How to Reduce Shipping Costs: 12 Ways

Shipping is one of the biggest costs for an online store, and it is also one of the easiest to improve. Most savings come from a small number of changes: smaller packages, better carrier terms, shipping from the right location and checking bills for errors. Each one is simple on its own. Together they can change your margin.

This guide covers 12 practical ways to reduce shipping costs, in the order we usually look at them with clients. Start by measuring your current spend, because you cannot judge any change without a baseline.

Start with a baseline

Export 3 to 6 months of shipments from your store or carrier account. For each shipment, record the weight, dimensions, service level, zone, base rate and every surcharge. Then calculate:

• Average shipping cost per order, and the same figure by zone and by service.
• Share of total cost made up of surcharges.
• Share of orders billed on dimensional weight rather than actual weight.
• Average cost compared with what the customer paid at checkout.

These numbers show where the money goes. If surcharges are 15% of the bill, they are your first target. If most parcels are billed on dimensional weight, packaging is.

PackagingRight-sized boxes lower billable weight

Carrier mixUse the best service for each parcel

ZonesShip from a location that shortens distance

Invoice auditsCheck surcharges and refunds

1. Right-size packaging

Carriers charge for the greater of actual weight and dimensional (volumetric) weight, which is calculated from the box size divided by a carrier-specific divisor. Common divisors are 139 and 166, depending on the carrier and rate type, so check your own agreement. A light product in a large box is billed as a heavy one.

• Audit your boxes. List every product, the box it ships in and the empty space.
• Reduce your box range to a small set of sizes that fit most orders closely.
• Use poly mailers for soft goods that do not need a box.
• Replace bulky void fill with proper sizing.
• Test any change to confirm the product still arrives undamaged.

2. Negotiate carrier rates

Published carrier rates are a starting point. Discounts depend on your volume, package profile and mix of services. Come with data: total parcels per week, average weight, zone distribution and the share of residential deliveries. Ask for discounts on base rates and on the surcharges that affect you most, such as residential, delivery area and additional handling. Review rates again each year, because carriers adjust general rates annually.

Small shippers often cannot negotiate effectively on their own. A fulfillment partner that ships large volumes can pass on better terms. Our carrier partnerships with UPS, FedEx and USPS can reduce shipping rates by up to 90% for qualifying shipments.

3. Use more than one carrier

No carrier is cheapest everywhere. Compare services by weight and zone: a national carrier may win on heavier parcels, USPS on light residential ones, and a regional carrier on short zones where it operates. Rate-shopping software chooses the cheapest service that meets the delivery promise for each order automatically.

4. Ship from the right location

Cost grows with distance, measured in zones. If most of your customers are on the East Coast and you ship from the West Coast, you pay for it on every parcel. Look at where your orders go and place stock accordingly. A single well-located warehouse works for many brands. Larger brands with volume in several regions may split inventory between two locations to reduce zones and transit time.

5. Choose service levels deliberately

Not every order needs the fastest option. Offer standard delivery as the default, and charge for express. Use economy services for lightweight, low-priority parcels where the delivery time is acceptable. Check what you promise at checkout against what you pay for, and avoid shipping everything by the fastest method out of habit.

6. Set free shipping thresholds carefully

A free shipping threshold above your average order value raises basket size, and the extra margin pays for the shipping. Set it from your own data: look at the order value distribution and choose a threshold that a meaningful share of customers will add items to reach. Re-check it after any carrier rate change.

7. Consolidate and bundle

Two parcels cost more than one. Make sure orders from the same customer ship together when they arrive close in time. Bundles of related products also reduce picks and parcels. Pre-built kits, sets and subscription boxes are an example of this. See Kitting and Fulfillment Services and Subscription Box Fulfillment Services.

8. Use the right technology

Shipping software compares carriers, prints labels, validates addresses and tracks costs. Address validation avoids correction fees and failed deliveries. Reports show the cost per order by zone and service. The dashboard in our Software gives clients live order and shipment visibility, and the Integrations page lists the store and marketplace connections we support.

9. Reduce returns and returns shipping costs

Every return costs you shipping twice. Cut return rates with accurate product pages, size guides and photos. For returns that happen anyway, set clear rules: when the customer pays, when you do, and which items are not worth shipping back. See reverse logistics in ecommerce and Reverse Logistics Solutions.

10. Plan inbound freight too

Shipping cost starts before the order. Frequent small inbound shipments cost more per unit than fewer larger ones. If you import, plan consolidation with your freight forwarder. Our Sea Freight & Customs Clearance service covers imports through to the warehouse.

11. Audit carrier invoices

Carrier bills contain errors: wrong weights, wrong dimensions, wrong zones and surcharges that do not apply. Review invoices on a schedule, compare the billed weight and dimensions with your records, and file adjustment claims within the carrier’s time limit. Check which services carry a delivery guarantee, because refunds for late deliveries are not always automatic. Software and some fulfillment partners can do this for you.

12. Negotiate or avoid surcharges

Common surcharges include residential delivery, delivery area, additional handling for large or heavy items, oversize, fuel and address correction. You can reduce them by changing packaging, correcting addresses before shipping, splitting heavy items, and negotiating caps or waivers in your carrier agreement. Track surcharges as a separate line in your reports so that increases are visible.

What to do first

To compare what different providers charge for shipping and other work, see fulfillment center costs. For benchmark rates by service, see average shipping rates. Our Ecommerce Shipping Solutions page describes what we do for clients.

Frequently asked questions