive them to your competitors.
A/B testing will allow you to find your minimum order “sweet spot,” so you can offer free shipping when it’s practical for your business’s profit margins.
5. Use flat rate shipping when possible
Flat rate options may be the best shipping choice for you because you don’t need to worry about:
- Price variations between ZIP codes
- Lower profit margins from one order to the next
If you can fit one or five items in the box, it still ships for the same price. When you know what the shipping rate will be for every package, you can find ways to standardize your savings, too.
Major carriers offer flat rate shipping, and they often include their boxes in the price.
UPS Simple Rate
FedEx One Rate
USPS Priority Mail Flat Rate®
6. Optimize your packaging to save on costs
Packaging your orders properly can reduce costs, and you have a few areas where you can save money.
- Package size: Large packages with excess space taken up by bubble wrap (for non-delicate items) will cost more money. Opt for smaller package dimensions. If your item can arrive safely in poly mailers, it will also reduce total weight.
- Free packaging: USPS, UPS, and other shipping companies offer certain free shipping supplies. Businesses can often receive free labels, stickers, boxes, envelopes, and other items.
- Reduce package weight: Your package’s weight will also impact cost. Lightweight materials, such as foam inserts or packing paper, can be chosen to reduce overall weight and prices. Depending on the order size, it may be better to split large orders into several shipments.
When reducing packaging, always consider the item being delivered. If your cost-cutting measures lead to higher breakage rates, it’s better to pay more money to reduce returns and keep consumers happy.
Optimizing your packaging can help you save on costs, but our article on small business packaging found a few interesting insights:
- 60%-70% of consumers in the U.S. will pay more for sustainable packaging.
- 49% of online shoppers get excited when premium packing is used, increasing the customer experience.
If you want to offer a premium feel with your packaging, consider adding a personal touch. You can add stickers, thank-you notes, or other customizable options.
Not sure which packaging you need most?
Order history can help you narrow down the type of packaging your business uses the most. You might be able to order packaging supplies in bulk at a discounted rate for the packages you ship most often and reduce the unnecessary materials you may be buying for rare orders.
Once your packaging is in order, you’ll need to keep close track of fluctuating carrier costs.
7. Stay on top of shipping cost changes
Shipping rates fluctuate based on supply, demand, and overhead, such as fuel and labor costs. Businesses must stay on top of these changes, which often go into effect in January. However, major carriers have also increased rates in December.
A few of the shipping carriers that announced higher rates for 2024 are:
USPS
The United States Postal Services (USPS) delivers to 167 million addresses and over 12.7 million businesses. Small businesses rely on the post office for shipping supplies, labels, packaging materials, and cost-effective services.
USPS’ price changes for 2024 include:
- 5.4% increase in USPS Ground Advantage™
- 5.7% increase in Priority Mail®
- 5.9% increase in Priority Mail Express®
You can also read all of the price increases on the official site.
UPS
UPS’ rates are routinely reviewed and adjusted to maintain profit margins. New rate increases were announced on March 7, 2024. Prices vary based on delivery area and certain origin locations. They include:
- 5.9% general rate increase.
- Area surcharge increases based on ZIP Codes.
You can view zone updates on the official announcement page.
FedEx
Rates at FedEx also increased at the start of the year. Increases depend on the shipping method and include:
- A 5.9% average increase for FedEx Ground (standard), FedEx Express, and FedEx Freight (standard).
- Shipping surcharges and fees may apply, but rate changes depend on dimension and zone. For example, U.S. Ground Services for Zone 2 had prices of $18.50 in 2023 and $22 in 2024 per package.
You can view current and future rate changes on the announcement page.
Small business shipping costs must keep up with rate changes, or you risk lower profit margins.
What should companies do when shipping fees increase?
Shipping is integral to any company, with or without an online store. Buyers are turned off by high shipping costs — 48% of abandoned carts are linked to high additional fees.
You have a lot of options to keep consumers happy, even as shipping rates rise:
- Shopify reports that 78% of consumers will buy more if it means they’ll receive free shipping. You may want to consider absorbing the shipping cost if a certain threshold is met.
- Absorb part of the cost and pass the rest to the consumer.
- Raise the rate of the product by the average increase in shipping costs.
- Keep the product price the same and raise shipment costs.
Consumers prefer free shipping, and 46% have chosen longer shipping to reduce costs. You may find it better to increase the product’s price to lower additional fees.
Small business shipping requires diligence, planning, and attention to customer satisfaction. As shipping rates rise, you can pass costs on to the consumer, or you can leverage flat-rate shipping, use cost-cutting best practices, and leverage technology to offer the best prices to consumers.
Companies that monitor fluctuating shipping costs can maintain profit margins without turning consumers away with sudden price increases.
Frequently Asked Questions
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