Insights to Help Your Business

How to Reduce Shipping Costs for Small Businesses

See how small businesses can reduce shipping costs to protect profits. Tips from the experts at InsureShield to help you lower rates and avoid high fees.

The cost of shipping can quickly cut into profits, especially for small businesses. However, with the right strategies, you can pay less for parcel shipping without sacrificing the quality of service to your customers.

Doing so can deliver (no pun intended) all sorts of benefits: relieving the pressure on your cash flow, reducing stresses on the budget, and allowing you more flexibility to pass on savings to customers. Ultimately, it might give your business the freedom it needs to grow.

Female sitting on a stool and is preparing an order surrounded by shipping supplies

Whether you are shipping a few orders or many, here are the steps to take to keep your shipping expenses at a minimum:

Review Your Current Shipping Costs
Compare Carrier Parcel Rates
Negotiate Shipping Rate Discounts
Package Goods Properly to Avoid Breakage
Reduce the Weight of Packages
Combine Shipments to Reduce Shipping Costs
Offer Eco-friendly Packaging Options
Use Shipping Insurance to Help Lower Business Risk
Increase Insurance Coverage Using a Third-Party Insurance
Avoid Extra Charges by Checking your Shipping Label Information
Make Your Shipping Operation More Efficient
Complete More Sales by Offering Free Shipping

Key Takeaways

There are lots of options to reduce shipping costs, but they can be simply grouped into these three categories: acquire good rates with a carrier, optimise your packaging to reduce shipping costs and breakage, and insure against losses.

1. Review Your Current Shipping Costs

Before you take your next step, it’s always a good idea to know where you are already standing. Do you have a spreadsheet that covers shipping costs? Now it is the time to break out Excel and lay it all out in front of you.

Once you’ve got a list of your shipping receipts, categorise them by shipping destination, carrier (UPS etc.) and shipping method. This will give you everything you need to follow the next steps in this article.

Understand the Factors Behind Your Current Prices

All of the following affect shipping costs:

Level of service - Do you pay for an expedited service?
Shipping destination - Do you ship further across the world?
Product being shipped - Do you ship 'dangerous goods' with an additional fee?
Additional services - Do you pay for tracking or insurance?

Now that you’ve considered the factors, you’re in a better position to know where you can save costs without hurting the service quality. If you need more details, look for your shipping company’s service guide.

2. Compare Carrier Parcel Rates

Not all carriers offer the same pricing, and rates can vary based on package size, weight, and destination. Take the time to compare the options, especially if you ship often. Subscription-based shipping programmes or business accounts with carriers can also help reduce shipping costs over time. Answer a few questions to find out what discounts you could get with UPS.

Use Shipping Software to Find Competitive Parcel Rates and Avoid Delays

Manually checking carrier rates can be time-consuming and inefficient. Instead, use shipping software to compare real-time pricing across multiple carriers.

Many platforms connect directly with e-commerce systems, i.e. Shopify, Shipstation etc. making it easy to find the best price for each package. Additionally, these tools can help identify carriers with good delivery performance, reducing the risk of delays that could impact customer satisfaction and experience.

Some platforms also offer predictive analytics, helping businesses determine the best shipping methods based on historical data. This can help you proactively adjust your strategy to prevent unnecessary costs and delays.

Check if Carrier Rates Have Changed

Most carriers change their rates each year. This could happen at any time, but it often happens in January, so if you want to get at least one recurring reminder in your calendar it should be this:

3. Negotiate Shipping Rate Discounts

49% of UK shoppers say they avoid haggling because it feels awkward, but to be an effective business owner you have to push for the best deal. Discounts are usually offered based on shipping volume. Small businesses often assume they don’t ship enough to ask for a discount, but you might be surprised.

As long as you do it politely, there’s no reason not to ask. Email or call your representative, and explain that:

you value the service they provide and want to continue working with them.
you are looking for ways to manage your costs effectively without compromising on the service provided to your customers.
you are looking for a customised rate or plan that would better align with your shipping volume and budget.

However, lower rates shouldn’t come at the expense of reliability. Longer transit times and delays in your supply chain typically increases the risk of something not going to plan. Strike the right balance between fast and reliable service and cost-effective shipping.

How to reduce shipping costs calendar event

Close up of hands using a smart phone by a laptop

Working with a reliable logistics partner is essential to reduce the risks to your packages and avoid lost revenue due to delay or damage. InsureShield^® protects your valuable shipments while keeping your business costs down.

Get a Quote

4. Package Goods Effectively to Avoid Breakage

With a thoughtful package design, you can discover valuable cost savings and increase your profit margin. For high-value items, be sure to:

Double-box merchandise to reduce risk, where necessary.
Use a smaller interior box, which weighs less.

Shipping fees are often based on dimensional weight, meaning bulky packaging can incur unnecessary charges. You can reduce shipping costs by using the right-sized boxes to avoid paying for unused space while making sure products fit securely.

Close up of hands using a laptop surrounded by boxes

5. Reduce the Weight of Packages

Switching to lightweight packing materials can reduce weight-based fees without compromising on protection. For example:

Inflatable Packaging (Air Bags)
Expanded Polystyrene “Peanuts” (Loose Fill)
Crumpled Kraft Paper

Once that’s done, make sure you accurately weigh the item and put the correct weight on your shipping label to take advantage of reduced cost.

While cutting packaging costs is important, businesses should balance efficiency with protection. Fragile or valuable shipments need strong materials to avoid damage. This can prevent expensive replacements and unhappy customers. For a detailed guide to packing your shipments correctly and cost-effectively, read these Packaging Guidelines.

6. Combine Shipments to Reduce Postage Costs

The rule of thumb here is that shipping will be cheaper when fewer packages are needed. For example:

If the box is the same size, fitting two items into one box will be cheaper than sending them as two mailing bags.
Putting six large boxes on one pallet will be cheaper than sending each box as its own shipment.

The caveats? Sometimes fragile or heavy items are just not suitable for combined shipping. Avoid overfilling if it will compromise the packaging.

You can also pass on the savings of combined shipments to your customers. As well as making your offer more attractive, some customers will simply expect it (that’s why eBay makes it a shipping preference option), and it will look like poor service if you fail to offer it. It’s a win for the buyer, seller, and emissions when you combine shipments. On that topic…

7. Offer Lower Emissions Options

Consider offering recycled packaging options that are cost-effective and appealing to customers.

Last-mile delivery is also evolving. More carriers, including UPS, are expanding the use of electric vehicles (EVs) and cycle vehicles in urban areas—lowering last-mile emissions and sometimes qualifying businesses for preferential delivery rates.

Some customers prefer to opt for these shipping options. However, depending on the services provided and carrier, reduced emissions shipping may incur additional charges.

8. Use Shipping Insurance to Lower Financial Risk

Though we hope the worst won’t happen, goods can suffer any of the following fates in transit:

Damage
Loss
Theft
Fraud

Insuring your shipments protects your business from these types of loss, reducing your financial risk. Some insurance policies will cover all of the above risks, and others will only cover specific types, restrict certain items and shipping methods (land, air or sea). It’s worth working with a logistics partner who can customise an insurance policy that meets your specific needs, to help you get the most suitable protection for your business.

Female using a computer as a male looks over her shoulder

Securing reliable shipping solutions is important for every business. Every product is valuable to your business and every loss has a financial impact. Coverage for concealed damage gives you and your customers peace of mind.

Insure Your Shipments

9. Increase Insurance Coverage Using a Third-Party Insurance

Even though insurance gives you peace of mind and can save money in the long run, it is nonetheless an expense. To reduce shipping costs we have to also reduce insurance costs.

You might default to using carrier liability, but you can take it one step further. Carrier liability may be convenient, but there are also downfalls. The shipper must prove that the carrier is liable.

With InsureShield^®coverage, there’s no need to prove carrier fault and claims can be filed for concealed (hidden) damages. Additional coverage is also available for industrial strikes, riots, and geo-political conflict. No matter who you ship with or how you do it, InsureShield^®has your business covered.

10. Avoid Extra Charges by Checking your Shipping Label Information

Carriers will rebill shippers if the data is different on the shipment and with the package. Make the following a habit to avoid expensive price adjustments:

Weigh and measure packages accurately before creating the shipment.
Verify the recipient address with an address finder tool that used by insured carriers or shipping platforms, reducing the risk of surprise charges for address correction.

Don’t waste the savings you are making on the other steps with these avoidable mistakes.

11. Make Your Shipping Operation More Efficient

Printing labels help to streamline operations, reducing time spent at the point of shipping. Whether arranging regular collections or using a drop-off location, such as lockers or person-operated stores, having your packages ready to ship with the correct customs documentation attached (for international shipments) saves time when you’re ready to ship.

Consider automating the labelling process with shipping software to ensure consistent accuracy, reducing the risk of human error. Address validation API tools can also help prevent failed deliveries, saving time and money.

12. Complete More Sales by Offering Free Shipping

This one won’t reduce your shipping costs directly, but it does utilise your shipping policy to lower the chances of abandoned baskets, making your business more money in the long run.

“39% of customers abandoning their carts were due to extra costs such as shipping, tax or other fees”
Source: https://baymard.com/lists/cart-abandonment-rate

Customers don’t like to pay shipping costs. Anything beyond the price of the item or service that they want feels like wasted money. Users will give up on their order if they don’t like the shipping price you offer at the checkout, or if the minimum order amount is too high. Choose when you want to strategically offer free shipping to help avoid these types of lost sales.

What makes InsureShield the better choice to protect your profits?

When it comes to shipping insurance, InsureShield^® offers more than just insurance— it delivers peace of mind, operational efficiency, and real financial value.

Whether you’re sending one package or managing an entire logistics operation, you’re covered with full-value reimbursement, including freight costs, in the event of a loss. There are no setup fees, no annual premiums, and you only pay for the coverage you use.

Plus, with fast claims payment, typically within 2–3 business days after approval, your cash isn’t tied up while waiting for resolution, and our in-house local claims adjusters offer next-level service and customer satisfaction.

Find out for yourself what makes InsureShield a great cargo insurance solution. Get a quote today.