Shipping gets complicated. It’s likely the reason why you’re here to begin with. Without a doubt, it’s a critical part of selling online, and it can make or break a sale. It’s one of an e-retailer’s largest expenses, it’s the final part of the purchase process — it’s how an order gets to the customer’s door.
In this guide, we’ll cover the single most important part of delivering orders that determines how much you will be paying: shipping rates.
A shipping rate, sometimes referred to as postage, is the cost a shipping carrier will charge you to deliver a product to the customer, and they’re a major expense when selling online that takes a bite out of every sale you make.
A shipping rate is determined by four factors — the weight (or dimensional weight) of an order, the distance it must travel to reach the customer, the shipping method used to get it there, and additional fees that a shipping carrier might charge to ship it.
Whether it’s in ounces, pounds, grams, or kilograms, the actual weight of an order has a heavy impact on shipping rates. Many e-retailers sell and package products deliberately with weight in mind, as even a couple of ounces can significantly affect your bottom line when you’re shipping out hundreds of orders.
Your product and your packaging will sum up the weight of a shipment. But that’s actual weight. In some instances, a shipping carrier will choose to charge a rate based on what’s called dimensional weight, a slightly more complicated way of weight measurement that’s centered on space.
In the past, shipping rates always focused on actual weight — purely ounces, pounds, grams, or kilograms. But in recent years following the surge in online orders, the implementation of dimensional weighting has expanded.
Think of a children’s foam playhouse or an aluminum birdcage. Although both are lightweight, they’re also spacious. If a shipping rate is calculated based on actual weight, the cost to ship such lightweight, large products is low. But they take up a considerable amount of space, space that a carrier could use for more valuable orders, whether it’s several lightweight orders or a single heavy one.
Dimensional weight exists for one reason: shippers want to charge for space. Only so many orders can fit in a vehicle or plane, and every centimeter of space is money a shipping carrier could be making. Here’s how it’s calculated:
Dimensional Weight = (Length x Width x Height) / Carrier-Determined Divisor
You can use inches or centimeters to calculate the volume of a shipment, and whatever unit of measurement is used will impact the divisor, which may also be referred to as a density factor or volumetric equivalent depending on the shipping carrier.
Most carriers will use inches to calculate the volume of an order, and they’ll base their divisors in inches as well — 139, 166, and 194 are some common ones. But volumes calculated in centimeters will naturally have larger divisors — those divisors mentioned earlier end up being 5,000, 6,000, and 7,000 respectively when using centimeters.
So long as the measurements you’re using — centimeters or inches — line up between your volume and divisor, you’ll get the same dimensional weight either way.
When it’s time to determine a shipping rate, all shipping carriers will select whichever weight, actual or dimensional, is larger.
As an example, let’s say you’re shipping out an order packaged in a box with the dimensions 12" x 12" x 12". Multiply that length, width, and height, and you have a volume of 1,728 cubic inches. Then divide by the divisor — we’ll use 139 in this case — to get a dimensional weight of 12.43, or 12 pounds (if the weight were to be 12.5 or more, most carriers would round up).
That foot by foot by foot box has a dimensional weight of 12 pounds. But let’s say the order’s actual weight is 13 pounds. In that situation, shipping carriers will base your shipping rate off the actual weight because it’s greater.
To the benefit of shipping carriers, dimensional weight does a solid job at forcing merchants to be careful with how they package an order. It discourages any wasted space, thus saving the merchant money and the carrier space for more orders.
Alongside weight, distance plays a major part in shipping rate calculations. To help streamline the process, shipping carriers tend to use what are called zones to pinpoint rates. Although most U.S.-based carriers will use zones to determine rates, others, such as Canada Post, may use a different method of measuring distance like postal codes.
Think of zones as waves that fan out from the location you’re shipping from — the further the zone, the greater its number, and the higher the shipping rate. Whatever zone an order’s final destination falls into will be the zone that determines a rate.
Shipping carriers formulate their shipping methods with weight and distance chiefly in mind, so you can bet that the method you select will impact your shipping rate. But those aren’t the only two factors — speed also plays a major role in how their services are designed.
In general, shipping carriers offer wide-ranging services that are more or less similar among each. Here are some common types of methods that carriers employ:
- Flat-Rate Methods
- Some shipping carriers offer flat-rate services. If an order fits into one of their carrier-made boxes and doesn’t exceed weight limits, they’ll charge you a flat rate for a range of zones.
- Fast Methods
- One to three days or overnight, all carriers offer speedy shipping methods for hasty delivery. How quick a shipping method is will impact your shipping rate tremendously.
- Low-Weight Methods
- Whether it’s USPS’ First Class, FedEx’s SmartPost, or UPS’ SurePost, shipping carriers typically offer extremely cost-effective services specifically for small and lightweight orders.
- International Methods
- International shipments will have a serious impact on shipping rates. Not only are they high-distance by nature — meaning high price — they tend to include more additional charges than domestic services.
On top of speed, shipping carriers will also attach some extra incentives to certain methods to make them more appealing. Order tracking and delivery confirmation are a couple of biggies.
Ultimately, the shipping method selected will put its finger on the scale when it comes to how expensive a rate is. If it’s a quicker delivery method, rates will be higher. If it’s a method designed for lightweight orders, rates will be lower.
Once a shipping method is selected and weight and distance are calculated, additional charges will often make their way into your final shipping rate. It’s one of the more irksome parts of shipping for many e-retailers, and because nobody wants to pay more on top of their rate, some opt for shipping carriers that don’t pile on the fees.
Additional charges can be slotted into three groups: fees that only apply if a service is requested by the e-retailer, fees that apply based on the condition of an order, and fees that apply based on shipping specifics.
- Shipping Specifics
- These type of fees tend to be non-negotiable and tied to delivery method. The most common is a fuel surcharge, where a carrier charges you a fee that covers their fuel costs. Another example is a residential delivery fee, where the carrier dings you a bit for a delivery to a home or business address.
- Order Condition
- An order’s contents and how it’s packaged can influence charges. For instance, any order that contains a fragile or dangerous good will incur an additional charge. And if a package surpasses certain dimensional and weight requirements, other fees like additional handling will be tacked onto your rate.
- Requested by Shipper
- For specific service requests, like signature confirmation on delivery, shipping insurance, or package pickup, carriers will charge you. They’ll also charge you for requests to fix an error you’ve made, like needing to change an address or rerouting a shipment.
For a deep dive on the many services that shipping carriers offer, as well as common additional charges e-retailers experience using each, check out any of our shipping carrier guides for USPS, FedEx, UPS, Canada Post, and DHL.
Although shipping carriers invest plenty of time and money into getting their logistics networks in ship-shape, errors do occur. Shipping insurance exists to reimburse e-retailers if something goes wrong with a package, whether it’s lost, stolen, damaged, or misdelivered.
Free or at a cost, all carriers will offer some form of shipping insurance. In many cases, they will automatically include a default amount of liability coverage, typically $100 worth, with every order. Many carriers will include it for all methods as a competitive advantage, but some only guarantee it for pricier methods that aren’t economy-class — it just depends on who you’re using.
For expensive orders, however, an e-retailer may choose to purchase more shipping insurance to cover themselves against any loss. Any amount that you want covered beyond a carrier’s default amount is referred to as “declared value” or “insured value” — you’ll set the declared value of your order and they’ll charge you a bit for every $100 of value you add.
Again, weight, zone, shipping methods, and additional fees all work together to sum up a shipping rate. A glimpse of this chart is all you need to understand how they play into one another:
FedEx First Overnight®
Next day by 8:30 am
FedEx Standard Overnight®
Next day by 3 pm
2nd day by 4:30 pm
Don’t worry. Nobody expects you to calculate shipping rates on your own or drag a finger up and down a chart to find what the shipping rate of an order will be. There are a few services out there that will do the number-crunching for you.
In the past, you had to take your shipment to a physical post office that did all the work for you, like packaging the product, determining a rate, and all that jazz. Fortunately, the worldwide web didn’t just provide the means for consumers to buy anywhere, it also provided the means for people to ship all on their own.
There are a few tools out there that an e-retailer (or just your average consumer) can use to calculate shipping rates.
Directly Through Carrier
Shipping carriers always offer their own online calculators that allow you to input every aspect of your shipment, from weight to product dimensions to ship-to addresses, to calculate a rate. Here are the tools of some popular carriers that you can use after creating an account with them:
The downside to these calculators is that they’re a little inefficient. If you’re shipping an order or two every now and again, they’re fine, but they can be time-consuming when you’re shipping a higher order volume.
Directly Through Platform
To simplify the process and save yourself time, you can calculate rates directly through the sales platform you’re using, like Amazon or Shopify. Many online channels will connect with a variety of shipping carriers, calculating the cost to ship for you (and the consumer).
Because a sales channel already knows your ship-from location, the customer’s address, and product information like weight or dimensions, they have all of the information needed to create a shipping label. By integrating with a variety of shipping carriers, they can communicate with them to automatically calculate real-time shipping rates.
Even so, using a sales channel to calculate rates carries some of the same disadvantages as going through a carrier’s calculator. If you’re selling on multiple channels, hopping on each to get rates can be tedious.
Enter: software solutions (like us). Shipping software tools will integrate with as many shipping carriers and sales channels as they can. The tool then acts a single hub where the user can view and ship orders from all of their channels.
Plus, shipping software tools will usually bundle in a bunch of other features and benefits (like discounted USPS shipping rates). For more on that, visit our our Shipping Workflow guide.
But a shipping rate is only how much you will need to pay to get a shipment from A to B. What comes next — the shipping label — contains all the information a shipping carrier needs to get it to the customer’s door.
Learn about shipping labels →