Guide

Small business shipping: Save time, cut costs and delight customers

Small business shipping affects costs, satisfaction, and growth. Learn how to reduce expenses, and streamline delivery.

Published Thursday 25 September 2025

Key takeaways

Implement a dual shipping strategy by offering free standard shipping (3-7 business days) while charging customers for express delivery options to balance customer expectations with profit margins.
Build shipping costs into your product pricing by integrating 50% of shipping expenses into item prices and covering the remaining 50% as a marketing investment to offer competitive "free" shipping.
Establish minimum order thresholds for free shipping (typically $50-100) to increase average order values while using paid express options for urgent deliveries.
Prevent costly returns by providing accurate product descriptions, detailed sizing guides, and implementing 100% quality control inspections before shipping, as returns can cost 2-3 times the original shipping fee.

Shipping options for small businesses

When you're starting out, the world of shipping can seem complex. But it boils down to a few key choices. Most carriers offer a range of services to fit different needs and budgets.

Standard shipping: This is your everyday, cost-effective option. It's reliable for non-urgent deliveries.
Express shipping: For customers who need their items faster, express services deliver within a shorter timeframe, usually for a higher price.
Same-day or next-day delivery: A premium option that's great for local customers or high-value goods. It offers maximum convenience but comes at a higher cost.

You can choose to work with a single national carrier or use a mix of providers to get the best rate for each delivery.

Choosing the right courier service

Finding the best courier for your business depends on what you value most. Not all services are created equal, so it's worth comparing them based on a few key factors.

Cost: Are their rates competitive for the sizes and weights you typically send?
Speed and reliability: Do they have a good track record for delivering on time?
Tracking: Can you and your customers easily track parcels from dispatch to delivery?
Service options: Do they offer the mix of express and standard services you need?
Customer support: Is it easy to get help if a delivery goes wrong?

Speaking to other business owners or checking online reviews can give you a good sense of a courier's performance.

Understanding shipping rates and costs

Shipping costs aren't just about the price tag on the service. They're determined by a combination of factors that are good to understand.

Weight and dimensions: Heavier and larger parcels generally cost more to send. Carriers often use volumetric weight (a calculation of a package's size) to set prices.
Destination: The further a parcel has to travel, the more it will cost. Shipping to a remote area can also add a surcharge.
Speed: Faster delivery services come at a premium.

You can choose to charge your customers the exact shipping cost (variable rate) or offer a single price for all deliveries (flat rate). Knowing what drives your costs helps you set a pricing strategy that works for your business.

How to offer free shipping

Free shipping strategies let you offer competitive delivery without destroying profit margins. Here's how to make it work:

Pricing integration approach:

Build 50% of shipping costs into your product prices
Cover the remaining 50% as a marketing expense
Use shipping brokerages to reduce overall costs by 20-40%

Cost-sharing model:

Offer free shipping on orders above a minimum threshold
Provide paid express options for urgent deliveries
Factor shipping into your overall pricing strategy, not as an add-on cost

Ecommerce consultant, Shaheman Farid of Boobooks Accountants recommends his clients factor it into their pricing model.

Should small business shipping be free or fast?

Shipping speed options let customers choose between cost and convenience while protecting your margins.

Standard vs express strategy:

Free standard shipping: 3-7 business days for regular orders
Paid express delivery: 1-2 business days for urgent needs
Threshold-based free shipping: Free delivery on orders over $50-100

When to charge for shipping:

Low-value items: Under $25-30, customers expect shipping charges
Rush orders: Express delivery should always be customer-paid
Specialty items: Heavy or fragile products may require shipping fees

Another online business consultant, Marc McKeown of FortBrave, suggests you can charge shipping on low-cost products. "People do not expect free shipping on small purchases."

Setting up your shipping process

A smooth shipping process saves you time and keeps customers happy. Creating a simple, repeatable workflow is key. Here's a basic process to get you started.

Package your products: Choose sturdy boxes or mailers that protect your items without adding unnecessary weight.
Weigh and measure: Use a shipping scale and measuring tape to get accurate details for every package. This is crucial for calculating correct postage.
Buy and print postage: Use a shipping platform or your courier's website to buy and print shipping labels. This is often cheaper and faster than going to the post office.
Schedule a pickup or drop-off: Many couriers offer a pickup service, or you can find a convenient drop-off point.

Another way to think about cost

Shipping as a marketing investment can help you attract new customers, not just cover delivery costs.

Marketing benefits of free shipping:

Increased conversion rates: Up to 60% of customers abandon carts due to shipping costs
Higher average order values: Free shipping thresholds encourage larger purchases
Customer retention: Free delivery creates positive brand associations
Cart recovery: Offer free shipping to customers who abandon purchases

Measurable outcomes:

Traffic spikes during free shipping promotions
Improved customer lifetime value
Reduced cart abandonment rates

What about shipping returns?

Shipping returns management prevents costly reverse logistics that can double your shipping expenses per sale.

Return prevention strategies:

Accurate descriptions: Use specific measurements, materials, and detailed photos
Quality control: Inspect 100% of items before shipping to avoid defective returns
Clear policies: Set expectations for return timeframes and conditions
Size guides: Provide detailed sizing charts for clothing and dimensional items

Cost impact:

Returns can cost 2-3x the original shipping fee
Quality control reduces returns by up to 70%
Better descriptions cut sizing-related returns by 40%

How small businesses can win at shipping

Small business shipping advantages let you compete through personalisation rather than just price and speed.

Unique competitive strengths:

Personal touches: Handwritten notes and custom packaging create memorable experiences
Brand storytelling: Use packaging to communicate your business story and values
Flexible service: Accommodate special requests that large retailers can't handle
Local connections: Build relationships with customers in your area

Differentiation tactics:

Custom packaging that reflects your brand personality
Thank you notes or small free samples with orders
Flexible delivery options like local pickup or specific time windows
Direct communication about order status and delivery updates

Shipping tips for small business

Decide which purchases will come with free shipping
Offer customer-paid express delivery as well
Use a brokerage to get the best possible shipping rates
Put small extra touches into your packaging
Have clear product descriptions on your website to cut down on returns
Also quality check shipments before they go out
Ensure packaging can protect products against damages in transit

Managing shipping with the right business tools

As your business grows, managing shipping manually can become a real time-drain. This is where technology can help. Shipping management software can connect to your online store to automate tasks like creating labels and sending tracking updates to customers.

When you connect these tools to your accounting software, you get a clear view of your shipping costs. Xero integrates with a wide range of inventory and shipping apps. This helps you track expenses, manage stock levels and see how shipping costs affect your profitability, all in one place.

Try Xero for free today.

FAQs on small business shipping

Here are answers to a few common questions small businesses have about shipping.

What is the best shipping method for small businesses?

The 'best' method depends on your priorities. If cost is most important, standard ground shipping is usually best. If speed is key, an express service is the way to go. Many businesses offer both to give customers a choice.

What is the cheapest way to ship in Australia?

For small, lightweight items, national postal services are often the most affordable. For larger parcels, comparing rates between different couriers or using a shipping brokerage can help you find the cheapest option for each delivery.

What is a shipping policy for a small business?

A shipping policy clearly explains your shipping procedures to customers. It should include your shipping options (like standard or express), delivery timeframes, costs, and information on how you handle returns. Having a clear policy builds trust and manages customer expectations.

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

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