Why is it so Hard to Manage Small Package Shipping Costs

Managing small package shipping costs can be a real headache for small and medium-sized businesses. As customer expectations for fast, cheap delivery keep rising, it’s tough to keep up without letting costs spiral out of control. Here are some of the main reasons shipping small packages can get so expensive.

1. Carriers Constantly Raising Rates

Major carriers like UPS, FedEx, and USPS frequently adjust their rates, often raising prices annually and adding extra fees for things like fuel costs, holiday surcharges, or peak season demands. These unpredictable increases make it tough to set a reliable shipping budget. Even when the base rate seems reasonable, unexpected fees can quickly add up, cutting into profit margins.

2. Dimensional Weight Pricing

Shipping costs aren’t just based on the weight of a package anymore; they also factor in the size or “DIM weight.” This can make shipping bulky but lightweight items more expensive. For example, something like a pillow might cost more to ship because of its size, even though it doesn’t weigh much.

3. Last-Mile Delivery Challenges

The “last mile” of delivery—getting a package from the local distribution center to the customer’s door—is often the most expensive part. This stage involves multiple stops and more handling, driving up costs. Shipping to rural or remote areas can be particularly pricey due to the extra distance and fewer delivery points.

4. Fuel and Seasonal Surcharges

Carriers often apply fuel surcharges based on gas prices and charge extra during busy seasons like the holidays. When order volumes go up, so do these charges, making it difficult to predict shipping expenses throughout the year.

5. Small Businesses Have Less Leverage

Big companies that ship in large volumes can negotiate better deals with carriers because they bring more business. Small and medium-sized businesses, however, often don’t have that same bargaining power and end up paying higher rates, which puts them at a disadvantage.

6. High Customer Expectations

Thanks to large retailers like Amazon offering two-day or even same-day delivery, customers now expect fast and often free shipping. Small businesses feel the need to keep up, but providing quick delivery can get expensive, eating into their bottom line.

7. Packaging and Labeling Inefficiencies

Inefficient packaging, like using boxes that are too big or failing to label packages correctly, can lead to higher shipping costs. Carriers may charge extra for packages that don’t meet their guidelines or that require additional handling.

8. Challenges with International Shipping

International shipping adds even more costs, such as customs duties, taxes, and handling fees, which can quickly add up. On top of that, changes in trade agreements or international shipping rules can make it difficult to keep track of costs, leading to unpredictable expenses.

Bottom Line

Managing small package shipping costs isn’t easy, but Schooley Mitchell can help get cost under control. From fluctuating carrier rates to customer expectations for fast delivery, shipping expenses can add up quickly, we carefully plan and use smart strategies to keep you competitive while keeping costs under control.