Knowing how to calculate shipping costs is essential to staying profitable and competitive in e-commerce. That’s why I’m offering you this overview of how carriers determine shipping rates.
USPS, UPS, and FedEx divide up a map of the United States into shipping zones. They calculate rates by the distance of these zones from your zip code.
Of course, how fast you want your goods to get to the destination will affect how much you pay as well:
Your parcel shipping costs will depend on the package’s weight and the amount of space it takes up in the truck. Parcel carriers charge according to the actual weight or dimensional weight, whichever is greater.
To calculate dimensional weight, you first measure the package volume in inches. Multiply the width, length, and height of the package. Round fractions up to the next whole number.
Let’s say, for example, your package measures 10 3/8 “ X 10 ⅞” X 8 ½”
You will round these dimensions up to the next integer:
11” X 11” X 9”
After you determine the package’s volume, divide it by the carrier’s divisor:
You'll round any fractions up to the next whole pound.
When you’re shipping high-value goods, you may want to hedge your risk of loss. Some carriers offer insurance, sometimes from a third-party vendor.
Declared value is different from insurance. You pay a higher rate for a declared value above the carrier’s standard liability limits. The carrier in return raises liability limits for damage or loss.
For example, UPS covers damage or loss of up to $100 with their standard rate. But if you declare a value of $500, you’ll pay a higher rate. UPS will pay $500 if it’s lost or damaged.
Parcel carriers may charge extra for special services. For example, if you sell perishable goods that need to be packed with dry ice, you’ll be charged a dangerous goods fee.
Some common accessorial charges include:
Foreign governments may tax international shipments.
If you’re shipping abroad, see the websites for the destination country and The World Customs Organization.
If you fill orders that are too large for parcel shipping, LTL shipping may be a cost-effective option.
In an LTL Shipment, your freight travels with freight from other shippers on the same trailer. The LTL carrier may unload and reload your product to different trailers at each leg of the trip.
LTL carriers quote rates per 100 lbs weight. You can usually get better rates for heavier cargo.
As a rule, you’ll pay lower rates for heavier, more compact cargo. Density is the chief factor that determines a shipment’s freight class.
Most LTL shipping determines rates according to The National Motor Freight Classification® (NMFC) system.
The product’s “transportability” determines its freight class. It’s based upon these four traits:
Density. Expressed as weight per cubic foot, density is the key factor the NMFC uses to determine freight class.
Handling. Goods that need special handling are assigned to a higher freight class:
Stowability. This has to do with how well your freight travels with others. Some features of your cargo can move it into a higher, more expensive freight class:
Liability. The value of the item and the risk of damage during the freight handling process get factored in. A higher risk of damage or theft can move the freight to a higher freight class.
You can learn more about the LTL freight class in this post.
LTL carriers offer several added services that may increase shipping costs.
How far the freight travels is a key factor in shipping costs. Most carriers also add a surcharge for the cost of fuel.
Full truckload (FTL) is often just called truckload (TL). With FTL shipping, you don’t share trailer space with other shippers.
Consolidated freight is like LTL in that you share trailer space, but there are a couple of differences:
FTL and consolidated carriers quote a rate per mile for each shipment. However, the rate varies with market supply and demand.
Freight lanes are routes that carriers run regularly. Because established lanes increase efficiency for the carrier, they offer lower rates for these routes.
Did you know you can get quick and accurate shipping quotes on your e-commerce platform for about 55 cents a day? Be sure to check out our freight quote plugins and apps for Woocommerce, Shopify, Magento, and more.
Eniture Technology specializes in helping e-Commerce merchants grow by providing useful information, digital marketing services, off-the-shelf apps that solve common problems, and custom programming services. Please contact us if you need help growing your online business or implementing the concepts presented in this blog post.
Interested in learning more? Check out our free guide, A Beginner's Guide To E-Commerce Shipping and subscribe to our blog!
