For many small businesses, especially those that sell products, shipping is a major expense. Not only are labor and transportation costs substantial in getting the product to store shelves and to customer homes, but the cost of packaging materials themselves quickly adds up.
How Are Shipping Costs Calculated?
Knowing the basics of how shipping costs are calculated to find ways that you can reduce shipping costs and strengthen your bottom line. Though different carriers might account for these variables in different ways, the shipping costs are usually determined using the following considerations.
Package Weight
The total weight of the package is a major consideration for overall shipping costs. The more weight you ship, the more expensive your postage will be. Most carriers will either charge based on the actual weight of the package or the package's dimensional weight.
Package Dimensions (Dim Weight)
Dimensional weight or "dim weight" is an estimate of a package's weight based on its size. After multiplying the package's height, length, and width to get its cubic volume, carriers divide that figure by a minimum package density, leaving a "theoretical weight" for the package based on its size.
Fuel Surcharges
Each year, carriers reassess the changing costs of things like fuel and labor, factoring these expenses into their future shipping costs. Carriers usually announce these changes toward the end of the year, so pay attention to your carrier's announcements.
Zone Distance
Instead of charging for total distance traveled, the USPS prices shipping based on distance ranges called "zones". For instance, if you needed to ship a package to a location less than 50 miles away, this would be Zone 1 shipment. Packages traveling between 51 and 150 miles are Zone 2, and so on. The higher the zone distance, the more expensive shipping will be for each parcel.
6 Ways Shipping Supplies Can Help Reduce Costs for Small Businesses
Now that you have an idea of variables that determine shipping prices, it's time to apply that knowledge to optimize your shipping program. Taking steps to lower your shipping costs is a great way to widen the profit margins for your small business.
1. Reduce Package Dimensions
Reducing the cubic volume of your shipments is a smart strategy. Not only will it lower shipping prices — it can also save money on packaging and protective shipping materials, as you'll need less void fill; styrofoam, bubble wrap, or other cushioning materials to fill the empty spaces.
One way to reduce dimensions is to produce or purchase fitted packaging for your product. Depending on the size and shape of your product, this can either mean that you are buying pre-made boxes that most closely match the dimensions of the product, or it could mean producing custom-fitted packaging that is specifically made to hold your product.
Custom packaging is an investment upfront, but over time it can vastly reduce your shipping costs by cutting down on excess volume. If you choose not to use custom packaging, it's important to purchase a few different sizes of boxes to ensure that each product you sell gets the best fit possible.
It's also worth asking whether a box is the correct packaging at all, or if a poly mailer would be more suited to the job. If you're sending products that are small, non-fragile, and low quantity, poly mailers are a great option to use, as they cut a low profile, fit a wide assortment of items, and are very inexpensive for small business owners.
2. Reduce Package Weight
The best way to reduce the weight of shipments is to consider packing materials. In an effort to keep products safe in transit, it is tempting to overstuff packages, but this practice adds unnecessary weight to the parcel and costing more money in both materials and shipping.
When packing shipments, consider the actual in-transit needs of your products. If items are non-fragile, and the packaging is snug, minimal padding is needed to keep them safe on their journey. For more fragile items, pay close attention to the item's most delicate areas and anywhere the item comes closer to touching the inside surface of the box. These areas need more careful attention than others. Give fragile items two inches of clearance from the sides of the box, filling those gaps with lightweight padding materials. This extra space allows the packaging to compress slightly without the fragile item bearing the weight, but doesn't create so much extra space as to needlessly increase your parcel's dim weight.
You may also consider corrugated cardboard boxes, mainly because corrugated cardboard boxes are highly durable and extremely lightweight. This gives your shipments a little extra protection without the need for added weight or volume.
3. Use a Postage Scale
The investment of a postage scale can be a game-changer. By experimenting with the weight of several different types of packaging, you'll be able to figure out the most cost-effective methods of shipping your merchandise.
4. Purchase Shipping Materials in Bulk
When purchasing your packing materials (such as boxes, packaging, tape, and labels), your small business can save a considerable amount of money by buying these items in bulk. Bulk purchasing allows you to drive down the unit prices of your packing materials by buying the items in a larger quantity upfront. Sourcing discounted shipping supplies from Staples Advantage allows customers to negotiate custom prices or buy in bulk based on the exact needs of the business.
5. Purchase Discounted Shipping Materials
Many shipping carrier companies provide small businesses with certain boxes and envelopes for free or at a discount for certain packing supplies. Shipping supplies are also available from many retailers, and business owners can receive advantages when purchasing through Staples and joining our rewards program.
6. Flat-Rate vs. Standard Shipping
Another consideration is how your customers will contribute to the shipping costs with their purchase. There are various pricing models to choose from, but one element that you'll want to think about is flat-rate shipping vs. standard shipping.
Standard shipping passes the expense of shipment to its respective customer. For example, a customer buying a product from a Zone 1 location will pay less than a customer buying the same product from a Zone 4 location. Depending on where the customer is, and how large the shipment is, this might not always be practical, and it can be an unpleasant nasty surprise for customers at checkout and may cause customers to choose not to make the purchase.
Flat-rate shipping charges the same to each customer, averaging your shipping costs to give each customer a predictable shipping cost, while still allowing you to pay the necessary amount on the other end.
Save on Shipping to Deliver for Customers
In the complicated climate of modern shipping, small business owners can’t afford to ignore shipping costs. To keep your business thriving, be sure to consider the different aspects of shipping your products to optimize your shipping process. The goal is to keep your products safe during transit while trimming away unnecessary costs. This is an often overlooked, but effective way for small businesses to increase profits with relatively little effort.
