At Cahoot, we believe today’s ecommerce industry needs next‑generation shipping software. Selecting the best shipping software is crucial for enhancing efficiency and customer satisfaction. But before we talk about this amazing technology, it’s first worth asking – why is now the time? After all, legacy shipping software has been around for years. Thousands of Sellers are already using these tools – why make the switch?

We believe the present moment is perfect because ecommerce is dramatically different from how it looked just twenty years ago. The event that changed everything was the introduction of Amazon Prime in 2005. Just like the first iPhone revolutionized society’s experience with personal technology, Prime’s introduction transformed everything in the ecommerce industry. Sellers had to throw out old strategies and create entirely new ones to run their businesses.

The differences are stark, but we’ve summarized them in this table:

Let’s begin by going back to the 1990s and journey through the early 2000s to see what the ‘old world’ of ecommerce looked like, for Sellers and customers. By understanding these changes, we can see how modern shipping solutions can turn challenges into a competitive advantage.

The ‘Old World’ of Ecommerce: Lower Complexity

In the olden days of ecommerce, life was simpler. Fewer channels to manage, fewer customer expectations, and less technological complexity meant uncomplicated logistics and order fulfillment processes that seem almost quaint by today’s standards.

Just One Channel to Manage

In the old world, Amazon was not the ‘everything store’ yet. It was largely a first‑party Seller of a few products like books, CDs, and DVDs. They did not face much competition – Walmart and Target restricted themselves to physical stores while shopping cart platforms like Shopify and BigCommerce did not exist. All this meant that Sellers did not have multiple sales channels to sell and take care of customers on. There was usually just one channel – their own website. With just one channel to support, it was also possible to operate with smaller‑sized teams.

Minimal Competitive Pressure

In the 1990s, online marketplaces did not exist. Amazon launched its third‑party marketplace only in 2000. In this environment, customers did not have a lot of choices. Sellers had to ensure they drew customers to their website through good marketing. Once they found you, it was not easy to comparison‑shop across different listings, brands, or platforms. There was little pressure on Sellers – it was unlikely a competitor would undercut you on price or beat you on shipping speed.

Low Customer Expectations

Perhaps most importantly, customers had no expectation of free and fast shipping. Before Prime’s introduction in 2005, customers had never tasted that experience. They were willing to wait 7–10 days for orders and covered the cost of shipping. Even if they did not like this experience, there was no social media platform at the time where they could share their frustration.

Single Warehouse, Single Carrier

The combination of lower customer expectations and sales through a single channel meant that Sellers could get by with operating from a single warehouse location, or two if they really needed the space. Customers living far away were okay with waiting as long as 1–2 weeks for their orders. Because customers were willing to cover shipping costs, Sellers saw no reason to compare and find the lowest rate among multiple carriers. It was easier to just sign a contract with one carrier. Why bother with cost optimization when the customer was paying?

Small and Simple Orders

In the old world, lower basket sizes (units per transaction) were common because customers were yet to trust making payments over the internet. The least risky way to test ecommerce was to just buy one item. As confidence grew, so did basket sizes. Multi‑Line, Multi‑Quantity (MLMQ) orders were less frequent, reducing warehouse packing complexity.

In summary, Sellers faced little complexity in running their businesses in the old world. They sold on a single channel, faced minimal competitive threats, and could easily satisfy customers. All of this translated into simpler operations across the shipping lifecycle.

The ‘Old World’ of Ecommerce: Lower Costs

We’ve taken a look at how operationally simpler it was to run an ecommerce business in the old world. But this was not the biggest advantage Sellers had – we’ll now explain how costs were lower back then.

Shipping Costs Were Cheaper

Carrier General Rate Increases held steady at 4.4%–4.9% through the 1990s and into the 2010s, which provided predictability and control over delivery costs.

Labor was Cheaper

In the old world, ecommerce did not require massive warehouse labor networks. Sellers could staff warehouses at wages that protected margins, as fewer large players competed for workers.

Warehouse Space was Cheaper

Warehouse demand was lower, so Sellers could find and lease space more easily and at lower rates. Fewer ecommerce operations competed for limited industrial real estate.

Across the fulfillment workflow, Sellers had cost certainty. Carrier rates, labor wages, and warehouse leases were steady, protecting margins without constant optimization.

Inefficiency in Operations Did Not Impact Margins

In a world without marketplaces, customers paid shipping fees and lacked social media to complain. There was no pressure to optimize operations or cut costs – margins remained protected without innovation.

The ‘New World’ of Ecommerce: High Operational Complexity

Prime’s launch in 2005 changed ecommerce permanently. Today’s Sellers operate in a vastly more complex environment.

Many Channels to Manage

Amazon’s third‑party marketplace, Walmart, Target, Shopify, BigCommerce, and others mean Sellers must sell and support customers across multiple platforms. This requires larger teams and integrated shipping solutions.

Intense Competitive Pressure

Online marketplaces give customers infinite choice. Sellers face constant threats of price undercuts, faster shipping, and knock‑offs. High shipping costs further squeeze margins.

Sky High Customer Expectations

Customers now expect 1‑day and 2-day free shipping. Cart abandonment soars without transparent free, fast options and social media amplifies complaints.

Multiple Warehouses, Multiple Carriers

To meet fast, free delivery, Sellers must distribute inventory across strategically located warehouses and rate‑shop among many carriers. Multi‑carrier shipping software automates this complexity.

Large and Complex Orders

Higher free‑ship thresholds and multi‑item carts drive more Multi‑Line, Multi‑Quantity (MLMQ) orders, requiring more varied box sizes and longer packing times.

Sellers today juggle multiple channels, unrelenting competition, and sky‑high expectations — reinventing every step of shipping with distributed fulfillment and intelligent software.

Rising costs

Complexity isn’t the only challenge — costs have also soared in the new world.

Shipping Cost is Expensive

Carrier GRIs jumped to 5.9% in 2022, 6.9% in 2023, and 5.9% in 2024 and 2025 — well above historical norms and inflation, leaving Sellers scrambling to adjust budgets and operations.

Labor is Expensive

Warehouse wages have risen as Amazon, Walmart, and Target compete for labor. In some regions, $20/hr has become the baseline, making staffing more costly for smaller Sellers.

Warehouse Space is Expensive

Warehouse rents soared during COVID‑19 and remain high as supply lags demand. Over 80% of U.S. warehouses were built before 2000, driving up lease rates.

Sellers now face rising carrier rates, labor wages, and lease costs, compounding the complexity of meeting modern customer demands.

Efficient Operations Essential for Margins and Profits

In marketplaces, creative cost‑saving and resource pooling are essential. Sellers must optimize operations to preserve margins, stay competitive, and win.

Why Sellers Need to Switch to Next‑Gen Ecommerce Shipping Software

Legacy tools worked in the old world but add problems in the new one. They lack automation, cost savings, and multi‑channel flexibility, consuming time rather than simplifying workflows.

Choosing shipping software is crucial in developing an effective shipping and fulfillment strategy.

The next generation of ecommerce shipping software must solve three key problems:

• Simplify the operational complexities of the new world of ecommerce
• Drive operational efficiencies and productivity gains for your team
• Generate meaningful cost savings across each step of the shipping and order fulfillment workflow

In the coming sections, we’ll dive deeper into each of these aspects and explain how Cahoot’s next‑generation software is purpose‑built to address these challenges.

Summary

Ecommerce has come a long way. The simplicity of the past has given way to a fiercely competitive, complex environment where every decision matters. Traditional shipping software is now a relic, not a reliable tool.

To thrive today, businesses need software that simplifies complexity, enhances efficiency, and drives down costs in ways the old world never required.

At Cahoot, we’re actively shaping the future of ecommerce fulfillment. In today’s market, the right technology isn’t just helpful—it’s essential.

If you’d like to learn more, check out our Next Generation Shipping Software Guide, Part 2: “Shipping Software for Ecommerce Fulfillment: The Next Generation of Shipping Simplified”.

Frequently Asked Questions

How can I reduce shipping costs for my ecommerce business?

Reducing shipping costs requires a multi‑faceted approach:

• Negotiate rates with multiple carriers rather than relying on a single provider
• Consider using regional carriers for deliveries within specific areas
• Optimize packaging to reduce dimensional weight charges
• Implement zone skipping by shipping bulk orders to carrier hubs closer to final destinations
• Use shipping software that compares rates across carriers in real time
• Offer local pickup options for customers in your area
• Consider flat‑rate shipping for certain product categories

What are the most common causes of parcel delivery delays?

Several factors commonly contribute to delivery delays:

• Weather events and natural disasters
• Carrier capacity constraints during peak seasons
• Customs clearance issues for international shipments
• Address errors or incomplete delivery information
• Staffing shortages at carrier facilities
• Vehicle breakdowns or logistical issues
• High volume surges (e.g., Black Friday/Cyber Monday)
• Last‑mile delivery complications in rural or hard‑to‑access areas

How can I reduce the environmental impact of my ecommerce shipping?

To make your shipping more sustainable:

• Use right‑sized packaging to minimize waste and reduce dimensional weight
• Choose recycled or biodegradable packaging materials
• Offer carbon offset options at checkout
• Consolidate orders when possible to reduce the number of shipments
• Partner with carriers that have environmental initiatives or electric vehicle fleets
• Implement a packaging reuse program for returns
• Consider local fulfillment options to reduce transportation distances

What should I do about rising return rates in ecommerce?

To address the challenge of increasing returns:

• Provide detailed product descriptions, measurements, and high‑quality images to set accurate expectations
• Implement a clear, easy‑to‑understand return policy
• Consider offering free returns as a competitive advantage
• Use analytics to identify products with high return rates and address underlying issues
• Implement a return merchandise authorization (RMA) system to streamline the process
• Consider restocking fees for certain categories to discourage unnecessary returns
• Offer virtual try‑on or AR features for appropriate products

How can I improve last‑mile delivery efficiency?

Improving last‑mile delivery, often the most expensive part of shipping, requires:

• Partnering with multiple carriers to diversify delivery options
• Implementing delivery management software to optimize routes
• Offering alternative delivery options like BOPIS (Buy Online, Pick Up In Store)
• Using lockers or pickup points in convenient locations
• Providing narrow delivery windows to improve customer experience
• Leveraging data analytics to predict delivery challenges in specific areas
• Considering micro‑fulfillment centers in urban areas for faster delivery

What are the best practices for international shipping in ecommerce?

For effective international shipping:

• Partner with carriers experienced in global logistics
• Understand customs documentation requirements for each country
• Use harmonized system (HS) codes correctly for all products
• Be transparent about duties and taxes that customers may need to pay
• Consider using a third‑party logistics provider specializing in international shipping
• Implement reliable package tracking for international orders
• Offer DDP (Delivered Duty Paid) options for a smoother customer experience
• Research import restrictions for products in your target markets

How can I manage shipping expectations during peak seasons?

To handle peak season shipping challenges:

• Plan ahead by increasing inventory and staffing well before peak periods
• Communicate realistic delivery timeframes to customers
• Consider implementing order cutoff dates for holiday deliveries
• Diversify carrier partnerships to spread volume across multiple providers
• Use shipping software that can automatically route orders to carriers with capacity
• Offer incentives for early shopping to spread out order volume
• Maintain transparent communication about potential delays
• Consider temporary local pickup options during extremely high‑volume periods

Written By:

Rinaldi Juwono

Rinaldi Juwono leads content and SEO strategy at Cahoot, crafting data-driven insights that help ecommerce brands navigate logistics challenges. He works closely with the product, sales, and operations teams to translate Cahoot’s innovations into actionable strategies merchants can use to grow smarter and leaner.

Free shipping has become an expectation in ecommerce, but for many businesses, it feels like an uphill battle against shrinking profit margins. The key to making free shipping work isn’t just about absorbing the cost, it’s about optimizing your supply chain to offset those expenses. From strategic inventory management to innovative fulfillment methods, businesses that refine their logistics can transform free shipping from a financial burden into a competitive advantage. In this guide, we’ll explore supply chain strategies that not only help sustain free shipping but also attract more customers without compromising your bottom line.

1. Minimize Inventory Storage With Just-in-Time Procurement

Just-in-Time inventory Stocking (JIT) is a common inventory management technique and a lean methodology to increase efficiency. A successful example is the apparel retailer Zara, with its “mind-spinningly supersonic” supply chain. Zara operates in an industry where inventory “spoils” quickly so they commit less than a quarter of a season’s line and produces about half of its line at the start of the season. The remaining? They were designed and produced during the season. Zara identifies popular styles and puts new similar designs in stores throughout the season while they’re still popular. With JIT, Zara improved its cash flow by reducing low-demand inventory while doubling down on what’s working.

Today, online Sellers can quickly gather and process historical sales data to make better demand predictions, but they are still just guesses. And yes, some safety stock is still needed as a buffer, but Sellers don’t need to dedicate as much space for storage as they had in the past. With proper data analysis and planning for smaller but more frequent procurement cycles, merchants can derisk the capital investment and direct the savings into their customer acquisition strategy.

Another application of JIT is cutting storage costs at 3PLs such as Fulfilled by Amazon. FBA is generally an excellent option, but only if the Seller can handle the storage costs (including peak season storage rates and aged inventory surcharges). By estimating their sales via FBA, Sellers can ship items regularly to FBA warehouses in quantities that will sell quickly. The remaining items can be stored in an inexpensive warehouse or their own facility.

2. Buy Online Pick Up In Store (BOPIS)

This is not strictly a solution for improving shipping costs, but it can help the customer get their order on their schedule at a lower cost to you. Buy Online Pick Up in Store (BOPIS) enables customers to pick up their items from one of your physical retail locations. The key here is to eliminate the shipping cost altogether by encouraging the customer to pick up their order.

Customers expect free and fast shipping and in some categories such as grocery, healthcare products, and some household items, fast shipping is a priority over free shipping. You may even want to offer a discount to encourage in-store pick-up which is a win-win for both you and your customer.

BOPIS bypasses the shipping process, cutting delivery from days to mere hours. Moreover, it can be a differentiator between you and a competitor, leading to higher top-line revenue. To minimize additional staffing needs and wait times, self-service package lockers can be used as a touchless way for customers to pick up their orders. Prepared orders are delivered to a locker inside or outside of your store that customers can open via an app or one-time password.

3. Zero Inventory Through Dropshipping

Dropshipping is a popular order fulfillment method used by many online Sellers. Dropshipping is an ecommerce business model that allows retailers to sell products without holding onto inventory. Instead, the retailer forwards customer orders to a third-party supplier who ships the product directly to the customer for a fee. Sellers don’t stock the items in their warehouse, effectively making it a zero-inventory business. When an order for a dropship item is received, the Seller purchases the item from a wholesale supplier who ships the order directly to the customer on behalf of the Seller. Sellers don’t handle or even see the product in the whole process.

Dropshipping has a host of advantages as the online Seller does not require capital to pre-purchase inventory, does not need a warehouse to store it, and doesn’t even need expertise in order fulfillment and operations. However, the Seller must contend with low margins and no control over fulfillment. Therefore, dropshipping should be pursued by Sellers who intend to focus on building a diverse and creative product portfolio and concentrate on marketing to drive sales and revenue growth.

In the dropshipping model, the suppliers assume the risk of unsold inventory, though it’s minimal as they tend to have many affiliates selling their wares, and they pass the cost of logistics to the dropship Seller. Running an assetless business and maintaining low operational costs allows you to offer free shipping while concentrating on improving your sales without worrying about fulfillment.

Another form of dropshipping is cross-docking. In this ecommerce business model, instead of the wholesaler shipping orders directly to their affiliate’s customers, they bulk ship all the days’ orders to the merchant’s warehouse, who then fulfills all the customer orders. Cross-cocking tends to be used by merchants that already have the fulfillment infrastructure and the sunk costs of operating a physical ecommerce business. However, this strategy enables them to sell an expanded product catalog with lower product pricing and logistics fees, which results in higher profitability at a lower risk profile comparable to pure-play dropshipping.

4. Streamlining Your Supply Chain

The supply chain, in general, is not easy to manipulate. However, it’s a good idea to step back and reassess your supply chain for opportunities to improve your cost structure and allow you to offer free shipping.

Here are a few high-level recommendations to streamline your supply chain:

• Optimize Sourcing: When you first open an online store, you would typically start with the easiest product sourcing options. As you scale and increase your bargaining power, though, you should look beyond the current sourcing and look for alternative suppliers that align with your selling strategy, which can be a cost leader, highly differentiated, or anywhere in between. You should also consider talking directly with manufacturers, if you’re not already (and using a broker or aggregator), and have a conversation about how you can bring your landed costs down. For example, sometimes overseas factories have preferred freight forwarders with much better ocean container rates than you might currently have available. Ask your 3PL/4PL if they can help with container shipping rates for the same reason…they can often get better rates by aggregating volume across clients.

• Optimize Your Order Fulfillment Location: Ecommerce allows businesses to operate from anywhere they can get an internet connection. But as you scale, the inbound and outbound shipping becomes one of the most significant contributors to fulfillment costs. Moving your fulfillment location closer to the customer can save you money AND delight customers with faster shipping; middle of the country, for example (if more than one warehouse is not feasible, though Cahoot makes it easy to add warehouse locations to your existing setup to improve efficiency and reduce cost). On the other hand, being closer to vendors will help you reduce lead time and inbound costs. Both of these factors should be considered in deciding the optimal fulfillment center location. In addition, some locations also enjoy cheaper warehouse rents, cheaper labor costs, and may have government incentives. Taken together, an optimized fulfillment infrastructure can sometimes save substantial money.

• Reduce Inventory: As an ecommerce business grows, the common reaction is to increase the size of the warehousing facility as well as the inventory on hand to meet the customer demand. But inventory is a cost trap and increasing inventory should be avoided as much as possible. Explore options such as reducing lead time from suppliers and getting rid of slow-moving inventory. Drastic measures such as liquidation and promotional sale of obsolete items should be standard practices in an industry with dynamic SKUs.

• Consider Distributed Inventory: Distributed warehousing is a well-known solution for offering fast and free shipping. Whether leveraging a 3PL service such Amazon FBA, Multi-Channel Fulfillment (MCF), or a 3PL that has many locations, the benefits of distributing inventory to minimize final-mile shipping cost can often improve margins enough to be able to offer free shipping.

• Multi-Channel Sales: Many studies have shown that the advantage of selling on many channels is huge. You reach more customers and the topline sales growth increases. This is not different from the conventional brand offering their product through the flagship store, departmental stores, specialty stores, or even outlets. In a similar vein, online shoppers have different channel preferences, and as such, different channels tend to command the attention and loyalty of different demographics. For example, Gen Z is more likely to shop via social channels and be drawn to influencer marketing while millennials prefer comparing different marketplaces and stores. Mix up your strategy to reach more eyeballs to grow revenue and earn the budget needed to cover free shipping.

5. Optimize Shipment Packaging

Packaging is an often-overlooked opportunity to optimize shipping costs. Shipping costs are dependent on the size and weight of the package, and online Sellers should look to cut down on both while choosing the optimal packaging. Shipping “air” is throwing money out the window.

If you are using small cardboard boxes, you can cut down on weight and size both by going with poly bubble mailers (if the product can ship and deliver safely in one). Poly mailers are versatile and can accommodate different shapes and sizes of items while keeping the cubic volume and weights low. For example, a poly bubble mailer of size 7.5” x 12” can weigh just 0.5 ounces compared to 3.6 ounces for a small 6”x6”x4” box. Be mindful of only shipping small and strong items using poly mailers like books, cables, or kitchen gadgets. For apparel, some brands like Abercrombie & Fitch use un-padded poly mailers that cost and weigh even less than their bubble-padded brethren.

Another way to cut costs is to use carrier-provided boxes or packaging. All carriers give away free packaging for specific classes of mail. If you are shipping within that service, buying a separate box and affixing the label to it may be more costly than just going with the carrier-provided packaging.

Lastly, consolidate shipping supplies into the 20-ish sizes that are used most often and negotiate bulk discounts to help reduce your packaging costs. As a part of the exercise, take the time to optimize your packaging sizes around the frequency of multi-line/multi-quantity orders by SKU. In other words, figure out the most frequently ordered quantities for your products and purchase the packaging that is optimum for those orders. For example, you may be using the same package to ship multiple quantities of an item like soap. But if your box is designed to accommodate 5 units of soap, and your most commonly order quantity is 2 units, you should consider getting a separate smaller package and save money on the cheaper box or mailer and lower shipping cost. It increases complexity but will save money over time.

Smart cartonization software can be worth its weight in gold and could protect most of your shipping budget by itself by helping you automatically ship in the most economical packaging, minimizing the amount of shipped “air” and extra cost associated with the larger shipment. It can also help you track packaging inventory and alert you when you’re running low.

PRO TIP: Order packaging in bulk directly from overseas manufacturers for the most impactful savings. Buying from domestic suppliers allows you to buy Just In Time and minimize how much is spent at once, but the advantage of saving ~30 – 40% on shipping supplies may far outweigh the convenience of local sourcing in the long run.

6. Reuse Packaging from Inbound Orders

There are two main benefits of reusing supplies from inbound orders. The first is reducing waste (most used shipping supplies are sent to the landfill), and the second is reducing the supplies you need to buy. Packaging supplies like boxes, mailers, and void fill may look trivial when you consider the cost of 1 unit, but en masse, the costs can really add up because they apply to every order shipped.

If you offer fragile or sensitive items that require special packaging, chances are some materials from your inbound shipments can be reused. For example, reusing void fill materials like bubble wrap, peanuts, or crinkled paper can reduce your spending on new supplies while reducing waste. Of course, the amount that can be reused may vary from each Seller, but it’s generally a better idea to reuse before finally recycling them.

Inbound boxes can also be reused to save money here and there, especially if you’re shipping larger items. But be aware that customers can be sensitive to what their package looks like when it’s delivered. If a reused box has old shipping labels, stickers, tape, and/or writing on them, they may have a poor experience and may not buy from you again.

7. Warehouse Robots

Autonomous mobile robotics (AMR) is an exciting innovation in warehousing operations that helps reduce the costs of the picking, packing, and sorting parts of the fulfillment workflow. The robots eliminate the cost of labor from these steps while increasing efficiency. Fulfillment is faster and there are fewer mistakes when a robot conducts an operation. Currently, order fulfillment centers that have robots working alongside humans can transport many more items at once, and in some cases, the complete rack of shelves are brought to stations manned by humans, rather than humans going to the shelves to pick products.

In other cases, robots speed-sort items by weight and volume to be packaged accordingly for different shipping services. This reduces human error while increasing fulfillment speed.

Kiva Systems and 6 River Systems have been two breakthrough AMR robot developers that have helped lower costs significantly for ecommerce Sellers. Kiva specializes in moving the entire shelf of products mentioned previously and was acquired by Amazon for the exclusive use of Amazon fulfillment centers. 6 River Systems was acquired by Shopify and is best known for their collaborative mobile robot named “Chuck” that uses sensors to navigate warehouses, avoiding obstacles and slowing down around people and equipment, guiding workers through their work zones to reduce walking and increase efficiency.

According to Amazon in 2016, Kiva robots cut the cost of warehousing by 20%, which amounts to more than $22 million dollars per warehouse per year. It is estimated that Amazon could save as much as $2.5 billion per year if the robots were deployed to all facilities.

Using robots helps businesses cut the time required to fulfill each order. At the same time, it has allowed better utilization of space by building narrower isles and getting rid of handling mechanisms that were required before.

For a warehouse without any robots, simple solutions such as Automated Guided Vehicles (AGV’s) can be an entry level solution. They are used extensively on factory floors and follow a predetermined path to transport materials without human intervention. This helps reduce manpower. Another solution could be Autonomous Mobile Robots (AMR’s) that can identify their environment and information on packages, where items are located on shelves, and can be used for picking, putaway, sorting, counting, and replenishment tasks, reducing human intervention even further.

Summary

Successful ecommerce businesses don’t just offer free shipping, they master the logistics behind it. Whether through just-in-time inventory, dropshipping, or regional fulfillment centers, the right logistical decisions can make all the difference. Businesses that stay ahead in supply chain optimization will not only keep shipping costs under control but also position themselves for scalable, long-term success. The key is to continuously refine operations, embrace emerging technologies, and find efficiencies that drive long-term savings that can be reinvested into a growth strategy that includes free shipping. With the right approach, free shipping can become a sustainable and profitable part of your business.

Download The Ultimate Guide to Profitable Free Shipping

Frequently Asked Questions

How to lower supply chain costs?

Companies can reduce their supply chain costs by working with suppliers, choosing specialist logistics and warehousing firms, using technology to boost efficiency, and finding ways to reduce waste such as materials or time.

How to reduce the cost of supply chain?

Streamlined processes, efficient transportation, and optimized inventory management all contribute to significant cost savings. By minimizing waste and maximizing resource utilization, businesses can lower expenses and boost profitability.

What is an efficient supply chain?

Supply chain efficiency focuses on delivering quality products to customers at the lowest possible cost by maximizing such resources as materials and labor. Supply chain responsiveness focuses on customers’ expectations and strives to provide a quality product faster.

What is cost control in supply chain management?

It involves optimizing operations to deliver maximum value with minimum waste, thereby impacting the total cost of the products or services. Supply chain managers and leaders have a pivotal role in analyzing and optimizing the supply chain.

Where can I reduce supply chain costs?

Some examples include: avoid minimum order quantities, know your reorder point, get rid of obsolete stock, implement Just-in-Time inventory management practices, and use consignment inventory (or a drop shipping business model).

Written By:

Manish Chowdhary

Manish Chowdhary is the founder and CEO of Cahoot, the most comprehensive post-purchase suite for ecommerce brands. A serial entrepreneur and industry thought leader, Manish has decades of experience building technologies that simplify ecommerce logistics—from order fulfillment to returns. His insights help brands stay ahead of market shifts and operational challenges.

For ecommerce sellers, shipping is more than just getting a package from point A to point B — it’s the invisible backbone, quietly shaping customer satisfaction, operational costs, and, ultimately, your bottom line. Yet, as carriers raise their rates and consumer expectations for fast, free shipping continue to rise, businesses are left with a difficult choice: absorb the costs, pass them on to customers, or find a smarter way to optimize logistics to avoid sacrificing profit.

The good news? You don’t have to choose between customer satisfaction and profitability. With the right shipping strategies — whether it’s negotiating better carrier rates, using regional shipping options, or leveraging technology to streamline fulfillment — you can reduce costs while maintaining service quality. This guide explores key tactics to help businesses of all sizes take control of their shipping costs and turn logistics into a strategic advantage.

1. Structured Negotiation with Multiple Carriers

Shipping costs are easily the biggest component of your order fulfillment prices, worse if you happen to sell big bulky items. But the problem is, every year the carriers increase their rates while you have to keep prices low to stay competitive. Giants like Amazon can afford to subsidize their deliveries, but how are you to offer free shipping as a small business?

Well, a lot.

With Amazon’s transportation business, Amazon Shipping, enabling the company to reduce its reliance on USPS, UPS, and FedEx, these national carriers are doing all they can to retain their customers. For these carriers, every bit of business is important to retain shareholder value. This presents you with the perfect opportunity to pull up your socks and put on your negotiation cap.

The key is shopping around and negotiating with your carrier Account Manager (if you have one). Chances are you’ll get a better deal if you can convince carriers that you are a reliable source of repeat business. First, you’ll have to gather what your business’ shipping needs are and then you formulate a formal Request for Proposal (RFP). This RFP document will help carriers assess your needs and tailor a deal for you. It’s easier to distribute this document across multiple carriers rather than setting up one-on-one discussions with everyone too early in the negotiation. For more details, Logiwa does an excellent job of explaining how to go about it.

There’s a merit to being well-prepared for your negotiation. Be sure to really understand what sort of shipping profile your business has, ranging from:

• Breakdown of your historical shipping speeds (Ground, Express, Consolidation)
• Shipment weights and dimensional weights
• Percentage of residential vs. commercial deliveries, including weekend deliveries
• How often errors and corrections like address changes and incorrect weights occur

Having a clear sense of what your business really needs helps you avoid paying for features you don’t really need in your deal with the carrier and makes sure that you do negotiate for the items that you use the most. Pulse Commerce also has a great in-depth article on how you can negotiate better rates using shipping data and analytics.

2. Convince Suppliers to Use Your Shipping Account

You might be leaving money on the table if you use your shipping account for only outbound shipments from your warehouse(s). Most ecommerce Sellers get inbound inventory shipments from their suppliers. If you’re one of those merchants, it would be a good idea to convince your suppliers to send them using your shipping account, meaning the carrier will bill you directly for the inbound shipment. This translates to more shipping volume on your account, and if we learned anything from the first tip, the more volume you have the more bargaining power you’ll have as well. In addition, you might already hit a higher volume discount even before further negotiations.

There are third-party contract negotiation/optimization solutions such as TransImpact, ShipSigma, and ShipRx, (among many others), that will analyze your shipping history for you, identify the most commonly used services, sizes, weights, and accessorial fees, and then help you negotiate your best agreement. With over 600 negotiable terms in a UPS contract, for example, outsourcing the work could make sense.

Lastly, make sure to request that any outsourced fulfillment partners also use your negotiated accounts. Modern ecommerce order fulfillment providers such as Cahoot have a Bring Your Own Carriers option that allows you to keep your volume on your accounts while outsourcing the fulfillment logistics to increase efficiency and lower cost.

A simple solution would be to set up a process through which suppliers can provide you with all the shipment details and you can provide them with the shipping labels. You can email those labels directly to them, and they can be printed, and packages can be handed over to the carrier.

3. Use Trade or Group Association Discounts

Trade organizations such as the American Bar Association or the Outdoor Industry Association are not just good for their annual conferences and shows, but they also offer a lot of advantages to their members. One of them is working together to help businesses reach scale when buying goods and services.

image courtesy: UPS

Shipping carriers often have relationships with many professional associations and offer member discounts. Depending on the size of the organization, you could be eligible for discounted rates of up to 50 percent with UPS and FedEx.

While UPS does not advertise the associations they offer discounts to, don’t hold back from asking your Account Manager or your association, whether you qualify. By aggregating your volume with that of your industry peers, you may just find that you’ve been missing out on a lucrative opportunity.

4. Use Shipping Label Software

There are two types of shipping label software we’re talking about in this tip: multi-carrier channel-integrated shipping label software such as Cahoot or ShipStation, and specific carrier websites that support online shipping label generation, such as USPS.

Shipping label software is an easy opportunity for Sellers who are new to ecommerce and/or haven’t reached the volume to qualify for negotiated rates or discounted 3PL services yet to get access to discounted rates. Cahoot, ShipStation and many others aggregate their shipping volume to negotiate big discounts with several carriers each and pass the savings onto their customers. Alternatively, you can print your shipping labels at usps.com instead of at the post office counter and enjoy the same reduced rates (commercial program) available to larger shippers. Discounted USPS shipping labels can also be purchased through authorized USPS postage services like Endicia which claims savings of up to 40%, whereas Stamps.com can save you up to 30% on Priority Mail services. Online shipping with USPS also saves you from carrying all your packages to the post office with its free parcel pickup service.

image courtesy: UPS

Using USPS is ideal only if you are shipping packages weighing less than two pounds. For heavier packages, it’s less expensive to go with the private carriers (FedEx and UPS). For private carriers, it’s best to open an account online rather than shipping them through the physical stores (e.g. The UPS Store and FedEx Office). These carriers reward the Do-it-yourself mentality! If you pay & print labels online and drop them off at the carrier store, you can save up to 50% compared to doing all of this directly at the carrier’s store.

5. Maximize Ground Shipping Services

Free shipping is a great motivator for shoppers even if it means getting the delivery a little later in some cases. According to a study published by McKinsey & Company in 2025, 95% of online shoppers prefer free standard delivery over paid expedited delivery, and 8 out of 10 shoppers are willing to wait even longer for a free shipment. Therefore, using the cheaper ground shipping option may be your best bet.

Similar to tip #3, which aims to add enough margin to the shopping cart subtotal to make free shipping viable, an alternative is to provide free shipping but at a slower speed. Consider offering a no-rush delivery option for customers willing to wait for free shipping. Ground shipping uses more economical long-haul trucks to move packages around the country rather than expensive air cargo, reducing the carrier’s costs and giving you better margins.

Here are some possible options for ground shipping from different carriers:

• FedEx Ground: Offers delivery to commercial destinations with the certainty of delivery on a pre-informed day. They deliver within typical business hours and the delivery timeline is between one and five days.
• FedEx Home: This is like FedEx Ground but with deliveries to residential addresses. It is slightly more expensive and has a wider delivery window, between 9 am and 8 pm. The delivery duration is between one and five days.
• UPS Ground: UPS Ground shipping is a ground delivery service that guarantees delivery on a specific date, similar to FedEx.
• USPS Ground Advantage: USPS Ground Advantage is an affordable and reliable service for sending packages to all 50 states, U.S. military bases, territories, possessions, and Freely Associated States. The delivery timeline is published as between two and five business days, but packages can be delivered in as little as one day. Rates are lower if shipping labels are purchased online as shippers benefit from commercial rates rather than retail rates if purchased inside a post office.

Check out this price comparison table using February 2025 rates for the ground shipping services described above to help determine which carriers to consider. Keep in mind that historically, UPS and FedEx have had more reliable on-time delivery:

6. Try Amazon Shipping

Amazon Shipping is the newest last-mile shipping service meant to complement and partially replace existing national providers like UPS, USPS, and FedEx. It started by servicing only Fulfilled by Amazon (FBA) orders but has since been aggressively recruiting high-performing retailers to use Amazon Shipping at low teaser rates. If you are a top-rated Seller on Amazon and haven’t received any such invitation, you should reach out to your Amazon contact and try to make your case for it as it offers reliable delivery in two to five days to the majority of the contiguous United States. Pickup and delivery is available seven days a week with no additional weekend delivery fees or residential surcharges.

Amazon Shipping uses Delivery Service Partners (DSPs), that is, freelance partners delivering on behalf of Amazon, while Amazon provides the technology needed for drivers to successfully pick up and deliver packages. By awarding delivery routes to DSPs, the management of the fleet and employees is borne by the outsourced companies, the dependence on traditional shipping carriers is eliminated, and Amazon can offer fast deliveries at lower costs than the unionized national carriers.

Amazon Shipping can sometimes be cheaper than the discounted shipping rates that Amazon offers to merchants using its FBA program. With total control over operations and a contracted workforce, Amazon can run an efficient and lean operation and pass on incredible savings to its participating merchants.

7. Take Advantage of ‘Hybrid’ Shipping Services

Hybrid services are a great example of how competitors work together to increase value by working in their areas of expertise. The most expensive component of shipping is the last-mile delivery. And the ground distribution network, especially in residential areas, has never been strong for large national carriers such as UPS and FedEx. So they work together with USPS to offer ‘hybrid’ services; the moniker originates from this collaboration, (aka ‘co-opetition’, that is, cooperative competition), which makes it possible to leverage what each does best to maximize efficiency and lower costs.

Carriers supporting consolidation services collect large volumes of packages, sort them in their own ground network facilities, consolidate them, and then inject them into the USPS network way downstream for delivery to the doorstep (that USPS is already touching every day), effectively outsourcing the final delivery.

Consolidation services are using the USPS Parcel Select service that has a delivery timeline between two and seven days, however, these shipments are lower priority and can sometimes take up to 10 days to deliver. So while much less expensive than UPS, FedEx, and USPS Ground services, packages can take 2 to 5 days longer to deliver to your customer. If your business offers recurring subscription purchases like dog food, you may not care how long transit takes, you just need to ship a few days earlier to meet your customer’s subscription expectations.

Hybrid shipping services are ideal for packages weighing less than 10 pounds (the lighter, the better), and best for residential, non-urgent, low-value domestic deliveries. Outside of this sweet spot, the prices for hybrid services may be comparable to other service types but hybrid services will take longer to deliver.

Packages heavier than 10 pounds should use standard ground shipping or Priority Mail Flat Rate box (because if it fits, it ships; up to 70 pounds, regardless of distance). And the Priority Mail delivery expectation is 1 – 3 days, making it a good option for shipments that need to arrive quickly but don’t require expensive overnight services.

See the 2025 FedEx Ground Economy delivery details and package weight and size limits:

image courtesy: FedEx

Here’s a UPS Mail Innovations graphic depicting how consolidation services ‘skip’ steps along the USPS sortation and delivery journey and get injected into the USPS network much further downstream, often one step before residential delivery:

image courtesy: UPS

Note: there are substantial minimum volume commitments to qualify for free pickup of packages by many of the consolidation services. Some piggyback on existing infrastructure, while others require separate workflows and must be kept separate from standard ground shipping services. Make sure to understand how your workflows will change when implementing these services.

8. Consider a Regional Carrier or Regional Rates

Some carriers operate in specific regions only; they are often less expensive compared to FedEx or UPS because they operate in a smaller area and use mainly ground transportation for delivery. By avoiding expensive air cargo, ground services don’t have to help absorb some of the overall operational costs. Their delivery networks are typically limited, but many of them cover a wide range of states with fast deliveries. Some of the prime examples of such carriers are:

Note: LaserShip and OnTrac merged and now operate under the name OnTrac.

Regional carriers typically provide better services than national carriers because they specialize and operate in a smaller area. They can provide same day or next day delivery options for deliveries that usually take a couple of days through FedEx and UPS.

They are more flexible in accommodating the requests of online Sellers too. Since they have a smaller base of customers and fewer packages to handle, it is not uncommon for them to provide later pickup time and earlier deliveries.

9. Avoiding Residential Address Surcharges

UPS and FedEx, the biggest national carriers, add a surcharge for all shipments to residential addresses. A carriers’ definition of a residential addresses isn’t always clear, but you can reduce some of your costs by planning around residential surcharges and encouraging customers to ship to their office building or a commercial pickup location (e.g. The UPS Store, FedEx Office, or a Pickup Locker). Benefits to the customer include:

• Accurate Delivery: Carriers don’t leave packages at the wrong address by accident, creating a WISMO (Where is My Order) customer service event.
• Improved Successful Delivery Rate: Helps people living in densely populated, urban areas such as apartment buildings.
• Security and Safety: Office buildings often have secure access and reception areas, reducing the risk of packages being lost or stolen compared to home delivery.
• Convenience: Packages can be received during business hours without needing to adjust a personal schedule or worry about missed deliveries.
• Immediate Access: Packages can be opened and inspected immediately upon arrival, which is helpful for checking for damage or errors.
• Reduced Delivery Attempts: Since someone is usually available during business hours, there are fewer chances of multiple delivery attempts, which can delay receipt and require pickup from inconvenient carrier locations.
• Less Disturbance at Home: This can be beneficial if they work from home or prefer not to have deliveries to a residence (for example, dogs may start barking and disturb a work phone call in progress).

UPS defines residential delivery as delivery to a location that is a home, including a business operating out of a home.

FedEx adopts a similar definition of a residential address:

image courtesy: FedEx

You can find the complete list of surcharges for FedEx and UPS on their site here.

Carriers impose residential surcharges because, to them, it is more expensive to deliver to a residence. A courier can deliver many packages to many different businesses in a single trip to a commercial building, whereas typically a courier makes one delivery to a single residential address at a time.

It’s important to choose the right shipping service to avoid surcharges. For example, FedEx Ground is cheaper than FedEx Home Delivery, but when shipped to residential addresses, the shipper will incur a ~$4 fee that will be reflected on the invoice. Be careful not to make too many mistakes or your carrier account and negotiated rates may be negatively impacted.

Another way to avoid residential surcharges is to utilize hybrid services such as UPS SurePost and FedEx Ground Economy, (or even Amazon Shipping), all of which do not impose this fee. Also, keep in mind that hybrid services do not give you a guaranteed delivery day and take longer to deliver by design.

Also, analyzing your past shipments will help you understand just how much of a problem residential surcharges are for you so you can take action accordingly. The surcharges may not seem like much, but when shipping high-volume and utilizing a less ideal carrier/services mix, they can add up quickly.

The solution is to separate your deliveries for home and commercial addresses and select delivery methods accordingly. While we can’t force the customers to only ship to a commercial address, you can make it easier to create the correct shipping labels (and make fewer mistakes) by asking the customer to identify in the address type if it is a commercial or residential address. Lastly, there are intelligent shipping software solutions like Cahoot that provide accurate address type identification using USPS and UPS databases, along with auto-rate shopping across all carriers and services to help you ship as economically as possible.

10. Use Zone Skipping for High Volume Zones

Zone skipping is a practice of consolidating orders and shipping them together to a destination region. From there on, the parcels can be shipped individually within the destination region. The shipping cost is often calculated by the number of regions or ‘zones’ a package travels through to reach the destination. Through zone skipping, the parcel is injected into the carrier’s network directly into the destination zone. Hence, the term Zone-Skipping.

This is ideal for online Sellers with a large volume of sales within a region. If you have close to a truckload of orders from a zone every day, zone skipping is for you. Your objective should be to get your orders as close to the destination as possible in fewer stops and sorts, where the shipping carrier can pick up and deliver each package to the final destination.

For example, if you are based out of Detroit (Zone 1) and have a considerable volume of orders from Southern California (Zone 8); if you ship all your orders directly, you will pay high shipping rates for Zone 8 for all orders. With zone skipping, you can bundle all your orders going to Southern California every couple of days and send them by truck in bulk. Once in Southern California, packages are picked up by the shipping carrier and shipped within the Zone at lower rates. You save big because paying for bulk transportation is far cheaper than the difference between zone 8 and zone 1 shipping rates per unit.

Here is a snapshot of how zone skipping saved money for two online merchants:

image courtesy: MultiChannelMerchant.com

USPS Parcel Select is a great complementary service to zone skipping. Under Parcel Select, Sellers drop their packages in bulk at a postal facility as close to the destination as possible. Not only, do they save on zone-skipping, but Parcel Select also offers an additional discount for bulk shipping, similar to the hybrid shipping services mentioned above. But in this case, you’re dealing directly with USPS without the intermediaries.

11. Use International Freight Forwarders to Fulfill International Orders

Shipping international from the US can be a costly affair. Besides, international shipping can be an operational headache too. There are several things to consider. You need enough manpower and time to manage the different aspects of international shipping that aren’t considerations for domestic shipments.

International Freight Forwarding services carry out the logistics operations on behalf of a firm. These generally involve, as the name suggests, large orders. But these days, a lot of freight forwarding agencies offer services tailored to ecommerce Sellers, for example, less-than-container load (LCL) services, where they bundle your parcels with other parcels to fill pallets and containers, which are then delivered to your destination country via the conventional freight network. At the destination, the last-mile delivery is done by the local postal service in the destination country.

This end-to-end process is taken care of by the freight forwarder. Online Sellers enjoy savings since they get a bulk freight discount for what is essentially parcel shipping, and only have to deal with their freight forwarder. Freight Forwarders also provide support for calculating real-time duties, taxes, and other governmental fees to present itemized final prices to customers as well as costs to Sellers before the sale is made.

In some cases, if you have an order fulfillment provider like Amazon FBA in the destination country, a freight forwarder ensures that your items reach the fulfillment provider’s warehouses.

A good example of such a service is DHL eCommerce (formerly Global Mail) which provides a solution tailored for online Sellers.

12. Selling Internationally through Full-Service Cross-Border Solutions

While domestic sales and fulfillment can be taken care of using the shipping strategies we’ve discussed so far, selling and delivering to customers in other countries is a whole other ball game.

Aside from accurately calculating shipping charges and various import fees, there are a few other things that an online Seller needs to do. To avoid surprises, your customer must understand your product’s pricing and the different tariffs included in the final landed cost. Additionally, having familiar payment options at checkout would reduce hesitancy, for example, by allowing payment via China Union Pay, WeChat, or Alipay.

Thankfully there are cross-border solutions such as Global-e’s BorderFree and International Localized Checkout that provide a comprehensive solution for selling to international customers. An end-to-end solution typically includes:

• Localization of your product content and checkout pages in locale-specific language, UI, and currency.
• Calculation of duties, taxes, and import fees for transparent final pricing to customers before the order is placed.
• Presenting and processing country-specific payment options.
• Efficient international order fulfillment using freight forwarders and other service providers.

The following checkout page is an example of an online store that uses Global-e to display the page to a Chinese customer buying from a Seller located in Australia:

Summary

Mastering shipping isn’t just about saving a few dollars per package — it’s about building a sustainable and profitable business that encourages customer loyalty while building a scalable foundation for future growth. The strategies outlined here, from negotiating better carrier rates to leveraging hybrid shipping solutions, are designed to help you take control of your logistics instead of letting them control you. In an era where customer expectations are sky-high and operational costs are constantly climbing, businesses that optimize their shipping program can carve out an undeniable edge over competitors. Whether you’re a growing e-commerce brand or an established retailer, the right approach to shipping will not only protect your margins but also ensure a seamless experience for your customers. The key is to stay adaptable, explore new opportunities, and continually refine your strategy — because in shipping, as in business, the smartest players always come out ahead.

Download The Ultimate Guide to Profitable Free Shipping

Frequently Asked Questions

What is the most cost-effective shipping method?

Generally speaking, for standard delivery service, (1 – 5 days), USPS is the cheapest option for smaller, lighter packages that are traveling short distances, while UPS and FedEx tend to be cheaper for larger packages traveling longer distances. However hybrid shipping services where consolidator carriers accumulate and inject mass quantities of packages into the USPS network for final mile delivery take much longer to deliver, but can offer substantial savings over standard delivery services.

Does offering free shipping increase sales?

Yes, offering free shipping can increase sales. Studies show that free shipping is a key factor in purchasing decisions.

What is free shipping?

Free shipping is a marketing strategy used by online stores that allow shoppers and customers not to have to pay an additional fee when placing orders for particular items. From the online shopper’s perspective, getting no additional cost added to an item purchased makes shopping much easier.

Who really pays for free shipping?

There Is No Such Thing as “Free Shipping”. It is a fact that shipping costs are being paid for, whether consumers know it or not. Customers ultimately pay for this perk, even if it is not specified in their online shopping cart. The cost is lumped in with the final price of the goods they buy.

What is a good free shipping threshold?

Knowing how much an average customer spends per transaction can provide a better idea of what a business’ minimum order value for free shipping should be. A free shipping threshold should be about 30% above the average order value.

What is the psychology of free shipping?

The psychology of free shipping shows that customers often perceive free shipping as a better deal than a discount. This perception increases the perceived value of a purchase and encourages higher spending.

How do businesses make money with free shipping?

Free shipping can help boost sales. Shoppers believe they’re getting a better deal when they don’t have to pay for shipping costs which can help increase cart sizes. Customers will buy more to get free shipping and will take their business elsewhere if they can’t.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

As ecommerce continues to grow year-over-year, shipping costs remain one of the most critical elements affecting profitability. Dimensional weight pricing, often abbreviated as dim weight, is a crucial concept that every ecommerce business must grasp to avoid overpaying for shipping. This pricing model is designed to account for the space that a package occupies in relation to its actual weight. Whether you are a small business owner or managing logistics for a large ecommerce operation, understanding how dimensional weight works can help streamline your shipping processes and save on costs. In this article, we will break down what dimensional weight is, why carriers use it, and how to manage and minimize its impact on shipping expenses.

What is Dimensional Weight?

Dimensional weight is a pricing technique used by shipping carriers to charge based on the volume of a package rather than its actual weight. In traditional weight-based shipping models, customers pay according to the physical weight of their package. However, this approach doesn’t always account for packages that are large but lightweight—think of a large box filled with foam padding or bubble wrap, but containing only a small item inside. In these cases, the carrier is still using valuable space on their truck or aircraft, and thus, dimensional weight is applied.

To calculate dimensional weight, the carrier will use a formula that considers the dimensions of the package—its length, width, and height. For most carriers, this is usually done by multiplying these three dimensions together to find the volume of the package. That number is then divided by a standard “dimensional factor,” which varies depending on the carrier.

For example, if a box measures 12 inches long, 10 inches wide, and 8 inches tall, the volume would be 960 cubic inches (12 x 10 x 8). The carrier would then divide that number by the dimensional factor (let’s say it’s 139 for domestic ground shipping with FedEx or UPS), which results in a dim weight of 6.9 pounds (rounded up to the nearest pound, so 7 pounds). If the actual weight of the package is 3 pounds, the carrier would charge for the 7-pound dimensional weight instead of the actual weight, since it takes up more space.

Why Do Carriers Use Dimensional Weight?

Carriers adopted dimensional weight pricing to more accurately reflect the costs of transporting packages. Shipping is not only about the weight of the package—it’s also about how much space it occupies in a truck or airplane. The more space a package takes up, the less room there is for other packages. For shipping carriers, this means they can carry fewer goods, which ultimately reduces their efficiency and increases costs.

In recent years, the rise of ecommerce has led to an influx of smaller, lightweight items that are packaged in oversized boxes. While these packages are light in weight, they take up considerable space in transportation vehicles. As a result, carriers needed a way to ensure they were being fairly compensated for the space they were losing in favor of these packages. Dimensional weight provides a more accurate measure of the space a package occupies, which helps carriers balance costs, maximize capacity, and avoid inefficiencies.

Additionally, with the increasing popularity of express shipping and global commerce, international shipping has become more complex. In the case of air freight, the cost of moving goods is heavily influenced by the weight-to-space ratio. Shipping carriers must account for both weight and volume when determining prices to remain competitive while covering their expenses. Dimensional weight ensures that carriers are not subsidizing the cost of lighter, bulkier packages, which is crucial for maintaining profitability in a highly competitive and resource-intensive industry.

The Importance of the DIM Factor

The “DIM factor” is a crucial element in dimensional weight pricing. This factor represents the “expected” ratio of a package’s volume (in cubic inches) to its weight. It plays a vital role in determining the dimensional weight of a package, and its value can vary depending on the carrier and the mode of transportation (ground, air, etc.). The DIM factor is a multiplier that converts the volume of the package into a weight equivalent. A lower DIM factor means that less volume per pound is “expected,” resulting in a higher dimensional weight, while a higher DIM factor leads to a lower dimensional weight for the same package.

Understanding the DIM factor is essential for ecommerce shippers because it allows them to better estimate shipping costs. As indicated above, different carriers may use different DIM factors, and knowing these differences can help make more informed decisions about which carrier to choose for a specific shipment. Additionally, some carriers may update their DIM factors periodically, so it’s important to stay informed about any changes to ensure you’re not caught off guard by unexpected cost increases.

Carriers can offer different DIM factors depending on the type of shipment. For example, express and international shipments might have a different DIM factor compared to standard ground shipping. This variation in the DIM factor means that dimensional weight can affect the total cost of shipping depending on how quickly the package needs to reach its destination and the method of transport being used.

Differences in DIM Factors Among Carriers and 3PLs

Different shipping carriers use slightly varied dimensional weight (DIM) calculation methods, primarily by adjusting the DIM factor, which influences how volume converts to weight. For example:

• FedEx, DHL, and UPS generally use a DIM factor of 139 for ground shipments within the U.S.
• USPS uses a factor of 166.

Additionally, different DIM factors may be used for air as opposed to ground shipments. This means that the same package might be billed at different rates depending on which carrier is used, making it crucial for shippers to compare options before selecting a service.

Some carriers also offer customized DIM factors for high-volume shippers or businesses that negotiate specific contracts. Additionally, certain services, such as USPS Priority Mail, do not apply dimensional weight pricing unless the package exceeds a particular size threshold (e.g., one cubic foot for domestic shipments). Understanding these variations can help ecommerce businesses strategically choose carriers and optimize packaging to minimize shipping costs.

In addition to differences in DIM factors among carriers, various 3PL services may use differing DIM factors when assessing fulfillment or inventory removal fees. Just as carriers use different DIM factors when calculating rates for different kinds of shipments, 3PLs may use different factors for domestic as opposed to international shipments, or for specific product classes. Be sure to confirm the DIM factors used by any 3PL service, including FBA, to accurately forecast shipping and fulfillment costs.

How to Minimize Dimensional Weight Costs

While dimensional weight pricing is a reality that ecommerce shippers must navigate, there are several strategies that can help minimize the associated costs. Here are some practical tips for reducing the financial impact of dimensional weight:

1. Optimize Packaging: One of the most effective ways to reduce dimensional weight charges is to carefully consider the packaging you use. Shipping products in unnecessarily large boxes is a common mistake that results in higher shipping costs. Choose packaging that fits the product as closely as possible without wasting space. Nowadays, there is cartonization software that helps you decide what package to use to minimize excess space. If you can’t, you may also want to explore packaging materials like air pillows or foam inserts that can better protect your products while minimizing wasted space.
2. Use Custom Packaging: If you consistently ship products that have irregular shapes or sizes, investing in custom packaging could be a smart move. Custom packaging allows you to reduce empty space within the box, which will help lower the dimensional weight.
3. Consolidate Shipments: For businesses that ship multiple items, consolidating shipments into fewer packages can help lower dimensional weight charges. Instead of sending each item individually, combine them into a larger, more efficient package. This strategy helps spread out the dimensional weight across multiple products, reducing the overall cost of shipping.
4. Take Advantage of Volumetric Pricing: Some carriers offer volume discounts or reduced dimensional weight charges for larger or heavier shipments. If you regularly ship large volumes, consider negotiating with carriers for better rates based on your shipment sizes. Shipping in bulk or negotiating long-term contracts with carriers can also provide discounts on dimensional weight charges.
5. Compare Carrier Rates: As we’ve discussed, the DIM factor used can vary between carriers or between services for a given carrier. The exact same package can be billed as 18 pounds in one carrier account and 35 pounds in another. Therefore, it’s important to compare rates from different carriers to see who offers the most cost-effective pricing based on your packages’ size and weight.
6. Monitor Your Shipments: Consistently tracking your shipping costs and reviewing your packaging practices can lead to ongoing savings. If you notice that certain shipments are disproportionately affected by dimensional weight pricing, reassess your packaging and look for ways to reduce the dimensions of those shipments.
7. Choose the Right Service: When selecting a shipping method, choose the one that best fits the size and weight of your package. Ground shipping, for example, often has different dimensional weight rules than air freight, and express services can come with higher fees due to the faster delivery time. Take time to analyze your options before committing to a particular service.

Conclusion

Dimensional weight pricing is a necessary part of modern shipping, particularly for ecommerce businesses that regularly ship lightweight but bulky packages. Understanding dimensional weight, the importance of the DIM factor, and how to minimize costs can significantly improve your bottom line. By optimizing packaging, choosing the right carrier, and staying informed about changes in pricing, you can effectively navigate dimensional weight charges and keep your shipping expenses in check. In the competitive world of ecommerce, small adjustments to your shipping strategy can lead to big savings, ultimately helping you offer more competitive pricing and enhancing your customers’ satisfaction.

Fortunately, Cahoot is here to help. Our state-of-the-art shipping software is able to integrate across all major sales channels and compares rates across carriers to automatically select the most cost-effective options to meet your delivery requirements. Our nationwide network of warehouses ensures that, whatever your product and wherever your customer base, we are able to accommodate your specific fulfillment needs. Our proven solutions can help small businesses scale into established players, provide needed savings to sellers seeking to remain competitive, or find the best shipping solutions for bulky or hard-to-ship products. Whatever blockers are keeping your business from reaching its potential, Cahoot is here to help.

Frequently Asked Questions

Why is dimensional weight used by carriers?

Dimensional weight is used to account for the space taken up by a package as well as its weight. This kind of pricing has long been used for services like air freight, where space is at a premium and must be accounted for. With the explosion of ecommerce in the late 2000s and early 2010s, the major carriers began to apply dimensional weight pricing to ground shipments around 2015, to ensure that limited space in freight and delivery trucks is used efficiently.

Why do DIM factors differ between carriers or services?

Different carriers use varying DIM factors to align their pricing models with their specific operational costs, transportation methods, and target markets. The DIM factor represents the volume that equates to one pound of billable weight, and adjusting the factor allows carriers to balance space utilization and profitability. A lower DIM factor results in a higher dimensional weight, meaning shippers are charged more for bulky but lightweight packages. Conversely, a higher DIM factor allows for more generous volume-to-weight conversions, reducing costs for shippers.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.

In today’s aggressive ecommerce landscape, small businesses face the challenge of meeting growing customer demands while maintaining efficiency and cost-effectiveness. The right shipping software can change this rough wilderness into a smooth and straight road to success.

Understanding Small Business Shipping Needs

Before diving into specifics, it is crucial to evaluate the unique requirements and pain points for small businesses; starting out, many small businesses solve problems with manual work; only as things start to scale does it make sense to automate. Here are the key areas where shipping software can save small businesses time and money:

• Shipping Volume
  Small businesses may get away with inefficient shipping processes at the start, but processing hundreds of orders a day requires different tools than handling just a few orders. As sales volume increases, inefficiencies in manual shipping processes slow everything down, increasing customer dissatisfaction. Conversely, Time and Cost savings compound with higher shipping volume automation, becoming more and more necessary as shipping volume increases.
• International Shipping
  Domestic-only shipping is much simpler compared to international shipping. International shipping requires customs documentation that needs to be often manually configured for products and appear properly on packaging labels. Some shipping software can automate this, while others require manual creation for each international order’s customs forms.
• Non-Standard Product Characteristics
  Products with special handling requirements (hazmat) or bespoke details benefit from shipping solutions that can handle complex packaging, mailers, and dunnage (packaging filler). If products vary widely in size or weight, then packaging inventory tracking and correct cartonization (packaging assignment) can save money on shipping.
• Additionally, shipping software that integrates and automates the printing and processing of shipping labels and packing slips in bulk, even for non-standard products, can significantly impact the overall cost and efficiency of shipping operations.
• Ease of Setup and Use
  Shipping software needs to be simple and easy to configure and use. Ease of use ensures the team can leverage the software’s features and prevents orders lingering in limbo between systems.
• Technical Support Access
  A critical but often overlooked factor in choosing shipping software is the level of support offered by the provider. Small businesses need solutions quickly and if the shipping software has an issue and technical support is slow to respond then operations can grind to a halt. Availability via multiple communication channels such as email, chat, SMS, and phone facilitates prompt resolution of issues.
• Self Service Support Options
  Access to tutorials, webinars, and FAQs help the team maximize the software’s capabilities and solve problems immediately instead of waiting hours or days for Support tickets to resolve.
• Affordability
  Small businesses often have tight budgets and have to maximize value. Good shipping software saves a small business money on shipping costs alone even before factoring in time savings and other multipliers.
• Scalability and Integration
  The shipping software should integrate smoothly with existing ecommerce platforms, accounting systems, and inventory management tools to minimize manual data entry and errors. The chosen solution must also scale with small business needs as the business grows; higher order volumes, additional sales channels, and increasing complexity can mean yesterday’s solutions no longer solve today’s problems. It is also important to choose shipping software that can handle multiple sales channels; ensuring compliance with specific labeling requirements for each marketplace.

Understanding What Shipping Software Does for Small Businesses

Fundamentally, shipping software integrates with ecommerce platforms to streamline shipping for orders. It doesn’t matter how great order management software can be if orders can’t ship! Shipping software is an integral platform for managing every aspect of ecommerce order fulfillment.

Here are some key features to look for in shipping software for ecommerce businesses:

1. Integration with Ecommerce Platforms: Look for shipping software that integrates seamlessly with ecommerce platforms. Integration ensures smooth data flow and reduces manual data entry; the whole point of using shipping software is to help automate shipping; manual data entry means the shipping software is a side-grade, at best.
2. Automated Order Import and Export: Ensure the shipping software can automatically import orders from the ecommerce platform, eliminating the need for manual data entry and reducing the risk of errors. Once orders are processed, shipping labels and tracking data need to pass back to the ecommerce platform automatically.
3. Multi-Carrier Support: Choose shipping software that supports multiple carriers, comparing rates and services across different providers. This flexibility helps find the most cost-effective and reliable shipping options.
4. Real-Time Tracking: Provide customers with real-time tracking updates and automated shipping notifications to enhance their experience. This transparency builds trust and keeps customers informed about their orders.
5. Discounted Shipping Rates: Take advantage of discounted shipping rates and services offered by shipping software providers to reduce shipping costs. These discounts can significantly impact profitability and competitiveness.

For small businesses, the right shipping software is a gateway to professionalizing logistics without the need for a large, in-house team to handle orders every day.

Choosing the right solution can transform complex shipping operations into seamless workflows, empowering small businesses to compete with larger players. Choosing the wrong solution can complicate order processing and lead to mistakes and frustrated customers. This guide explores the essential aspects of selecting the shipping software that best fits small business needs.

Benefits of Using Shipping Software

Using shipping software can bring numerous benefits to a small business. Here are some of the most significant advantages:

1. Increased Efficiency: Shipping software automates many necessary tasks, such as printing shipping labels, tracking packages, and updating shipping data. This saves time and reduces the risk of human error, allowing a small team to focus on other critical aspects of the business.
2. Reduced Shipping Costs: By comparing shipping rates and services across multiple carriers, shipping software ensures the best deal for each order. This can significantly reduce shipping costs and improve the bottom line.
3. Improved Customer Experience: With shipping software, small businesses can provide customers with real-time tracking updates, accurate delivery estimates, and automated shipping notifications. This transparency enhances customer satisfaction and loyalty while helping a small team stay on top of all customer-facing activity.
4. Enhanced Data Analysis: Shipping software provides valuable insights into shipping data, helping identify trends, optimize shipping process, and make data-driven decisions. This can lead to more efficient operations and better strategic planning.
5. Scalability: As a small business grows, the right shipping software can handle increased shipping volumes and complexity with ease. This scalability ensures that shipping operations remain efficient and effective, even as business expands.

Shipping Software Features Breakdown

When evaluating shipping software consider both the immediate and long-term needs for the business. There is a diverse range of shipping software options available to meet various business needs, emphasizing the importance of understanding specific shipping requirements.

• Multi-Carrier Integration: A platform that connects with multiple carriers enables comparison between rates to select the most cost-effective option for each shipment. The more range in the product catalog size and weights, the more important managing multiple carriers becomes. If all products are the same size and weight (playing card games, different colored shirts, etc.) then the majority of shipments will use a single carrier service.
• Rate Comparison Tools: Real-time rate comparison between different carriers and services help optimize shipping costs while maintaining service quality by using the best method that gets to the customer on time. However, rate comparison is often manual. Comparatively, Cahoot provides automatic 0-click rate shopping and label generation. If the business focuses on international or specific domestic areas, relying solely on major carriers may not be sufficient and not all shipping software supports niche providers.
• Automated Label Creation: Streamlining the label creation process reduces manual work, minimizes errors, and accelerates fulfillment. Shipping volume is a force multiplier for label automation, as saving 10 seconds per label can result in hours of time savings per day. Cahoot is 21x faster than ShipStation.
• Tracking and Notifications: Providing customers with real-time shipment updates improves transparency and satisfaction. Managing customer expectations and clearly conveying the latest information means customers are much more understanding of carrier delays or other issues.
• Packaging Management and Assignment: Running out of boxes means higher costs as the wrong box is used, increasing shipping costs. Automatically assigning the correct package for each item is also important for orders requiring discreet packaging.
• Return Management: Simplified returns processes enhance customer loyalty and save time for the team. Returns are an unavoidable part of online retail and return rates are steadily rising.

Future-Proofing the Shipping Solution is Vital for Small Businesses

As business grows, shipping needs will evolve. Choosing scalable software that accommodates increased shipping volumes, additional sales channels, and complex logistics is essential. Look for solutions that can meet not just current needs but also future growth.

• Handle seasonal surges without compromising performance.
• Support expansion into new markets or products.
• Handle multiple inventory and orders across multiple warehouse locations.
• Integrate with additional tools and advanced capabilities, such as advanced analytics or CRM systems.

Future-proofing software choice ensures it remains a valuable asset as business scales instead of becoming an albatross.

Advanced Capabilities for Growing Businesses

As business scales, advanced features can add significant value.

• Artificial Intelligence (AI): AI-powered tools optimize warehouse and product organization, predict delivery delays, and offer process improvement insights.
• Branding: Custom shipping labels, tracking pages, packing slips, and return portals are all points of customer interaction to reiterate and reinforce brand value.
• Customization Options: Businesses with unique needs may require solutions with robust customization capabilities to avoid frequent platform changes.
• Analytics and Reporting: Detailed reports on shipping costs, delivery performance, and customer feedback help refine strategies and improve margins. These reports enable businesses to optimize carrier choices and leverage discounted rates to further reduce shipping costs.
• Omnichannel Integration: For businesses selling across multiple platforms, seamless integration with ecommerce and point-of-sale (POS) systems ensures consistency and prevents errors and duplication of work.

Shipping Software Security and Compliance

Shipping software security and compliance are critical to protecting business and customer data. Here are some key considerations:

1. Data Encryption: Ensure the shipping software uses robust data encryption methods to protect sensitive information, such as customer addresses and payment details. This encryption safeguards data from unauthorized access.
2. Compliance with Regulations: Verify that the shipping software complies with relevant regulations, such as GDPR, HIPAA, and PCI-DSS. Compliance ensures that the business adheres to legal standards and protects customer privacy, which in turn protects from liability and customer loss of trust.
3. Secure Payment Processing: Choose shipping software that integrates with secure payment gateways, such as PayPal or Stripe. Secure payment processing protects customers’ financial information and builds trust.
4. Access Controls: Implement access controls to restrict user access to sensitive data and shipping software features. This ensures that only authorized personnel can access critical information.
5. Regular Security Updates: Ensure the shipping software provider regularly updates and patches their software to prevent security vulnerabilities. Regular updates keep systems secure and protect against constantly emerging threats.

Shipping Software Integration with Other Tools

Shipping software integration with other tools and systems is essential to streamline shipping processes and improve efficiency. Here are some key integrations to consider either as an established part of the shipping software or an integration with 3rd party systems:

1. Ecommerce Platforms: Integrated shipping software with ecommerce platform ensures automatic order import and fulfillment. This integration reduces manual work and ensures accurate order processing.
2. Order Management Systems: Integrated shipping software with order management systems streamline order processing and tracking. This integration helps manage orders more efficiently and reduces errors.
3. Inventory Management Systems: Integrated shipping software with inventory management systems ensure accurate inventory levels and prevent overselling. This integration helps maintain stock accuracy and improves customer satisfaction.
4. Accounting and Bookkeeping Software: Integrated shipping software with accounting and bookkeeping software automates shipping cost tracking and invoicing. This integration simplifies financial management and ensures accurate record-keeping.
5. Customer Relationship Management (CRM) Software: Integrated shipping software with CRM software provides customers with real-time shipping updates and enhances their experience. This integration helps build stronger customer relationships and improves customer communication.

Cahoot is the Best Shipping Solution for Small Businesses

Cahoot’s next generation shipping software comes with end-to-end intelligent automation. When you receive an order, Cahoot intelligently compares multiple warehouse locations, inventory levels, carriers and shipping services to automatically pick the cheapest label that will meet the delivery SLA committed to the customer, up to 21x faster than our competitors.

See why people switch to Cahoot:

• Cahoot vs Deliverr
• Cahoot vs ShipBob
• Cahoot vs ShipMonk
• Cahoot vs ShipStation

Conclusion

Selecting the best shipping software requires a balance of cost, functionality, and scalability. Begin with a clear understanding of operational needs; identify pain points, non-negotiable necessities, and expected growth trajectory. Evaluate options based on the shipping software’s features, integrations, and long-term value. Trial periods, when available, provide an excellent opportunity to test compatibility and performance without fully committing.

By investing in the right solution, small businesses can streamline operations, reduce costs, and deliver an exceptional customer experience. In the competitive ecommerce market, the right shipping software isn’t just a tool. It’s a strategic advantage.

Frequently Asked Questions

1. How does shipping software work?
   Shipping software connects with order management systems; orders come from the order management system into the shipping software. Shipping labels are created and printed in the shipping software, and tracking information is sent back to the order management system.
2. What is the best shipping method for small businesses?
   “Best” for small businesses is usually defined as cheapest. This mainly depends on the size and weight of products. Cahoot can help find the best shipping methods for every business.
3. Is free shipping software worth it for small businesses?
   Often, no. While free shipping software may initially seem appealing, it often comes with limitations such as restricted features, higher rates for printing shipping labels, or per-transaction fees. Paid solutions, on the other hand, typically offer robust functionality, better support, and cost-saving tools like rate shopping and automation which end up saving small businesses money.

Written By:

Indy Pereira

Indy Pereira helps ecommerce brands optimize their shipping and fulfillment with Cahoot’s technology. With a background in both sales and people operations, she bridges customer needs with strategic solutions that drive growth. Indy works closely with merchants every day and brings real-world insight into what makes logistics efficient and scalable.