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How to Calculate & Estimate Shipping Costs (add 3 Shipping Calculators)

How to Calculate Shipping Costs - Making Accurate Estimates

Ecommerce stores are facing a tough battle to calculate shipment costs in the same way they need the lowest cost. Today consumers are looking to buy quickly at reasonable prices. Most people think shipping is free, particularly for people who purchase from you for large purchases. However, you must find balance in business. Can this option be profitable? If you want to keep up to date on cutting-edge technologies, you need a reliable shipping solution for your customers and calculate shipping charges. It is possible merely because of examining margin.

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The Importance of Calculating Shipping Costs

E-commerce businesses have many reasons for knowing the shipping costs of their products and services. It can directly affect your profits. Unless you know how much you will be paying to ship to customers, you cannot control your income. The second, and most important point, is to give our customers a reliable quote. Prices may vary depending on the size of the package as well as the type of shipment. Please make sure that your customers are provided accurate data when completing the purchase procedure. Please contact Honourocean team.

62% of shoppers expect free deliveries in less than 3 business days whenever they shop online — but is offering inexpensive (or even free) shipping options hurting your bottom line?

You want to offer the best e-commerce shipping options to your customers, but you can only do so if you’re keeping an eye on your margins. Knowing and managing your shipping and logistics costs is critical to keeping your online business profitable.

Shipping cost calculators for 3 popular shipping carriers

Each delivery service takes many of the above factors into account to offer different shipping pricing models and shipping methods. Here are the pricing models and calculators for three of the major US carriers that offer shipping services: USPS, FedEx, and UPS.

USPS shipping rates and shipping calculator

  • USPS offers several domestic shipping services like First-Class Mail, Priority Mail, Priority Mail Express, Parcel Select, Media Mail etc.

  • Each service has different transit times and price points based on weight, distance, dimensions and other factors.

  • USPS shipping rates are calculated based on the origin and destination ZIP codes as well as package weight.

  • The USPS shipping calculator allows you to input this information to get rate estimates for different shipping services.

     

To calculate USPS shipping costs, check out  their price calculator. Here are some examples:

  • Priority Mail, 2 lb package from 90210 to 10001 (LA to NYC):

$7.99

  • Priority Mail Express, 2 lb package from 90210 to 10001:

$26.95

  • First Class Package, 1 lb package from 60115 to 98121 (Chicago to Seattle):

$6.78

  • Media Mail, 5 lb package from 75001 to 90004 (Dallas to LA):

$6.30

  • Priority Mail, 10 lb package from 32809 to 98104 (Orlando to Seattle):

$23.75

  • Priority Mail Express, 10 lb package from 32809 to 98104:

$57.35

TIP: To calculate your domestic postage costs, you can use the USPS® Price Calculator tool. You’ll need to know your package’s weight, shape, and size measurements.

FedEx pricing and shipping calculator

FedEx uses dimensional weight to calculate shipping prices. They offer a variety of delivery speeds, from ground to overnight and same-day. FedEx is also known for its international shipping capabilities.

One benefit of shipping items through FedEx is the FedEx Small Business program geared toward growing companies in need of shipping solutions. In addition to a rewards program and the Packaging Help Hub, FedEx Small Business members receive discounts of up to 16% on select shipments.

To calculate FedEx shipping rates, use their Rate Finder tool

Example Pricing

Shipping ServiceShipping SpeedShipping CostFedEx First Overnight2 days$175.76FedEx Priority Overnight2 days$139.02FedEx Standard Overnight2 days$124.93FedEx 2Day AM3 days$77.29FedEx 2day3 days$68.20FedEx Express Saver4 days$64.43FedEx Ground6 days$13.54

Example pricing assuming a 1-pound parcel shipped from Los Angeles, CA to New York City, NY. Last updated 1/21/23.

 

UPS pricing and shipping calculator

UPS also calculates shipping fees based on dimensional weight. Different UPS shipping options use different pricing models, ranging from UPS Ground to UPS 3-Day Select or Next Day Air.

Depending on the shipping option, small businesses can access shipping discounts through the UPS Connect program, including 20% off air and international shipments and 10% off ground.

For the most accurate UPS pricing estimates, check out their shipping calculator

Example Pricing for UPS Shipping

Assumption: A 1-pound parcel shipped from Los Angeles, CA to New York City, NY.
Last Updated: 8/30/23.

Shipping ServiceShipping SpeedShipping Cost
UPS Next Day Air Early1 day$147.32
UPS Next Day Air1 day$111.77
UPS Next Day Air Saver1 day$100.48
UPS 2nd Day Air2 days$47.70
UPS 3 Day Air Select3 days$40.09
UPS Ground4 days$14.09

How to calculate shipping costs

Shipping costs vary depending on a variety of factors, from package measurements, shipment type, weight, location, and more. Once these variables are calculated, a carrier will put a price on your shipment.

Here are six variables that can affect the cost of shipping for your online store.

1. Package dimensions

All major carriers use a pricing technique called dimensional weight (also called DIM weight) to calculate shipping rates. Dimensional weight takes into account the size of a package to determine the shipping cost.

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. Whichever is higher becomes the billable weight for which your business will be charged.

2. Package weight

The weight on a package represents the mass of this product. If the weight is higher than DIM weight, the shipping cost is calculated. The heavier the package, the cheaper it is for delivery.

3. Shipping destination

Carriers use shipping zones to calculate shipping rates. Shipping zones measure the distance between a package’s point of origin and its destination. In the US, these can range from Zone 1 to Zone 8.

Shipping zones are calculated based on where your package is shipped from. This means that two different points of origin shipping to the same destination may be shipping to completely different zones.

As a rule of thumb, the higher the shipping zone, the more expensive a package will be to ship.

4. Value of contents shipped

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. This is common for smaller objects like jewelry, artwork, and medical supplies, as well as large items such as industrial equipment.

5. Delivery times

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. For example, 2-day shipping to a customer in Zone 1 can be done through ground shipping;  to Zone 8 will require more expensive expedited air shipping.

6. Unexpected problems

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. While you can never predict exactly what will happen, make sure to leave some wiggle room in your shipping budget in case of an emergency.

How much should you charge for shipping?

Shipping isn’t cheap, and if you’re selling online, you’ve got to think hard about how you’ll charge your customers for it. It’s not just about how much it costs you, but also how you explain these charges to your customers.

You’ve got a few ways to go about it:

  • Free Shipping: Everyone loves this, but can you afford it?

  • Charge What You’re Charged: Simply pass on the exact cost from the shipping company to your customer.

  • Set Rules: Charge based on things like how heavy or big the item is, or where it’s being sent.

According to a survey by Honour Ocean in their 2022 report:

  • 25% of online stores always give free shipping within their country.

  • 24% never offer free shipping.

  • 35% give free shipping if you buy stuff worth at least $50.

  • 15% only give it if you spend $80 or more.

  • 28% have a fixed shipping fee, no matter what you buy.

  • 13% charge based on the actual shipping company’s rates.

Shipping within your country is usually cheaper, so that’s where most of the deals are. But remember, customers love free shipping. If they see a shipping fee added at the last step, they might just leave without buying.

So, how do some stores manage to offer free shipping? They might:

  • Increase the price of their items a bit.

  • Encourage you to buy more at once or bundle items.

But, can you really offer free shipping? Think about:

  • How much your items cost. Pricier items might give you more room to offer free shipping.

  • How much, on average, a customer buys in one go.

  • Your profit margins. After all expenses, how much do you really earn from each sale?

  • Your usual shipping expenses. Do you get any discounts because you ship a lot, or because you store your items closer to most of your customers?

How to determine shipping costs strategically

Offering your customers great shipping rates is very important in this competitive market. To ensure you’re giving your customers the best possible prices, you need to approach this problem strategically. 

Decide on a pricing strategy

The amount you pay for shipping doesn’t necessarily reflect what you charge customers. It’s often a perception game, where the tradeoff is between more overall sales and revenue, or more profit per order. 

To recap, you can:

  • Charge nothing for shipping (and make sure all website visitors know it) to increase sales and acquire more customers. 

  • Charge a flat rate to cover at least some of your shipping costs on most orders.

  • Charge on a case-by-case basis, aiming to pass the shipping cost along to the customer.

Be sure to do scenario planning to calculate these nuances based on which pricing strategy you decide. It’s worth noting that:

  • Many brands test shipping cost pricing, and try running campaigns to their email database, like “Free shipping when you spend $60” when they typically see people spend $40 per order, for example. 

  • This helps shed light on the effect a free shipping promotion has on your order volume (e.g., did you get double the orders than usual?). 

  • This is an easy way to start small without having to commit to site-wide free shipping always. 

Select a carrier & speed

Of course, some carriers will charge different shipping costs from others, and the faster the service level (e.g., when paying for expedited shipping such as an overnight service), the more expensive it will be. 

Shipping costs will ultimately come down to the locations you’re shipping from and to, and how fast the order needs to get there. To keep shipping costs low for you and your customers, it’s a best practice to use ground shipping and ship from optimal locations that are closer to the majority of customers. 

Many brands achieve this by outsourcing fulfillment to a 3PL like Honour ocean  with multiple locations and splitting their inventory across the locations that make the most sense for their customer base (which can surprisingly save brands money in many cases — see a 25% reduction in shipping costs and a 13% cost-savings to a company’s bottom line). 

Calculate costs for selected carrier & speed

Shipping carriers have shipping cost calculators on their websites. So when in doubt, you can plug in specific information about an order to understand their exact costs and even compare across providers. You can also use shipping integrations on your online store to calculate this automatically for you (from shipping software to outsourced fulfillment providers). 

Additional charges to add

While the above covers standard orders, to be extra accurate, you may consider adding charges to cover additional costs you may incur, such as:

  • Packaging if you pay for this as a separate line item (boxes, mailers, and dunnage) 

  • Surcharges for shipping heavy or larger items (which carriers charge when packages are extra heavy and large for their employees to ship and handle)

  • When a signature is required (another fee from carriers when this is needed)

  • Additional insurance if the contents of the package is more valuable than the standard amount a carrier covers 

To take it a level further, you can also think through not just the shipping cost but some overhead you may want to allocate to find your true cost per order or revenue per unit, such as:

  • Any handling charges, like labor and order fulfillment.

  • Your return rate and policy to understand how offering free returns can end up costing you more money (including a second shipping label to send the product back).

Your reshipment rate for damages in transit misspeaks, and other order errors since those end up costing you more.

Comparing average shipping costs

Comparing Average Shipping Costs

For a better idea of rates across shippers, here is a comparison of retail shipping costs. For this example, we used a product approximately the size and weight of a smartphone shipping from Los Angeles to New York City.

Shipping CarrierShipping ServiceShipping SpeedShipping Cost
USPSRetail Ground7 days$10.85
USPSPriority Mail Small Flat Rate3 days$10.40
USPSPriority Mail Express 2-Day2 days$49.45
UPSUPS Ground4 days$14.09
UPS3-Day Select3 days$40.09
UPS2nd Day Air2 days$47.70
FedExFedEx Ground4 days$13.54
FedExFedEx 2-Day2 days$68.20
FedExStandard Overnight1 day$124.93

Last updated August 2023


 

How to reduce shipping costs

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. Some of the best ways to reduce shipping costs include:

  • Decreasing the shipping distance by distributing inventory near your customers

  • Reducing the weight and dimensions of packages

  • Finding discounted supplies

  • Getting discounted shipping rates

 

How small businesses can reduce shipping costs with a 3PL

Growing businesses aiming to cut down on shipping expenses can greatly benefit from partnering with a third-party logistics (3PL) provider.

Why Choose a 3PL for Ecommerce Shipping?

  1. Access to Discounted Rates: Many ecommerce ventures don’t have the shipping volume to qualify for carrier discounts. 3PLs, on the other hand, handle shipping for numerous merchants, amassing a volume that earns them significant discounts from major carriers. These savings are then transferred to their clients. For instance, ShipBob not only provides these discounted rates but also boasts international locations worldwide.

    Testimonial:

    “As our customer base grows, so does our global reach. ShipBob’s affordable rates addressed our international fulfillment needs.”

    — Carl Protsch, Co-Founder of FLEO Shorts

  2. Distributed Inventory & Faster Shipping: Relying on a single ecommerce fulfillment center might be convenient for nearby customers, but those farther away either wait longer or pay more for faster shipping. Distributing inventory across multiple centers reduces the distance for each order, ensuring quicker deliveries. ShipBob’s fulfillment centers, strategically located in major US cities, ensure inventory is closer to customers, facilitating 2-day ground shipping at reduced costs.

    Testimonials:

    “By using a second ShipBob fulfillment center, we now offer 65% of our customers 2-day shipping, a jump from 32% with just one West Coast facility. This not only benefits our customers but also saves us 13% in costs.”

    — Pablo Gabatto, Business Operations Manager, Ample Foods

    “Due to Amazon’s influence, our customers expect 2-day shipping, something other 3PLs couldn’t offer without hefty fees. With ShipBob, we can provide this service without the exorbitant costs.”

    — Founder, My Calm Blanket

  3. Time Efficiency: The adage “time is money” holds true, especially for businesses. Delegating time-consuming shipping tasks to a 3PL allows businesses to concentrate on growth strategies. Instead of spending time on packaging and postal runs, businesses can focus on expanding their customer base, innovating products, marketing, and more.

    Testimonial:

    “ShipBob’s efficient processing, compared to our in-house efforts, translates to significant cost and time savings.”

    — Sarah Chalos, Co-Founder and President, I Heart Keenwah

Shipping Costs FAQs

1. How do I calculate dimensional weight?

To calculate dimensional (DIM) weight, multiply the length, width, and height of a package, using the longest point on each side. Then, divide the cubic size of the package in inches by the DIM divisor to calculate the dimensional weight in pounds.

2. Can I ship flat rate?

Yes, carriers like USPS offer flat-rate shipping as long as your item fits into one of their pre-measured boxes.

3. How do I calculate shipping costs for USPS?

You can use the USPS shipping price calculator to calculate the shipping cost of sending a package with the United States Postal Service. If you are a ShipBob customer, you’ll get automatic discounts when shipping with USPS.

4. How do I get shipping discounts?

Shipping with a third-party logistics service provider such as Honourocean can allow you to get significant discounts off of major carrier services, as well as help optimize your supply chain, which can also save you money.

5. Which is the cheapest carrier to ship with?

While they aren’t always the cheapest, the USPS is consistently one of the best-value shipping carriers.

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