Shipping costs can vary significantly depending on a variety of factors, including package measurements, shipment type, weight, and location. For ecommerce businesses looking to expand their reach, understanding these costs is crucial for maintaining healthy profit margins.
Offering your customers great shipping rates is very important in this competitive market. The amount you pay for shipping doesn’t necessarily reflect what you charge customers. Shipping costs will ultimately come down to the locations you’re shipping from and to, and how fast the order needs to get there.
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"Shipping Costs! Reduce Your Shipping Costs: Tips & Advice To Help You Save Money"
Key Factors Affecting Shipping Costs
Several factors influence the final shipping cost. Being aware of these can help you optimize your shipping strategy and potentially reduce expenses.
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- Dimensional Weight (DIM Weight): All major carriers use a pricing technique called dimensional weight (also called DIM weight) to calculate shipping rates. DIM weight is calculated by multiplying the length, width, and height of the package or box size, then dividing by a standard DIM divisor. Shipping carriers like USPS, FedEx, and UPS calculate shipping charges based on whichever is greater: the actual weight of the package or its DIM weight.
- Package Weight: The package weight is how heavy the item is - no DIM divisor or calculation is necessary. As mentioned above, if this number is higher than the DIM weight, it’ll be used to calculate shipping costs.
- Shipping Zones: Carriers use shipping zones to calculate shipping rates. Shipping zones measure the distance between a package’s point of origin and its destination. Shipping zones are calculated based on where your package is shipped from.
- Shipping Insurance: If you’re shipping very high-value products, you may want to have your shipments insured. Shipping insurance offers reimbursement to senders whose parcels are lost, stolen, and/or damaged in transit. While useful, this service can add significantly to your shipping cost.
- Shipping Speed: Thanks to Amazon Prime, customers expect fast shipping everywhere they shop online. However, if you’re shipping from only one location, fast, premium shipping gets more expensive as zones get higher.
- Unexpected Issues: No matter how airtight your shipping strategy is, unexpected issues may come up from time to time. These can range from delays in transit, lost or damaged items, to split shipments.
Be sure to do scenario planning to calculate these nuances based on which pricing strategy you decide. So when in doubt, you can plug in specific information about an order to understand their exact costs and even compare across providers. You’ve found a service to ship your product with. That’s great! Now you need to make sure your profit margins can stay high with these costs.
Comparing Carrier Options
Several major carriers offer shipping services from San Francisco to Morocco. Here's a brief overview of some options:
- USPS: USPS is often the cheapest of the three carriers, especially for ground shipping. As of January 2019, USPS merged its two business pricing models (commercial plus and commercial base) into one: commercial pricing. Commercial pricing provides shipping discounts of up to 15% off retail shipping and postage prices. You need to apply for this pricing model through USPS. To calculate USPS shipping costs, check out their price calculator.
- FedEx: FedEx uses dimensional weight to calculate shipping prices. They offer a variety of delivery speeds, from ground to overnight and same-day. One benefit of shipping items through FedEx is the FedEx Small Business program geared toward growing companies in need of shipping solutions.
- UPS: UPS also calculates shipping fees based on dimensional weight.
Each delivery service takes many of the above factors into account to offer different shipping pricing models and shipping methods.
Leveraging 3PL for Cost Reduction
One of the best ways to improve your overall bottom line is to reduce your shipping costs. While retail giants like Amazon can offer free shipping, smaller businesses usually can’t do that and have to figure out ways to provide cheaper shipping costs to improve their margins.
Outsourcing shipping to a 3PL can help ecommerce businesses leverage shipping discounts not available to those who do in-house fulfillment. Many ecommerce businesses don’t ship enough to receive volume discounts directly from the carriers. Because 3PLs manage shipping for hundreds or even thousands of merchants, the cumulative volume qualifies for discounts from major carriers. These discounted shipping costs can then be passed directly onto their clients.
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Splitting inventory between multiple fulfillment centers lowers the distance each order has to travel. ShipBob’s network of fulfillment centers in major US cities can help keep your inventory close to your customers. Outsourcing time-intensive shipping tasks can give you time back to focus on activities to grow and scale your business. ShipBob can process things more quickly than we could in-house and at scale.
Operating our Freight-Calculator is as effortless as a walk through the vibrant Jardin Majorelle in Marrakech. A prominent feature of our Global MAX platform is real-time Air-Freight quotes, as reliable as the historic Koutoubia Mosque in Marrakesh. This functionality provides real-time updates on your shipment's journey to Morocco, empowering you to stay informed and promptly address any potential issues. A.I. Our A.I. powered Freight-Calculator, designed to conserve your time and resources, allows you to focus on your core business activities.
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