Worried About Rising Shipping Costs? Follow These 6 Tips to Overcome This Challenge
Updated: Jul 6
You plan to scale up your dropshipping business to a next level. However, you are worried about the rising shipping rates, especially due to the global pandemic. Fret not! In this article, we will be discussing some tips that you can use in order to cut down your costs.
1. Do not pack more weight, including air, than necessary
First and foremost, you need to take all the products that you sell into consideration and do some research about the most efficient and effective ways to pack them. If you have done this, you need to, from time to time, re-assess whether you are over or under packaging.
On one hand, over-packaging adds unnecessary weight to your parcels, which usually increases the shipping costs. Let’s take bubble wraps and air bags, which are known to be super lightweight, for example. If the weights of your products and external packages total at 4.9kg, inserting more than necessary dunnages can push the parcel into the next weight segment, such as 5.1kg. This could have a big impact on your business, especially when implemented on a large scale because you might have to pay for the shipping costs of a 6-kg package.
On the other hand, under-packaging might lead to breakage and other damages to the products, resulting in additional costs for returns and exchanges as well as low customer satisfaction. However, some fulfillment companies do not think much about these issues and end up overpacking your products to avoid liability.
Therefore, you should take your time and do some research to find a reliable third party logistics and fulfillment service provider in order to avoid the problems above. In addition, you should also request to be involved in the decision making process regarding what alternatives to be used for your orders.
2. Be mindful about volumetric/dimensional weight
This matter mostly concerns dropshippers selling items that are lightweight but puffy and/or large in size, such as pillows. The shipping rates for those parcels would be calculated based on the volumetric weight and a variable ‘divisor’, which depends on shipping destinations and methods. Many sellers would opt for bubble mailers to cut down costs. However, this is not always a feasible option for fulfillment services with little experience and poor equipment. Therefore, you should partner with experienced warehouses to handle those types of items. For instance, at Xianchao Logistics, we would help you vacuum and nicely pack the products so that the shipping costs are as low as possible.
3. Negotiate rates with courier services
Generally, the greater volume you ship on a regular basis, the better rates you enjoy. However, this does not mean that you would need hundreds of orders per month to have some negotiating power. In fact, you might be surprised at the negotiating power that you have. Although you might not be able to get much discounted rates, many companies are willing to give you additional perks such as free upgrade to live tracking if you agree to partner up with them in the long run. Nonetheless, if you do not want to burden yourself with this back-end issue, you can work with a trustworthy dropshipping agent, who has extensive relationships with many carriers. This would give them more leverage in negotiation, thus helping you obtain more favourable rates.
4. Work with multiple shipping companies and service providers
On top of the previous tactic, collaborating with several carrier services also allows you to reduce your shipping costs. First of all, different companies have different methods of calculating shipping rates depending on the weight segments and shipping methods. Therefore, working with more than one shipping company gives you more freedom to opt for those who provide favourable rates for certain types of products and requirements (e.g. shipping speed and destinations). Although this seems labor-intensive in the beginning, once you have more consistent categorisation of your orders, you can save much more in the long run for your business. Besides, this stimulates a more intense competition among shipping companies, encouraging them to give you more benefits and discounts for customer retention purposes. If you are working with a dropshipping agent, this is usually not something that you should be worried about since the agent should already have close connections with a pool of shipping companies.
5. Opt for flat-rate shipping
For flat-rate shipping, you only pay a fixed cost per order no matter how heavy and large the parcel is. This is especially relevant because the COVID-19 pandemic has caused many carriers to significantly raise their shipping rates. Let’s take Fedex for example. In 2021, their freight shipment costs climbed to $0.35 from the original rate of $0.10. That is a 250% increase. Another advantage that this tactic brings about is that it helps you make better strategic decisions because you have a good estimate of your costs (based on your consistent number of orders). Therefore, dropshippers who sell heavy or big products should consider using flat-rate shipping.
6. Work with suppliers and agents with strategic locations
Depending on the types of products and target markets that you want to dropship, you should do research on the locations of partner warehouses and/or fulfillment centres in order to maximise your potential. More often than not, it is ideal to work with suppliers who are based in China. This is advantageous for many reasons such as higher efficiency and cost effectiveness for operations. If you are worried about problems such as language barriers, you have the option to source for a trustworthy dropshipping agent, who represents you to work with the factories and secure the best deal for your store.
With 30+ years of experience in logistics industry and 5+ years in dropshipping sector, Xianchao can help you handle most back-end matters and solve your pain points, ranging from product & supplier sourcing to ecommerce order fulfillment, or branded packaging & private labelling to quality inspection & product certification. Do you have a dropshipping business to grow? Discuss with us and let’s get started ASAP! Please feel free to reach out to us if you need to know any details about partnering with us.
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