Economy shipping explained: Shipping options for your business
Vaishali Ravi
·January 3, 2025
For ecommerce businesses, shipping costs these days can sting.
COVID-era supply chain disruptions, paired with climate and geopolitical disruptions to international shipping routes, have led to astronomical increases in the cost of international shipping since 2020: In fact, global shipping costs increased by 572 percent over 19 months during the pandemic. After easing somewhat, they jumped by 250 percent during the first seven months of 2024, due to disruptions to the Suez and Panama canals.
Domestic shipping rates have also seen an upward trajectory: Both FedEx and UPS introduced 5.9% rate hikes for 2024, and real-world costs for customers are even higher. Reveel estimates that FedEx customers will pay 8.17% more than last year, and UPS customers will pay 7.72% more than a year ago.
Continuing to offer free shipping and return shipping in the face of rising costs can help you preserve a positive customer experience, but at the expense of your profit margins.
Let’s consider some alternative solutions to help you mitigate high shipping costs: Using economy shipping for initial deliveries, and using economy shipping or Loop’s Offset product to protect your margins on return fees.
In this article, we’ll discuss:
- What is economy shipping?
- Is it right for your ecommerce business?
- Using economy shipping for returns
- Using Loop Offset to cover return fees
What is economy shipping?
Economy shipping is a shipping option offered by most major couriers, including USPS, UPS, FedEx, and DHL, and is the cheapest way to ship products both domestically and internationally. It differs from standard, priority, or expedited shipping services in terms of delivery time and cost.
Economy shipping services are conducted via the least expensive—and slowest—methods of transport: water or road.
Economy shipping offers the trade-off of slower delivery time for a lower price than standard shipping or other shipping options, though couriers are still able to offer tracking and signature services. If you’re shipping domestically, most of the couriers offer guaranteed delivery within five business days.
Economy shipping can lead to substantial savings on shipping and returns, whether you’re covering shipping costs or passing them along to your customers. For example, USPS First Class offers delivery within five business days starting at $5.40 for lightweight packages, while guaranteeing next-day delivery for the same package would cost a minimum of $31.55.
If you’re not shipping time-sensitive products, making use of economy shipping may help your ecommerce business reduce costs and improve profit margins. We’ll take at some of the benefits of economy shipping, and some of the potential downsides.
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Is it right for your ecommerce business?
With so many ecommerce businesses offering next-day, or even same-day deliveries, economy shipping could put you at a disadvantage—but it may end up being your competitive advantage if you position it correctly.
If you’re competing against ecommerce stores that offer faster shipping, make sure that you set customer expectations clearly and show them the benefits of your shipping solution: By offering economy shipping, you’ll be able to pass the cost savings on to your customers if they’re willing to wait a few extra days for their product. You may wish to offer a variety of shipping solutions, with free economy shipping as well as the option to upgrade for a fee for expedited shipping times.
Additionally, if you’re selling bulky products, such as furniture, or shipping your products internationally, economy shipping may be the only cost-effective shipping option for your products, as expedited options may double the total price to ship your packages. If your products are unique or have a great reputation, your customers will more than likely be willing to wait the extra time to receive them.
That said, if you offer time-sensitive or perishable products, such as certain types of food, economy shipping isn’t a viable option for you. In this case, you’ll need to factor in the cost of priority shipping into your business model—perhaps by offering subscription packages that ensure that you’ll bring in a certain number of sales per month to make the shipping costs worthwhile.
If you’d like to save on shipping costs without the delays of economy shipping, you might also consider offering pick up in store options. Under this model, you’d be able to partner with certain stores where your products could be picked up by customers, making use of bulk shipping rates or cheaper logistics services to ship to retailers in your network.
Using economy shipping for returns
Whether or not it makes sense to offer economy shipping to your customers when they’re purchasing items, it’s often a good solution to save on costs when managing returns if you’re footing the bill for reverse shipping fees.
For items that don’t need to be immediately restocked, economy shipping can help you save costs on reverse logistics, while using the same tracking services available from pricier shipping methods to ensure that your return shipments are coming back safely.
You can offer customers printable economy shipping return labels, or ask your shoppers to drop their products off at a drop-off location, where they can be consolidated for shipping in a bulk shipment—giving you access to an even more cost-effective shipping solution.
Using a returns management solution like Loop makes it easy to provide flexible return delivery service options to your shoppers. You can automatically set up express shipping for products that you want to restock immediately, while relying on economy shipments for products that are less time-sensitive to restock, helping you save money on reverse logistics. You can also give your shoppers the option to send back the return with a pre-paid return shipping mailer, or provide them with scannable QR codes that they can take to nearby drop-off centers for bulk economy shipping. You’ll be able to add real-time order tracking, so that both your operations team and the shopper can see the status of the item while it’s in transit, and confirm the shopper’s eligibility for a refund or exchange credit either upon carrier scanning or upon manual inspection.
By choosing the right shipping method to fit both your ecommerce business’ and your shoppers’ needs, you’ll be able to offer a range of personalized services that meet your customers goals, giving you the ability to customize your delivery service to focus on faster transit times or lower costs on a case-by-case basis.
Save even more on reverse shipping fees with Loop Offset
One last thing: If you’re thinking you need to pay for both free shipping and free return shipping, it might be time to take another look at that assumption.
With rising shipping costs, many brands are cutting back on their customer perks: In fact, over 40% of brands now charge a fee for customers to return items by mail. If you’ve been holding off because you’re worried about losing customers to competitors, there’s a good chance your competitors are already charging for reverse shipping.
So instead of focusing on free return shipping, focus on delivering a premium return shipping experience. Shoppers should be able to rely on a streamlined, hassle-free return shipping process, with fair return policies and predictable costs.
That’s where Loop Offset comes in to help you offset your returns costs. Offset is an optional add-on into your shoppers’ carts when they’re making a purchase. By purchasing Offset for a small fee (generally $2 to $3), you’ll be able to guarantee your customers access to a free return at a later date. And, by choosing the Offset Free pricing model, you can even offset the entire cost of your returns management software solution and associated fees.
Saving costs on shipping can help you build a more profitable and sustainable business. By leveraging the cost-saving measures of economy shipping and Loop’s Offset product, and offering exchanges to boost customer retention, you’ll be able to build a brand with staying power.
Learn how to customize your return shipping options with Loop. Get a demo today.
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