Wondering how to get cheap shipping rates for your small business?
Scoring the best shipping rates for your small business doesn’t happen accidentally.
If you genuinely want to save on shipping costs, invest some time and do some homework.
Luckily, we’ve put together this ‘cheat sheet’ to make it a little easier to learn what you need to know to get cheap shipping rates for your small business.
When it comes to shipping rates, there are a few key factors you should be aware of.
Published rates: These are the retail rates available for shippers who don't have a pre-established pricing agreement with a carrier.
Negotiated rates: Negotiated rates are like striking a deal with a carrier. They offer pricing concessions, such as discounts based on service levels, volume, and even spending rebates. The USPS primarily negotiates with high-volume shippers. In contrast, FedEx and UPS consider both volume and profit margins when offering discounts. Even low-volume shippers can enjoy lower rates from FedEx and UPS if they frequently use express services.
Base rates: Base rates are what carriers charge based on your package's characteristics, delivery destination, and your chosen service. With the USPS, the base rates are the final prices you pay. But with FedEx and UPS, it's just the starting point. On top of their base rates, FedEx and UPS often add surcharges, like fuel charges.
General rate increase (FedEx & UPS only): Shipping costs increase yearly, and carriers implement the General Rate Increase (GRI). It's a percentage representing how much carriers raise rates, surcharges, and fees across the board. In 2020, this increase was 4.9%. Over the past decade (2010–2020), ground and air rates have increased by 75.8% and 80.0%, respectively.
Delivery guarantees: FedEx and UPS guarantee delivery by a specific date for most services, and Express shipments to many destinations are guaranteed to arrive by a specified time. On the other hand, Priority Mail Express is the only USPS service with a delivery date guarantee. But keep in mind that occasionally, carriers may suspend their delivery guarantees, such as during the COVID-19 pandemic.
When using FedEx and UPS, you must be aware of the various surcharges and fees that can impact your shipping costs. Shippers can incur fees in addition to the base rate over 20 different ways, including:
Fuel surcharge: A fuel surcharge applies to any parcel carried by FedEx or UPS. This surcharge changes monthly. The percentage depends on the average prices of diesel and jet fuel. They multiply the current fuel surcharge percentage by your shipping rate to calculate the cost. For instance, a 10% fuel surcharge on an Express shipment with a $20.00 rate would add $2.00 to the total cost.
Delivery area surcharge (DAS): More than half of the 42,000 zip codes in the United States are subject to a "Delivery Area Surcharge." This happens because providing service to and from less populated or harder-to-reach areas carries higher operating costs. Most DAS zip codes fall into the "extended" (more rural) category, which increases the surcharge by about 50 cents.
Residential surcharge: There’s an extra charge for carriers to deliver to any home location, including a business operating out of a home. This surcharge varies depending on the service. The average amount is $4.67.
Additional handling surcharge: If your shipment's weight exceeds 50 lbs., its length exceeds 48 inches, its width exceeds 30 inches, or your packaging is considered nonstandard, you might face an additional handling surcharge. This fee can range from $13.00 to $24.00.
Address correction fee: If the shipper provides an incomplete or incorrect recipient address, there's a fee of $17.
Signatures: Carriers can collect a signature when delivering a parcel as an extra service. Various options exist, and they come at an additional cost. It's about $3.00 for USPS, while FedEx and UPS can charge over $5.00.
Determining the best shipping rates for your small business can be an overwhelming experience because there isn’t one single solution you can use to address every shipping scenario you may have.
As a result, every carrier offers a wide variety of shipping services and options for you to choose from.
So, where do you start?
How do you narrow down all the available choices?
Simple.
The first thing you need to do is figure out the shipping requirements for the item(s) you need to ship.
- To do this, here are some basic questions to ask yourself:
- When does the item have to arrive?
- Do you want guaranteed delivery?
- Would you like to be able to track the shipment’s progress?
- Is the item going to a commercial or residential address?
- Do you require a signature to confirm delivery or any other add-on service?
Are you shipping alcohol, other specialized products, or any hazardous materials?
By confirming your shipping requirements beforehand, you’ll set yourself up to land the best shipping rates for your small business.
Now that you know what you need, you can source the shipping solution that best addresses your requirements at the best price. There are a few different ways you can do this.
- Check online: if you’ve got the time, you can visit carriers' websites such as USPS, UPS, FedEx, and DHL. Take note of the service that best meets your shipping requirements on each carrier’s website and then compare them to one another.
- Check using an online shipping platform: if your time is limited, an easier way to compare what each carrier offers is to utilize online shipping software. You can compare the best shipping rates for small businesses on the platform’s dashboard with just a few clicks.
- Call the rep: if you’re crunched and can’t afford the time to conduct your online research or purchase and get up to speed with an online shipping platform, go old school.
Pick up the phone and call reps at three different carriers.
Tell them your shipping requirements and ask them what their best shipping rate for your small business would be.
Want to make the best shipping rates for your small business even better? Here are a few tips to ensure you get the cheapest shipping rates for your small business.
- Ask for a discount on your shipping rate
Like many things, the ‘sticker price’ you’ll see on carrier websites isn’t always the best shipping rate you can get for your small business.
You may qualify for a lower rate if you’re shipping a decent volume of items each month.
If your volume is low right now but, based on market trends, you feel strongly that your volume will trend higher, you can use this forecast to negotiate a lower rate on your shipping.
And, of course, just by shopping around and letting your current carrier know that you’ve been investigating what kind of shipping rates you could get from their competitors, they may give you a better shipping rate.
- Optimize your shipping packaging
When determining how much to charge for their shipping rates, carriers consider the weight and dimensions of the package in which your item is being shipped.
If the box you’re using is larger than it needs to be, it will take up more space in the carrier’s truck. It will also be heavier since it will require more packaging inside to protect the item.
Using the smallest box possible, less space will be taken up in the carrier’s truck, and the box will be lighter. Both conditions will result in a lower, better shipping rate.
Most carriers offer flat-rate shipping to simplify life for many of their customers and themselves.
With flat-rate shipping, you pay one flat rate, up to a certain weight, to ship your item anywhere in the US if the item fits into a standardized, flat-rate box supplied by the carrier.
If most of the items that your small business ships are of a similar size, flat-rate shipping can result in the best shipping rates for your small business.
In a survey conducted by Usabilla, 58% of the respondents said the top reason they abandoned an online shopping cart is the high shipping costs.
So, how can you reduce the chances of this happening to your small business and still cover the unavoidable shipping expense? Here are a few solutions:
- Offer free shipping by building the cost of the shipping into the price of the item you’re selling.
- If you believe that building in the cost of the shipping will make the price of the item too expensive for your customers, charge customers for half the shipping cost and build the other half of the shipping cost into the price of the item.
- Do the math and take the total cost of shipping you incurred the previous year, divide it by the number of items you shipped, and come up with an average shipping cost. Use this blended amount as a flat-rate shipping charge that is standard for every customer.
- Offer free shipping on orders that are over a certain amount. This will provide a way for your customers to get ‘free shipping’ and allow you to generate additional sales.
Every small business owner wants to increase their profit margin.
Reducing expenses is one way of achieving this.
With shipping being one of the largest cost centers for your business, it has great potential for cost-cutting.
By asking a few basic questions, doing a little detective work, comparing your options, putting on your negotiator’s hat, being efficient with your packaging choices, and applying some shipping tips, you can achieve the best shipping rates for your small business.