Smart logistics – effective ways to reduce shipping costs and increase profit

Thanks to tech advances and ongoing digitalization, running an online business has never been easier. The global e-commerce market size was valued at $14.14 trillion in 2022 and is projected to reach $57.22 trillion by 2032. At the same time, the e-commerce landscape is becoming more competitive by the day, making things increasingly more complicated for the companies that want to break into this thriving industry and offer their products and services online.

It’s therefore vital for online businesses to focus their efforts on staying on top of their finances, saving money wherever possible and looking for solutions to boost income, if they want to handle challenges effectively and maintain competitiveness. With shipping being the second-biggest expense for e-commerce businesses, after product cost, this is an area that owners and managers should look into when striving to reduce spending. Various service providers provide efficiently organized shipping and packing solutions, contributing to the safe and prompt delivery of goods.

Admittedly, as an online company, saving money on shipping is not the easiest thing to achieve. You need to ensure that the goods get to their destination safely and on time, and provide competitive shipping rates for your customers, while also making sure your own costs are covered. Charging too much for shipping and handling can scare customers away while charging too little can chip away at profits. There’s a fine balance that you have to maintain to keep everyone happy.

That being said, even if cutting back on shipping expenses represents a real challenge, with a few clever strategies you can reduce these costs and boost your bottom line. 

What do shipping costs include?

Before we go into the money-saving solutions you could implement in your business, we have to get clear on what shipping costs entail. When calculating shipping rates, there’s more than transportation to take into account. The process includes all the steps that are necessary to get a product from its storage space to the customer’s address, and each of these steps comes with associated expenses, such as:

  • Costs of packaging materials (boxes, tape, bubble wrap, air pillows, foam rolls, labels, etc.)
  • Cost of fuel (including tolls, tariffs and other transport-related expenses)
  • Wages of employees hired to get the items ready for shipping
  • Insurance for providing financial coverage in case the items are lost or damaged during transportation
  • Fees charged by couriers or fulfilment services to collect and deliver items 
  • Import/export fees if items are shipped internationally

Where can you save?

Since shipping costs can’t be eliminated, the best thing you can do is try to reduce them as much as possible, and the following strategies can be extremely effective in this respect.

Reducing shipping distance

The distance between the pickup and delivery locations plays a crucial role in determining shipping costs. Longer distances inevitably translate into bigger expenses. That’s because carriers consume more fuel when they have to transport goods to distant locations, which obviously increases their costs. There’s also more handling involved on long shipping routes, increasing the risk of loss or damage. In addition, custom fees represent another extra expense in the case of international shipping.

If you are a small business that can’t afford the high expenses that come with long-distance deliveries because it would erase your profits, choosing to ship your goods only in close proximity to your business location could be the most viable solution for you. However, you have to inform your customers of these restrictions and list the exact areas where your business ships. Alternatively, you can give customers the possibility to order an item from your site and then pick it up in-store.

If you are determined to ship to multiple locations, the best way to reduce distance is to choose the location for your warehouse wisely, preferably in close proximity to your customer base. Having multiple warehouses in different parts of the country is also advisable if you want to expand your reach and keep shipping costs low.

Pick the right shipping carrier

Partnering up with the right shipping company to handle your orders is key to keeping expenses within a reasonable range. Fortunately, the rising popularity of e-commerce has prompted the emergence of a large number of fulfilment companies  carriers such as Montafulfilment in recent years, increasing the competition in the area, and giving companies the opportunity to have their pick.   

When vetting different carriers, it’s important to know exactly what your business requires in terms of shipping. You also have to inquire about the types of services these companies offer their delivery speed and range, as well as their customer support levels, tracking capabilities, and obviously the rates they charge. Make sure you take these aspects into account when comparing your options and don’t be afraid to negotiate so you can get the best deals, take advantage of discounted rates and save on shipping.

Pack your goods properly

The way you pack your items also has a direct impact on shipping expenses. You need to make sure the shipping containers you use are the right fit for the items you want to deliver, otherwise, you might risk damaging your goods during transportation. Besides, larger boxes can take up more space which will lead to additional costs. It’s equally important to reduce the weight of the package by using an adequate amount of packaging materials if you want to avoid extra charges.  

Last but not least, you might want to consider buying packaging supplies in bulk. These materials are generally inexpensive, but when you have to deliver large quantities of goods, these costs will add up over time and weigh on your budget. Buying packaging supplies in bulk allows you to enjoy great discounts and thus save money in the long run.

Final thoughts

Keeping shipping costs low should be a priority for all online businesses, big and small, in order to ensure customer satisfaction and boost profitability. Hopefully, these strategies will prove useful in reducing shipping expenses for your company and help you stay on top of your budget.


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