Six Factors That Affect Shipping Costs

Published on Sat, Sep 30, 2023 3:00 AM

Shipping can be a powerful tool for businesses that hold inventory, as it allows them to expand their customer base and boost sales via an efficient e-commerce platform. However, managing shipping expenses can be a daunting task. Choosing options that balance affordability and customer appeal requires a thoughtful approach. 

In this guide, we will explore the elements that impact shipping costs and tips to lower expenses or calculate shipping fees for their products. Shipping is so important to your business and this process may be more complex than expected.


Distance and Zones

The origin and destination of a package greatly impact shipping costs, as it is logical that the farther the package needs to travel, the higher the cost. For instance, shipping an item within a state is less expensive than sending it internationally. The same applies to different regions within a country. 

To accurately determine shipping costs, an online calculator can be used. It offers a quick estimate of the charges by requiring only basic information such as the sender and recipient's address and the package's dimensions and weight. 

While businesses can't change the cost associated with distance, they can optimize their shipping expenses by analyzing past sales and customer locations. By choosing a fulfillment warehouse closer to the majority of customers, businesses can minimize overall shipping costs while expanding to new regions.


Package weight and dimension

The primary determinant of shipping costs is the weight and size of the packages being shipped. The heavier and larger the package, the higher the cost. While the size of the cargo may be beyond your control, you can use various types of packaging to keep costs low. The package should be sufficient to securely hold the goods, but not so large that it results in excessive shipping fees. Additionally, smaller packages are more likely to protect the cargo from potential damage caused by movement during transport.


Declared Value

Another element that influences shipping costs is the declared value of the shipment, which applies to both domestic and international deliveries. Sellers have the option to set the declared value lower than the actual sale price. This can result in a reduced rate compared to the cost paid by the customer. However, it's important to note that courier companies are only held liable for damage or loss up to the specified declared value.


Shipping Method and Time

Shipping costs can vary greatly depending on the method chosen. Common options include air shipping and ground shipping, with air shipping being significantly more costly. If shipping internationally, ocean shipping should also be taken into account. 

The key is to find a balance between the desired shipping times and the associated costs. If offering expedited or overnight delivery is a priority, then air shipping may be necessary. For two-day delivery outside a certain radius, air shipping may also be required. Otherwise, ground shipping may be a more cost-effective option, although it will take longer. 

It's important for businesses to consider if these costs can be passed on to customers or absorbed as company expenses, depending on the industry and operations.



Customs and Duties

Customs, duties, and other taxes play a significant role in determining shipping costs, particularly for cross-border shipping which incurs country-specific fees, such as commodity-specific tariffs and import duties. It is important to familiarize yourself with the de minimis value or threshold set by other countries and identify which countries have no customs duties on imported goods. While customers are responsible for paying any additional customs taxes, it is essential to communicate this to them and explain that these duty fees are beyond the control of the merchant and not included in the seller's commission.


Tracking and Insurance

Tracking and shipping insurance are additional factors that can impact shipping costs. While not all merchants offer these services, they can be a valuable selling point as they provide customers with the assurance that the package will be secure during the delivery process.

Tracking is an important aspect of providing security, as it confirms that the package has been sent and allows customers to track their items. Shipping insurance, on the other hand, covers the cost of lost or damaged parcels. Many shipping companies in Canada offer insurance plans, and some include complementary coverage that covers the cost of the merchandise up to a certain amount.


Ways to lower your shipping costs:

  • Being ready to unload your goods promptly upon arrival to avoid charges for container detention.
  • Requesting extended free days before shipping if you know the unloading process will take longer.
  • Providing all necessary shipping documentation ahead of time to prevent delays or customs/quarantine issues.
  • Allowing for flexibility in your budget as freight timelines and costs can change unexpectedly.
  • Choosing experienced freight forwarders who can provide a cost estimate before shipping, and have established relationships with major container terminal operators. This can save you time and provide peace of mind.



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