Top 5 Factors that Affect Shipping Costs

Ah, shipping. Considering how much we talk about it, it wouldn’t be too far off to assume it was one of our favorite topics… and it is! (Just check out the shipping category on our blog!) While it seems fairly straightforward, there are so many moving parts to it (literally!) that we keep coming back to spill all the tips and tricks up our sleeve.

On the chopping block, we have all the ingredients from the delectable recipe known as “Why Are My Shipping Rates So Expensive?” Read on for the juicy deets and bon appétit!

#1 DIM Weight

Have you heard of DIM weight? No? Well, allow us to shed some light. Basically, dimensional (DIM) weight, also known as volumetric weight, is a theoretical figure that shipping carriers use to optimize the shipping process by effectively “penalizing” larger, lower weight packages that take up prized real estate in the carrier’s trucks and planes. Think about it like this: It’s way more profitable to ship a container full of smartphones than one full of pillows, as the smartphones cost more and can be shipped at a higher volume.

While DIM weight doesn’t affect everyone the same way, your downfall with DIM weight can be predicated on three things: 

  1. Using inefficient shipping methods that are affected greater by DIM weight
  2. Using packaging that’s too big to ship your products
  3. Shipping products that weigh less than the space they take up (like pillows)

The first cause is an easy fix — just try to conserve as much space as possible when it comes to packaging. However, if the issue is your products, you probably won’t want to jump ship and abandon your inventory completely. Instead, you can try shopping around for different carriers or consulting your trusty fulfillment center (if you have one!) to see what kind of shipping discounts you can score.

#2 Shipping Zones

Shipping zones refer to the various regions and countries you ship to. Easy enough, right? Nope. It’s a bit more complicated than that.

First of all, USPS, DHL, FedEx, and UPS do not follow a singular, standardized format for shipping zones, as they all have their own zone charts. Second, shipping zones are calculated based on the point of origin, or where your package is being shipped from. That means that even if two different points of origin are shipping to the same destination address, they could technically be shipping to different shipping zones. Typically, the more shipping zones your package crosses, the more expensive the shipping rate will be and the longer it will take to reach its final destination.

The biggest way to get over the cost hurdle of shipping to a zone that’s far from you would be to invest in multiple shipping locations, provided it makes sense for you and your business.

#3 Shipping Methods

Everyone knows that premium shipping comes with a premium price. Luckily, there are several shipping carriers and methods to choose from, which hopefully will allow you and your business greater flexibility. Aside from pursuing your options, there a few ways to cut back your shipping costs, namely:

  • Increasing product prices so they cover a portion of shipping costs
  • Negotiating with your chosen carrier
  • Outsourcing to a fulfillment center, as they typically get steeper discounts due to their higher order volume

Each choice will have its pros and cons, so think carefully before committing!

#4 Surcharges

Speaking of extra costs, let’s talk about shipping surcharges! When you create a shipping label for a package, the listed postage cost is actually just a quote and not your final price. Along the way, carriers might add surcharges to your quote which can really hike the costs up after all is shipped and done. 

Some common surcharges include:

  • Additional handling for packages over a certain size or weight
  • Delivery area surcharge for rural areas or addresses not included in the carrier’s specified range
  • Residential surcharges for businesses operating out of a home address
  • Saturday surcharge for overtime deliveries
  • Fuel surcharges

The best methods for fighting off shipping surcharges include contesting your charges, negotiating with your carrier, and carefully checking that the information printed on your shipping label is accurate. If you want more info on shipping surcharges and what you can do about them, check out this article we wrote!

#5 Handling and Labor Costs

Even with the right provisions, in-house fulfillment can get pricey, especially as your business expands. If you have a sneaking suspicion that some of these in-house costs are negatively affecting your profits, try determining exactly what those numbers are so you can compare and contrast. Here, we’ll help you out. 

To figure out how much your in-handling is costing you, use this formula:

  1. Determine how many minutes it takes you or your employee to package an item
  2. Divide that number by 60
  3. Multiply the number you get by the hourly wage of the person handling fulfillment (Yes, even the business owner has an hourly wage!)

For example:

  • Let’s say it takes your employee 5 minutes to package an item
  • Divide 5 by 60, which gets you 0.08
  • Multiply that number by the hourly wage, say $15/hour
  • That gets you a handling cost of $1.20 per package

Once you figure that out, it’ll be a lot easier to judge where your bottom line is at and consider the feasibility of outsourcing to a fulfillment center.

We already know you’re already a savvy business owner, but hopefully this article has taught you a thing or two so you can be an even savvier! If you have any questions, we’re here to help. Just give us a holler and we’ll help you right out. Thanks for reading!