How to Make Free Shipping Profitable, Part 9

In the past four months, we’ve covered nearly 50 unique strategies for making free shipping profitable, from pricing mechanisms and outsourcing to managing returns. In part nine of this series, we’ll focus on tweaks you can make in your operations to optimize your costs further. (Here are parts one, two, three, four, five, six, seven, and eight of this series.)

1. Downsize your packaging (when it’s safe).

Smaller packaging means lower shipping costs. Shipping costs are dependent on the size and weight of the package. Merchants should look to cut down on both while choosing the optimal packaging. However, you should ensure enough padding and protection to prevent damages.

Packing materials cost way less than their impact on shipping costs. That’s why it’s an often overlooked part of cost optimization. Many merchants operate on razor-thin margins but high volumes. Therefore, overpaying for packages can cost a lot for high-volume merchants. In the example below, 15 cents savings per package can bank you $1,800 a year (if you ship a thousand packages per month).

Credit: Cahoot Ecommerce Order Fulfillment Network

Switching from cardboard boxes to bubble mailers can reduce package size and weight. For example, a poly bubble mailer of size 7.5” x 12” weighs just 0.5 ounces compared to 3.6 ounces for a small 6” x 4” x 4” box. This reduction can help you meet the one-pound weight limit restrictions for the USPS First Class Package.

Be mindful of only shipping small and durable items using bubble mailers, like cables, lapel pins or pizza cutters. For apparel, some brands like Abercrombie & Fitch use unpadded poly mailers that cost and weigh even less than its bubble-padded counterparts.

Pros:

• Reduce shipping costs.
• Cut down on packaging costs.
• Lighter packaging materials can help you with weight limit compliance (e.g., USPS First Class).

Cons:

• Continually assessing and optimizing packages adds complexity to your operations.
• Switching to a smaller package can lead to damage if not done correctly.
• Swapping to bubble mailers is simply not an option for some SKUs (e.g., larger items or things that can break in transit).

2. Use carrier-provided free packaging supplies.

Another source of cost cutting is using carrier-supplied boxes or packaging. Most small parcel carriers provide free packaging for specific classes of mail. If you're shipping within that service, buying a separate box and affixing the label on to it may be more costly than just going with the carrier boxes. Here are some of the carriers that offer free packaging:

• USPS: Free boxes and envelopes when shipping using Priority Mail and Priority Mail Express
• UPS: Free packaging when using UPS Express
• FedEx: Free packaging when using FedEx Express. May offer regular boxes and envelopes for free, but requires an account.
• DHL: Free boxes, tubes, and envelopes, but requires a carrier account

Using carrier packaging may, however, not be a fit for all businesses. Some direct-to-consumer (D-to-C) brands, like Allbirds, place great emphasis on the unboxing experience. Allbirds' shoeboxes are made using recycled cardboard and serve as a shoebox, shopping bag, and mailer all in one. Other businesses that focus on unboxing are subscription services, which also place great emphasis on custom designed and branded boxes.

Pros:

• Eliminates packaging material costs when shipping.
• Some carriers will even deliver these packaging supplies to your location.
• These boxes are compliant with carrier size restrictions.

Cons:

• Some carriers only provide free packaging for their most expensive services. Free boxes for other services would require carrier accounts.
• Merchants have to choose between superior unboxing experiences and saving costs.
• Not suitable for merchants that are looking for greener packaging.

3. Reduce carbon emissions with reusable packaging.

As consumers become more environmentally conscious, a “green” movement is brewing. More people are using reusable bags for grocery shopping, bringing their reusable cups to coffee shops, and composting at home. This movement towards sustainability is also happening in e-commerce, from Loop’s reusable containers to RePack’s reusable mailers.

Credit: RePack

RePack, founded in Finland, produces plastic mailers that can be used up to 20 times before being recycled. The mailers are well-suited for shipping soft goods, like apparel and blankets. It requires customers to mail back the packaging for cleaning and reuse. RePack is not a cost-saving option because it adds a couple of extra dollars per transaction. However, many brands leverage RePack as a loyalty booster; they pass RePack’s fees onto their customers and offer a 10 percent discount on their next purchase. This option provides a choice for customers who care about the environment to opt in to this sustainability program, while RePack remains cost-neutral to the merchant.

Another solution that has been adopted by brands in the U.S. is Returnity, which creates custom reusable packaging for product returns. For example, thredUP uses Returnity’s reusable and 100 percent recyclable shipping bags to mail items to customers.

Pros:

• Reduce the cost of producing and buying single-use packaging by switching to reusable options.
• Enhance your image as an environmentally friendly brand.
• Help reduce overfilled recycling bins and landfills.

Cons:

• Reusable packaging is more expensive to make.
• There's a risk of customers not returning the packaging.
• Customer service hassles associated with returns of empty packaging.

4. Reuse packaging materials from inbound shipments.

There are two significant benefits of reusing supplies from inbound shipments: one is reducing waste and, two, is cutting the supplies you need to buy. Packaging supplies like boxes, void fill or padding may look trivial, but they still can pile up in costs because they apply to every parcel shipped. Shipping with a reused box is tricky because you have to remove/blot out all markings and labels before using it. And using a box with hazmat markings when not applicable may result in delays or package returns.

If you ship fragile or delicate items that require special packaging, chances are some materials from your inbound shipments can be reused. Reusing fillers like bubble wrap, peanuts, paper, or crinkled paper can reduce your spending on new supplies while reducing environmental waste.

Pros:

• Save money on packing materials.
• Reduce overall waste from the business.
• Merchants don’t need to store large amounts of packing supplies.

Cons:

• The availability of reusable materials you can extract may vary between suppliers.
• Old or damaged packing materials may create a poor unboxing experience or even lead to returns.
• Reusable packaging materials may require some processing before usage (e.g., markings on the old box need to be covered, cutting to smaller pieces, dusting, remove damaged parts).

5. Automate packaging decisions using innovation software.

At first, packaging seems like a simple decision of “if it doesn’t fit, try a different box.” However, there are many things to consider, like dimensions, shipping costs, rotations, drop tests, multi-item orders, and more. The packaging decision becomes tricky when you have a diverse set of SKUs with varying sizes. Picking and packing from a catalog of 10,000 SKUs would be much more complicated than a catalog of 100 products. The process is complicated further when there are multiple items in a single package, creating the Bin Packing Problem.

Software companies like Cahoot, Box On Demand, and ShipHawk use technology to help merchants pack orders in the right box. Cahoot Multi-Carrier Shipping Software, for example, uses intelligent machine learning algorithms to identify the optimal packaging for each order, including multiquantity and multiline. These services minimize the guesswork from warehouse staff, so they can always make the best decision when packing orders.

Pros:

• Save money through smaller boxes, less void fill, and DIM savings.
• Minimize human errors from poor packaging selection.
• Improve warehouse staff productivity, with less time spent figuring out which box to use.

Cons:

• Requires maintaining supplies inventory, just like the products for sale.
• Requires integration with your order and inventory management system so it won’t disrupt your existing fulfillment workflow.
• Machine learning technology may require time to achieve high levels of confidence to be trusted unsupervised.

Manish Chowdhary is the founder and CEO of Cahoot, a peer-to-peer order fulfillment network where merchants collaborate to increase their sales and margins by offering profitable one-day and two-day free shipping to customers nationwide without spending a penny more than the economical ground shipping.