How much does shipping cost? Every eCommerce firm and online shopper has asked themselves this question! The reasons behind shipping charges may indeed be complicated and opaque, irritating online retailers and buyers alike. Major couriers’ annual pricing rises to add to eCommerce firms’ aggravation.
Understanding why shipping is so costly may help SMBs plan their shipping tactics and optimize profit. Go Freight Hub has assisted over 40,000 customers worldwide with their eCommerce shipping requirements.
WHY IS SHIPPING SO EXPENSIVE?
Shipping prices include many factors and moving elements for vendors. Carrier agreements are complex and often have “hidden” expenses. Other fees depend on what you send and where. Due to these considerations, even minor package shipment may be costly, eroding your earnings.
So, what drives up your delivery costs? All of the factors listed below are considered when calculating delivery charges. These are some of the factors that increase up your shipping cost:
- Courier Agreements
They’re complicated. They generally include a lot of low-cost components that add up rapidly. For example, most courier agreements include money-back guarantees and early termination fees, all of which add to the total delivery cost.
- Charges for fuel
Fuel prices are a crucial but often misunderstood expense. So, what are gasoline surcharges? They’re the surcharges introduced by couriers to compensate for gasoline price changes. Their computation is usually a percentage of the base rate, then added to each parcel’s price. So couriers make money even if gasoline costs skyrocket. These fees, which many eCommerce retailers neglect, may rapidly mount up and boost delivery prices.
- Mini Packages Charges
Minimum package costs are when clients agree to pay more than their net fee due to a minimum in their courier agreement or a discount. Even with reductions, minimum package charges might raise online companies’ delivery expenses. For lighter-weight deliveries, especially those under five lbs. and those in lower zones, the tax negates most of the savings. This renders the rebate useless for more extensive packages, raising delivery costs for eCommerce businesses.
- Value added services.
Value-added services may significantly increase shipping expenses for eCommerce organizations. Many couriers bury extra costs in their contracts. This makes immediate identification difficult. A few examples of these added fees include delivery area surcharges, address correction fees, residential fees, and the like.
Courier overhead expenses also contribute to the high delivery cost for online companies. Personnel costs, such as salaries and benefits, are borne by all employees. They are then passed on to internet sellers as increased delivery charges. Despite the increased automation of the logistics business, the expenses spent at each stage build-up for eCommerce enterprises.
- Parcel Factors
Depending on the package’s size, weight, value, and location, shipping fees might increase. This is particularly true for businesses that transport heavy, bulky commodities cross-country or globally.
- Shipping Point
In the US, airlines employ “shipping zones” based on zip codes to determine how far an item goes and how much it costs. For example, sending an item within 50 miles of its origin is the cheapest. Shipments above 1800 miles (or to Zone 8) cost extra. You’ll need to verify pricing depending on your shipping location.
Based on origin, it’s crucial to think about how near your warehouses (or inventory) are to your consumers. Shipment from Maine to a California consumer costs more than shipping from a California facility. A flat-rate service like USPS means you pay the same fee regardless of where you ship
It would help if you also considered delivery time (and across what distance). Offering 2-day delivery to a consumer in Zone 1 is cheaper than Zone 8 since the carrier must travel a greater distance in less time.
- Product Type
Finally, consider the contents of your parcels. Include shipping insurance for high-value items (such as original artwork or jewelry) to protect against damage or loss. It may also be necessary to transport HAZMAT or temperature-sensitive items.