Shoppers today expect fast and affordable shipping with their orders. In order to stay competitive (and profitable), it is important to understand what factors affect shipping costs so that you can offer your customers great shipping rates without killing your bottom line.
Here are the 4 most common factors that will impact shipping costs.
1- Package Dimensions or Package Weight
The major carriers use a pricing strategy known as dimensional weight, more commonly referred to as DIM weight, when they calculate shipping rates. DIM weight uses the size of the package to determine the shipping cost.
As you would probably guess, to calculate the DIM weight of a package you start by multiplying the length, width, and height of it. Each shipping carrier then has a DIM divisor they use which you divide that number by.
Carriers do this for two reasons. The first is to encourage efficient packaging. Designing packaging that is only as big as it really needs to be in order to safely ship products is a simple way to cut down on shipping costs.
The second reason they do this is because larger, lighter packages take up a lot of valuable real estate in their trucks, planes, and shipping containers.
As an example, think of a 4’ x 4’ box that is filled with couch cushions. Now think of the same box filled with laptop computers. Obviously, the second one has much more value to the shipper, but both are going to take up the same 4’ x 4’ space in a shipping container. If they were charged only by the box’s weight, there would be a dramatic difference in cost between the two.
However, not everything ships according to its DIM weight. Some shipments are charged based on the physical weight of the package. Shipping carriers use whichever is greater between the actual package weight and its DIM weight.
2- Shipping Destination
Shipping zones refer to the regions and countries you ship to. USPS, FedEx, UPS, and DHL all have their own zone charts they use. The shipping zones are calculated based on the point of origin where your package is being shipped from and is based on the distance it is traveling.
Generally, the more shipping zones your package crosses, the more expensive the shipping rate is going to be.
If you are shipping products that are very valuable, you might want to consider insuring the shipments. Shipping insurance provides compensation in the event packages are lost, stolen, or damaged during the shipping process.
It is something worth considering if you are shipping high dollar items like laptops or jewelry, but it will significantly increase your shipping expenses.
4- Delivery Times
There is no doubt that Amazon Prime has set a new standard in customer expectations as far as how fast they expect their order to be delivered. With the exception of larger purchases and custom orders, many shoppers expect to receive their order within a few days, and in many cases they don’t want to pay for it.
Thanks to competition among shipping carriers, there are a lot of reliable and fast shipping options at affordable prices available, but the more zones you pass through the higher that cost can go.
For example, 2-day shipping to a customer in zone 1 can be done through basic ground shipping. On the other hand, to deliver the same order to zone 7 within 2 days will require more expensive air shipping.
How You Can Save Money on Shipping Costs
Using a third-party logistics company (3PL) like ShipBuddies is a great way to cut your shipping costs. Most merchants do not ship in a high enough volume to qualify for discounts directly from carriers. Third-party logistics and order fulfillment companies, on the other hand, are typically working with many merchants.
With all of their combined clients, they are shipping at a volume that allows them to qualify for discounts from the major carriers. These discounts can then be passed directly to the clients, which in turn allows these clients to offer competitive (or free) shipping rates to their customers.