Commentary: 7 ways small business can cut parcel-shipping costs

Small to midsize businesses (SMBs) overspend on parcel shipping by around 13% every year. They’re spending on services they don’t need and paying, often unnecessarily, for fees and surcharges. Small businesses might be unaware of new products and services, and they may not realize they can access discounts through the use of technology. 

Carrier rate changes have added further pressure to budgets. FedEx Corp. (NYSE:FDX) and UPS Inc. (NYSE:UPS) increased their tariff rates by an average of 4.9%. On Jan. 24, USPS will raise its shipping and mailing rates by an average of 3.5%. However, these general rate increases are not applicable to regular users, and rates and surcharges vary all over the lot. For example, UPS has raised its delivery area surcharges by 9% to more remote, less populated areas. For the first time, USPS will slap a $100 fee on parcels that exceed a particular size. 

Business-to-consumer (B2C) traffic driven by e-commerce clearly accounts for much of the volume gains. However, there is more to the story. Pitney Bowes spoke over the summer to 450 small businesses in the U.S., the U.K. and China. We found that shipping by employees working from home accounted for a decent chunk of the increase. 

Carrier rates are rising, and surcharges are proliferating. However, SMBs have ways to cut costs from their shipping spend while delivering a competitive service to their customers. Here are seven:

  1. Know the difference between First-Class Mail services and Priority Mail. 

First-Class Mail services are generally delivered in four days or less. They include postcards, letters and lightweight parcels weighing up to 3.5 ounces (First-Class Mail), as well as large envelopes and small packages weighing up to 15.9 ounces. USPS Tracking is included with their package services, which could help avoid having to resend items that are missing or undelivered and eliminate fraudulent claims. 

Priority Mail is the ticket for shipments weighing more than 15.9 ounces and you’re using USPS as a carrier. For First-Class Package Services, pricing begins at $3.01 and for Priority Mail services, pricing begins at $7.17. Make sure that items are weighed precisely rather than relying on an estimate as the latter approach may result in unnecessary overpayments. 

  1. Pack wisely. 

An SMB consistently sending the same items should keep consistent — and keep it light. Use envelopes instead of boxes, consider polybags and don’t use cartons too big for the items. Bulky packaging is one of the biggest factors in unnecessary overpayments.

  1. Negotiate discounts with carriers.

USPS and UPS offer special rates for small businesses, and FedEx is also responsive to pricing requests from smaller shippers. Negotiate discounts on surcharges as well as base rates. Working with third-party parcel experts enables SMBs to choose from prenegotiated rates across a variety of carriers. 

4. Use multiple carriers. 

Small businesses are loyal to their carriers. Of 450 SMBs in the U.S., the U.K. and China polled over the summer, 52% of U.S. participants said they rely on USPS all or most of the time. About 30% use UPS, and 21% select FedEx all or most of the time. There are cost benefits to be gained from shopping around. Shipping platforms make this easier by aggregating all of the providers for you, bringing them all in one place. This is especially true when it comes to accessorial charges.     

5. Explore different services. 

Parcel shipping can be a complex. A simple way to save money is to rethink what service you really need. For example, does a next-day delivery need to arrive within a specific time window or would anytime that day work? Could Same-Day Delivery cost the same as — or even less than — overnight deliveries with some carriers? 

6. Gain visibility into remote workers’ shipping.

It can be challenging to keep track of shipping spend during the best of times, let alone when employees are working remotely. One study of U.S. knowledge workers conducted last summer found that 72% preferred a hybrid remote/workplace way of working, so the idea of workers returning en masse to offices is unlikely to happen anytime soon. Knowing what employees are mailing or shipping, and which services they’re choosing, will equip SMBs with the insight to influence decision-making and budget allocation. Add to this the ability to track shipments and manage expenses online, all in one place, and managing sending across multiple locations becomes easier. 

7. Access postage in the cloud.

The cloud has been a game changer for small businesses. It facilitates access to subscription-based, scalable enterprise-level applications that can have a real impact on costs and efficiencies. Cloud-based shipping platforms bring together different services from multiple carriers in a single, easy-to-use interface accessible via mobile or desktop. These platforms will  provide the most cost-effective services that meet your requirements. Digitization ensures that the latest rates and accessorial charges are available so SMBs won’t risk surcharges or fines for underpayment. 

Cloud-based sending technologies also enable SMBs to benefit from Commercial Base pricing, which is much cheaper than Post Office retail pricing. Commercial Base is a special discounted rate that USPS offers businesses that buy and print their own shipping labels from an online platform. Businesses also benefit from advanced tracking and free insurance. 

With parcel demand and prices continuing to escalate, it’s important that small businesses take the necessary steps to optimize their shipping budgets, access the discounts they’re entitled to and understand the services that work best for them. Taking the time to do this now will generate savings in 2021 and beyond. 

(Jason Dies is an executive vice president at Pitney Bowes Inc. (NYSE:PBI) and president, Pitney Bowes Sending Technology Solutions, which handles metered mail and financial services.Dies oversees Pitney Bowes’ SendPro platform, which helps users choose the best parcel carrier and shipping method to meet their parcel and envelope delivery needs).