How To Calculate Shipping Costs and Choose the Right Service
by Marilyn Bunderson
Whether you’re in search of the cheapest shipping for a small business or simply want to provide more delivery options for your customers, we’ve got you. This article will explore all the costs associated with shipping a package and help you choose the right carrier for your needs.
Why understanding shipping costs matters
To understand shipping costs, you’ll need to understand what variables go into calculating your shipping rates. You’ll learn how packaging dimensions, weight, and destination will determine the value of your shipping. While understanding shipping costs is step one, step two is understanding how to leverage shipping to win over customers! Customers look for fast and cheap delivery when they order online. Asurvey conducted by Digital Commerce 360, found that 76% of shoppers listed free shipping as the attribute or condition most likely to lead shoppers to a website over the right price. Now, if free shipping isn’t something you’re able to offer, there are plenty of ways to make your shipping fees more enticing compared to competitors.
How do I calculate shipping costs?
You’ll need to take several different factors into account as you calculate shipping costs. Weight, dimensions, value, and other variables affect the calculation, so it’s important to understand how each comes into play.
Dimensions
Each carrier has its own unique method for calculating dimensional weight, or DIM weight, to measure the density of your package. It’s calculated by multiplying the length x width x height and then dividing by a carrier’s specific divisor. For oddly shaped packages, use the longest point on each side.
Carrier Divisors | |
Carrier | Formula |
USPS | (L x W x H)/166 |
FedEx | (L x W x H)/139 |
UPS | (L x W x H)/166* |
DHL | (L x W x H)/166** |
*UPS uses a divisor of 139 for Daily Rates and 166 for Retail Rates.
**DHL uses a divisor of 166 for inches and 6,000 for centimeters.
Weight
If the package weight is more than the calculated dimensional weight, the actual weight of the package is used. Heavy packages use more resources to ship, so you’ll pay more in shipping costs to ship heavy items.
In some cases, it may be worth it to break up heavy shipments into smaller packages to make delivery easier and avoid overweight charges.
Destination
Shipping zones are geographic areas carriers use to calculate delivery times and prices. The greater the distance, the more it will cost to ship the item, so shipping within your zone will cost less. The United States is generally broken down into eight zones (USPS uses nine zones).
When possible, distribute your products to warehouses throughout the country so you don’t have to ship long distances to get to your end destination.
Value
The value of an item can impact the charges if you want to include shipping insurance. If you choose to insure a package, you will receive reimbursement for lost, stolen, or damaged packages. The cost of insurance is generally a percentage of the value of the item being shipped.
Delivery times
A Statista.com survey of consumers who shop online at least once a month found that 41% expect delivery within 24 hours. Expectations for 2-day delivery are on the rise as well, and fast delivery will need to figure into your shipping cost calculations.
Providing 2-day delivery to customers in the same zone you’re sending the item from can best be done through ground shipping. However, if you need to deliver to a customer in zone 8 or 9, you’ll need to use more expedited options. To cut time and costs, you should use a fulfillment center close to the destination.
Surcharges
Surcharges are extra fees added to the shipment that may show up as a service or handling fee. Surcharges could include the following:
- Fuel
- Oversize package
- Weekend delivery
- Residential delivery
- Signature required
- Address correction
- And more
Make sure you understand exactly what you are being charged and why. Often, you can take steps to minimize surcharges or even renegotiate contracts to eliminate them altogether.
Duties and taxes
Goods transported across international borders must pay a tariff or tax. These Customs Duties, which are put in place to protect a country’s economy, can be paid by either the seller or the buyer. You can and should calculate these tariffs and taxes before you ship to gain full insight into your shipping costs.
Packaging supplies
Not to be overlooked, packaging supplies can be a big part of your overall shipping costs. USPS does provide some free materials for some levels of shipping, but you’ll likely need to include additional packing materials to keep your items safe.
To save money on supplies and packaging, make sure your boxes are the right size for your product, and consider making bulk purchases of supplies like boxes, packing peanuts, air pillows, tape, etc.
Unexpected events
Delays, lost packages, damaged packages, and other issues will happen from time to time. Make sure you leave a little room in your budget for these unplanned events.
Comparing shipping costs by carrier
Since shipping costs vary from carrier to carrier, it’s imperative that you look at all of your options for shipping a package. Comparing shipping costs across carriers gives you insight into quicker delivery times and lower rates.
USPS
The United States Postal Service (USPS) is government-operated and provides some of the most cost-effective delivery services available. To calculate your exact shipping costs, you can enter your information into a price calculator on their website.
Below are examples of shipping costs for a one-pound package shipping to zone one using USPS. You can also view the current USPS price sheet here
Service | Speed | Cost |
Priority Mail Flat Rate Envelope | 3 days | $10.45 |
Priority Mail Small Flat Rate Box | 3 days | $11.00 |
USPS Ground Advantage | 2 to 5 days | $8.40 |
Priority Mail Medium Flat Rate Box | 3 days | $19.30 |
Priority Mail | 3 days | $9.65 |
Priority Mail Large Flat Rate Box | 3 days | $26.00 |
UPS
UPS rates are based on where the package is shipped from, the destination, which service you choose, how much the package weighs, and more. You can estimate your UPS shipping charges on their site. Here are their starting retail rates when sending a one-pound package.
Service | Speed | Cost |
Ground | 1 to 5 days | $12.45 |
3 Day Select | 3 days, end of day | $14.47 |
2nd Day Air | 2 days, end of day | $47.70 |
Next Day Air Saver | 1 day, end of day | $33.58 |
Next Day Air | 1 day | $37.07 |
Next Day Air Early | 1 day | $67.07 |
FedEx
With FedEx, the service you choose is the biggest player when it comes to price. However, size and weight also play a role. FedEx also uses the dimensional weight or the actual weight, whichever is the larger number, and you can use their handy price calculator to find out exactly how much you’ll be charged.
The table below shows the starting FedEx rates for sending a one-pound package. For a complete rate breakdown, here is the FedEx rate sheet.
Service | Speed | Cost |
FedEx Home Delivery | 7 days, end of day | $10.70 |
FedEx Express Saver | 3 days | $21.97 |
FedEx 2Day | 2 days | $23.83 |
FedEx 2Day A.M. | 2 days. | $27.12 |
FedEx Standard Overnight | Next day | $36.41 |
FedEx Priority Overnight | Next day | $39.96 |
FedEx First Overnight | Next day | $70.96 |
DHL eCommerce
DHL eCommerce Solutions is best for high-volume shippers who need parcels delivered domestically or internationally. Shipping charges are calculated using dimensional weight, and you can get an online quote with their shipping calculator.
For businesses, DHL eCommerce offers several service levels for domestic and international shipping. Additional fees may apply for shipping certain items—or to certain areas—that can be displayed for your shoppers at checkout.
How to charge for shipping
It’s important for the health of your business to know how much to charge for shipping. Shipping costs can add up, but it doesn’t have to hurt your bottom line. When you know what you have to pay, you can cover that cost in a variety of ways.
- Free shipping – Wrap the cost of shipping into the price of your product or service.
- Threshold shipping – Offer free shipping or discounted shipping after customers reach a specified order amount.
- Flat rate shipping – If your products typically fit well into one of the USPS flat rate shipping boxes, you can pass that flat rate on to your customers. FedEx and UPS offer flat rate options too.
- Shipment-level transit time – Help your customers save time, improve on-time delivery percentiles, and receive extremely reliable delivery estimates using our EasyPost Smartrate API.
Optimize shipping costs with EasyPost
One of the best ways to lower shipping costs is to use a shipping platform that offers discounted rates. EasyPost has over 100 eligible carriers, making it quick and easy for businesses to find and compare the cheapest shipping rates and best delivery times. EasyPost is free for those who ship fewer than 10,000 packages a month, and the more you ship, the more you save. We deliver the most reliable logistics technology platform for businesses of all sizes, with 99.9% uptime even during peak season shipping.