Calculating shipping costs is essential for any business that sells physical products. The cost depends on factors like package size, weight, shipping distance, delivery speed, and carrier rates. By understanding these elements and using online shipping calculators or manual estimation methods, businesses can set accurate shipping fees, optimize expenses, and improve customer satisfaction.
Nowadays, lots of businesses run export-import activities to widen their business and increase revenue. Obviously, sellers need to deliver their products to buyers and shipping costs will happen here. Therefore, owners should know how to calculate shipping costs for their products. From that, they will determine the whole product prices to sell to customers.
There are various factors that influence shipping costs such as package dimensions, weight, shipping distances, and so on. We will provide a clear guide on how to estimate shipping costs based on these elements that affect shipping costs. The article should be useful for both new and experienced sellers.
Factors affecting shipping costs
Understanding apparently guides on how to calculate shipping costs and factors affecting shipping costs will help business owners control business activity efficiently. Let’s explore factors that influence shipping costs as follows:
Package dimensions and weight
Package dimensions and weight are two significant factors in determining shipping costs.
- Weight: The carriers based on the shipment weight calculate the handling fee, which is one of the components of shipping cost.
- Size: The package with a large size will be charged more shipping costs although its weight is light.
- Dimensional weight: The carrier root size of the package consists of length, width, and height to estimate volumetric weight and shipping costs. The formula is:
DIM weight (volumetric weight – centimeters) = (Length x Width x Height) / Dimensional factor (5000 or 6000).
Shipping distance
The bigger the distance, the higher the shipping costs because of the increase in fuel surcharges, delivery time, and special zones. Business owners should know exactly the distance for shipping consisting of pickup and the delivery address to manage shipping costs effectively.
Carriers will divide geographical areas into many shipping zones with different shipping costs. The cost of remote areas with fewer delivery services is higher than in normal zones. Overall, shipping zones are a basic rule for carriers to determine shipping costs for a shipment.
Delivery speed
The chosen delivery speed between these options, like economy, standard, and expedited, also impacts shipping costs. Here is a breakdown of their influence on costs:
- Economy: This is the slowest and lowest shipping method, applied for ground transportation (such as truck or rail) or any shipment that needs to be shipped non-urgent.
- Standard shipping: If you have a shipment, you want to look for a delivery service that is faster than economy and cheaper than expedited, let you choose standard shipping.
- Expedited shipping: For air methods, sellers and buyers often choose this method to ship their cargo with high safety.
Shipping carrier
The different carriers will have different pricing structures and service options. The shipper is based on shipping demand, the features of the package, and price to decide the suitable carriers.
- USPS is divided into two types of service options. The shape and weight of the package will decide the shipping costs for the First-Class Mail option. For Priority Mail, shipping costs will be calculated based on size, weight, and distance from start to end point.
- UPS: The pricing structures have three levels. Daily Rates apply to individual accounts that sign contracts with UPS. Retail Rates will apply if you ship packages from UPS locations. Air Freight Rates apply for large shipments that need supporting services such as pickup, delivery, and customs clearance.
- FedEx breaks down into International Priority Rates(IP service) and International Economy Rates (IE service). IP service has a high cost and short delivery time while IE service has a low cost and long transit time. Therefore, based on the demand for shipping cargo, you will choose the suitable option.
Read more >>> Difference Between USPS and UPS: Service, Pricing, Which courier is cheaper?
Packaging
The type and amount of packaging can affect freight charges because these elements consist of dimensional weight, the weight of packaging materials, and the actual weight of the package. If shippers want to optimize shipping costs, they should use packaging materials that fit in objects to decrease the packaging fees and the overall costs.
To manage shipping costs effectively and avoid extra fees, shippers should consider packing the products carefully and efficiently.
Insurance and additional services
The optional services like insurance, signature confirmation, and Saturday delivery are not included in the shipping cost. If shippers want to guarantee their shipment during transit time, they need to buy cargo insurance. In case of damage or natural disaster, the insurance company will compensate for them.
Besides, carriers usually deliver shipments on working days (from Monday to Friday). You require Saturday or Sunday delivery or signature confirmation that you have to add overtime fees to the overall costs.
Related News
Read more >>> How to Ship Internationally Cheap?
How to calculate shipping costs
How to calculate shipping costs? We will highlight the method as below:
- Using a shipping cost calculator:
- Using online shipping cost calculators has many conveniences and benefits for personnel and businesses proactively to determine costs. You can have the overall costs of shipment immediately as soon as inputting the cargo details. That helps you save time and make the right decision to choose a method to deliver the products.
- Below is an example of how to use shipping cost calculators offered by FedEx:
Example:
-
- Step 1: Access to the FedEx website.
- Step 2: First, click the “Shipping” button, next select “Shipping rates and delivery times.”
- Step 3: Fill in the pickup and delivery point.
- Step 4: Submit the shipment information such as number of packages, cargo weight, and dimension.
- Step 5: FedEx will display the shipping cost after filling in the information.
- Manual calculation: Business owners can follow these steps for manually calculating shipping costs:
- Step 1: Use tape or ruler to scale the dimensions of the package (length, width, and height).
- Step 2: Calculate the volumetric weight by the formula.
- Step 3: Compare the volumetric weight and the actual weight.
- Step 4: Determine chargeable weight and multiply with cost per unit.
You can try to use some signal calculator tools from these carriers, such as FedEx, UPS, USPS, DHL, or third-party platforms.
Read more >>> How to Calculate Total Manufacturing Cost – Full Formula
Estimating shipping costs
- Importance of estimation: Estimating shipping costs accurately is so important for eCommerce businesses and online sellers. Here is why it is vital:
- Pricing planning and profit: If businesses estimate shipping costs inaccurately, that results in overpricing or underpricing of commodities. Businesses and online sellers encounter trouble in losing profit when measuring shipping costs.
- Preventing extra costs: Estimating shipping costs and supporting services charges will help businesses avoid additional fees as well as they can control their business.
- Methods for estimation:
- Historical data: Based on similar shipments businesses can use past shipping data to estimate future costs
- Industry benchmarks: You can research online the industry averages for shipping costs in similar commodities, routing, and the features of shipment.
- Carrier quotes: Collecting quotations online from carrier calculator platforms to compare and decide the best option.
How much to charge customers for shipping
- Pricing strategies:
- Free shipping has pros and cons as below:
|
Pros
|
Cons
|
|
Increasing conversion rates in online sales.
|
Rising fees in overall costs.
|
|
Building customer satisfaction.
|
Profit margin may be affected.
|
|
Competitive advantage.
|
Lasting free shipping policy for coming shipments.
|
|
A strong marketing tool.
|
Affecting international shipping.
|
-
- Flat rate shipping: Flat rate shipping is a model where the shipping cost is fixed following the weight, size, or distance of the package. The question is how to calculate flat rate shipping for e-Commerce. As per the above guide, you can calculate rates through carrier platforms such as FedEx, UPS, DHL, or USPS.
- Real-time carrier calculated shipping: Using real-time carrier-calculated shipping rates can have the exact shipping cost as well as eliminate mistakes in calculating. Besides, real-time carrier calculating also helps manage businesses shipping costs.
- Weight-based shipping: This method secures improving customer satisfaction and improves profit margin by guaranteeing that is true cost of fulfillment.
- Factors to consider:
- Product price and margins: When setting shipping charges, business owners should notice product prices and profit margins to ensure competitive selling rates in the eCommerce market.
- Competition: In the calculating process, online sellers should search for the different shipping rates platforms to compare and choose the best one.
- Customer expectations: Shipping costs are a part of product price. However, it is so important to maintain and keep customer satisfaction in online purchases. Setting reasonable shipping costs, you will have many customers.
Conclusion
In conclusion, knowing clearly how to calculate shipping costs can help business owners and online sellers manage efficient costs of shipping in order to avoid mistakes in calculating costs. We also mentioned some typical factors affecting shipping costs and step-buy-step guides on how to calculate shipping costs. This is a simple way to do so you will master your shipping costs and boost your bottom line
Let’s visit SourceVietnam.com and explore more trusted suppliers to take your business to the next level.
FAQs
How do I calculate shipping costs for my small business?
How to calculate shipping costs for small businesses? USPS shipping cost calculator for small packages is one of the best choices for calculating shipping costs for small businesses. You can sign up for an account online and submit cargo details to determine the shipping costs. Besides, DHL, UPS, and FedEx also provide calculator tools for business to figure out shipping costs easily and quickly.
What is the cheapest way to ship a package?
That is UPSP service. You can pack your shipment, measure it, and apply USPS postage calculator by weight to calculate the shipping costs. This way is so easy to proceed and you can find out the results immediately. For personal or small shipments, you can try to calculate shipping costs as a guide.
How do I estimate shipping costs for international shipments?
Estimating shipping costs for international shipments is necessary for trading activity. Let you take a look at these steps to calculate international shipping rates:
- Step 1: Scale the size and weight of the package.
- Step 2: Consider choosing a suitable shipping carrier.
- Step 3: Access to their online shipping calculator.
- Step 4: Fill in the shipment information and get the shipping costs.
What is dimensional weight and how does it affect shipping costs?
Dimensional weight is determined by the formula:
Dimensional weight (centimeters) = (Length x Width x Height) / Default number
Default number: 5000 for express option, 6000 for air cargo option.
Shipment weight and dimension will strongly affect shipping costs. The larger weight and dimension, the higher shipping costs.
How do I calculate shipping costs for international deliveries?
How to figure out shipping cost. You can follow these steps below:
- Step 1: Measure package size and weight.
- Step 2: Decide to select the best delivery option and carrier.
- Step 3: Approach to the online shipping calculator.
- Step 4: Input the details of the shipment and get the final results.
What factors affect the cost of shipping?
In the transportation process, there are many factors that influence the cost of shipping. However, we can list some typical elements consisting of package dimensions and weight; shipping distance, delivery speed, shipping carrier, packaging, insurance and additional services. In cost management, managers need to focus on them to have the right effective strategies.
Can I charge customers for shipping based on their location?
Yes of course. The question is how much to charge customers for shipping? You should apply the rules that, the farther the locations, the higher the shipping cost to manage costings effectively. Distance is also an importation factor for carriers doing cost strategies because it affects fuel charges, surcharges, and handling fees.
Is there a way to offer free shipping without losing money?
Yes, it is. You can offer free shipping and you do not lose money. However, this way you need to be careful in planning pricing strategies to prevent from meeting financial risks. Free shipping is also an attractive strategy for businesses to promote their services and products to customers.
