How to reduce shipping rates for SMEs

According to Baymard Institute, 48% of shoppers attribute abandoning their carts to the high costs of shipping. Although it can be tempting to offer the lowest shipping rates to your customers, doing so may have a negative impact on your profit margins. Hence, it is crucial for small businesses to provide low-cost shipping to benefit their company and customers.

If you are in the business for the long term, you need strategies that will ensure you get competitive shipping rates consistently. Read on to learn how you can provide cost-effective shipping options for your small business.

Why is shipping expensive?

Growing consumer trend is the main cause of high shipping fees. The global e-commerce market has grown by 44% from 2019 to 2020, 32-36% faster than other high-growth markets. This growth has put pressure on the entire supply chain. When resources are limited, it creates a ripple effect on price changes. Manufacturers increase the average wholesale price; wholesalers increase their prices to distributors and distributors will increase costs to shipping companies.

Other factors that affect the increase in shipping costs include:

• High transportation costs: Besides gas and fuel prices, the cost of shipping containers contributes to the increase in shipping costs. According to IMF, the cost of shipping containers has increased by seven-fold since March 2020. 
• Port congestion: With more cargo ships waiting to unload their goods, shipping carriers have to load fewer containers onto their ships. This means that more trips are needed, which causes an increase in transportation costs.
• Increase in consumer demand: As more consumers turn to e-commerce shopping, companies need to have a strong outbound process. The more products needed to be shipped, the higher the costs. 

Tips to reduce shipping costs

Shipping cost is one of the factors that affect customers’ buying decisions. With customers’ expectations rising due to more e-commerce platforms offering free shipping, small and medium enterprises (SMEs) have to find solutions that keep shipping costs low while maintaining healthy profit margins. Here are some strategies for cutting down shipping costs.

1. Ship with a trusted logistics partner 

One of the ways small businesses can reduce their shipping costs would be price comparison. You can request quotes from multiple shipping companies to compare prices. Make sure to conduct adequate research so as to assess whether you are getting the rate that has the best value.

Another way is by negotiating. You can use the quotes offered by these shipping companies and negotiate a more favourable rate. Sharing your business’ sales projections can be helpful if you are expecting an increase in demand in the near future. A trusted logistics partner can help to minimise potential delivery problems such as damaged or lost goods. You can also avoid situations where you would need to expend resources on service recovery by having your goods reach your customers on time and in the right conditions.