How to Calculate Shipping Costs: A Guide

Calculating shipping costs helps you offer the best shipping experience to your customers and your business growth. Learn how get estimates here.
SendTech Staff Pitney Bowes
09/06/2023 Office

Shipping often accounts for 15-20% or more of total net sales, making it a significant business expense. Overpaying for shipping is all too common. To ensure profitability, it is key to understand how to accurately calculate shipping costs for all major carriers.

In this article, we will provide a step-by-step method to help you:

  • Calculate USPS shipping costs
  • Calculate FedEx shipping costs
  • Calculate UPS shipping costs

Table of Contents

Why is it important to calculate shipping costs?

 

Businesses of all sizes want to understand shipping costs to provide a better customer experience and grow profits. Yet, parcel shipping is inherently complex due to varying costs, carriers and service levels. Crafting a shipping strategy is essential to strike the balance between customer satisfaction and protecting your bottom line.

The reason? Statistics prove that shoppers are very sensitive about shipping costs.

  • Consumers consider shipping costs 2.85 times more important than delivery speed.
  • 47% of shoppers abandoned their cart because extra costs, such as shipping, taxes and fees were too high.
  • More than two-thirds of consumers won’t consider purchasing from a retailer that doesn’t offer free shipping.

By mastering how to precisely calculate UPS, FedEx, and USPS shipping costs, you empower your business to deliver spot-on shipping quotes during checkout, establish free shipping thresholds with confidence, and cultivate unwavering trust and brand loyalty among customers.

How to calculate USPS, UPS, FedEx and DHL shipping costs

Each of the major carriers has its own rate card and pricing strategy, and this will impact how you calculate shipping costs. In the next few paragraphs, we will take a close-up look at each carrier’s rates and services.

How to calculate USPS shipping costs

USPS is often the most economical shipping option, but not always the fastest. The most recent USPS price changes announced in July 2023 announced that its First-Class package service is now called USPS Ground Advantage. Here are a few examples to illustrate the cost of shipping parcels with the USPS:

  • Shipping a large flat rate box (with an outside measurement of 12” x 12-1/4” x 6”) from New York, NY to Columbus, OH via Priority Mail (2-day delivery) will cost you $22.80, regardless of weight.
  • Shipping a 9-pound package from Philadelphia, PA to Atlanta, GA via Priority Mail Express with insurance for $200 and adult signature confirmation will cost $111.00.
  • Shipping a 36-pound box from Chicago, IL to Memphis, TN via USPS Ground Advantage will cost $56.60.

Use this table to calculate USPS shipping costs for various packages:



Cost to ship a package from Boston MA to
Sacramento CA
  Speed Cost – 1 lb. Cost – 5 lbs. Cost – 10 lbs.
Priority Mail Express 1 day $51.65 $83.55 $122.90
Priority Mail    3 days $17.05 $29.35 $49.00
Small flat rate box 3 days $10.20 $10.20 $10.20
Medium flat rate box 3 days $17.10 $17.10 $17.10
Large flat rate box 3 days $22.80 $22.80 $22.80
USPS Ground Advantage 7 days $8.55 $20.50 $31.45

How to calculate UPS shipping costs

As a leader in package delivery services in the United States, UPS offers a wide range of domestic air and ground services. The examples and table below illustrate how your UPS shipping cost will vary based on the size and weight of your package, when it needs to arrive, and the distance to its final destination.

  • The total cost for shipping a 3-pound package from Minneapolis, MN to a residential address in Denver, CO via UPS Next Day Air would be $95.73.
  • Shipping a 12-pound package from Charlotte, NC to Indianapolis, IN via UPS 2nd Day Air A.M. would cost $54.05.
  • The cost to ship a 25-pound package from Portland, OR to a business in Seattle, WA for Saturday delivery via UPS 3 Day Select would be $73.25.

It’s important to choose the appropriate shipping option for your package: the cost difference between express delivery and ground service can have a significant impact on your bottom line.

Cost to ship a package from Boston MA to Sacramento CA via UPS
  Speed Cost – 1 lb. Cost – 5 lbs. Cost – 10 lbs.
UPS Next Day Air Early 1 day $118.67 $149.18 $187.29
UPS Next Day Air 1 day $88.67 $119.18 $157.29
UPS Next Day Air Saver 1 day $79.14 $112.14 $154.40
UPS 2nd Day Air A.M. 2 days $39.68 $69.82 $110.00
UPS 2nd Day Air 2 days $34.60 $61.03 $96.17
UPS 3 Day Select 3 days $28.18 $46.17 $69.28
UPS Ground  4 days $14.09 $23.38 $33.22

How to calculate FedEx shipping costs

FedEx is one of the most recognizable names in shipping, delivering millions of packages around the world each day. With a diversity of shipping options that range from early A.M. overnight services to economical ground services, there is a FedEx offering to meet every need. FedEx shipping costs will vary based on your shipping preferences, package dimensions, weight and destination. For example:

  • If you ship a 5 lb. package from Houston, TX to a customer’s home in Baton Rouge, LA  via FedEx Standard Overnight you will pay $55.87 plus a $5.80 residential delivery charge for a total cost of $61.67.
  • The cost to ship a 63.5 lb. package from Kansas City, KS to  Eau Clair, WI via FedEx Ground is $39.19 plus a $20 additional handling fee for a total of $59.19.
  • Shipping a 20 lb. package from Phoenix, AZ to Des Moines, IA via FedEx Priority Overnight will cost $223.65.

Use this table to calculate FedEx shipping costs for typical shipments:

FedEx costs to ship to Zone 8
  Speed Cost – 1 lb. Cost – 5 lbs. Cost – 10 lbs.
FedEx First Overnight 1 day $128.32 $161.39 $199.53
FedEx Priority Overnight 1 day $97.32 $130.39 $168.53
FedEx Standard Overnight 1 day $85.43 $120.00 $165.22
FedEx 2Day A.M. 2 days $45.22 $81.26 $127.21
FedEx 2Day 2 days $37.55 $67.50 $106.40
FedEx Express Saver 3 days $34.37 $57.85 $91.63
FedEx Ground 4 days $13.54 $22.46 $31.92

How to calculate DHL shipping costs

Although it may not be as much of a “household name” as FedEx or UPS, DHL is recognized as a global leader in express shipping. In the U.S., consumers can ship with DHL Express. The company also offers high volume shipping services for online businesses through its ecommerce division. The following are some examples of the rates you can expect to pay when shipping via DHL:

  • Shipping a 7 lb. package from Elizabeth, NJ to Tampa, FL via DHL Express Domestic will cost $46.67.
  • The cost to ship a 30 lb. package from Birmingham, AL to Cincinnati, OH with one-day delivery is $256.49.
  • If you ship a 12 lb. package from Tacoma, WA to Anchorage, AL via DHL Express Domestic you will pay $179.93.

 

DHL Express Domestic Rates – 1 day delivery
  Zone 2 Zone 4 Zone 6  Zone 8
1 lb package $28.55 $42.46 $48.38 $55.37
5 lb package $39.02 $86.68 $106.42 $115.52
10 lb package 446.47 $119.29 $143.24 $159.04
20 lb package $65.07 $183.39 $215.64 $232.64
50 lb package $118.47 $337.29 $402.54
 $445.04

How to determine shipping costs

Calculating shipping costs for your business and customers is not a one-size-fits-all task. Every order is unique and customer expectations vary. Balancing price and delivery speed is crucial for online success. Let's explore various methods to calculate shipping costs and find the best fit for your business.

Calculated shipping

Meeting customer expectations hinges on clarity in shipping costs. Calculated shipping offers a seamless solution, ensuring they know exactly what they'll pay. Here’s how it works: you determine the weight and package dimensions for every product that you sell. You’ll need this information to accurately calculate the shipping cost at checkout, based on the customer’s location.

Opting for calculated shipping offers both efficiency and profit optimization, as customers bear the shipping costs, eliminating the need to cut into your margins for a sale. The only trade-off is that a few customers may pay slightly more for shipping compared to flat-rate or free shipping options.

Flat rate shipping

Unlock the value of flat-rate shipping, with transparent pricing and complimentary packaging, without the worry of unexpected fees or hidden charges.

Flat rate shipping is the simplest way to calculate shipping costs. Flat rate shipping simplifies your shipping costs. You pay a single, fixed rate for various standard package sizes, from small to extra-large, regardless of the item's weight. If it fits in the box, it ships anywhere in the 48 contiguous states for the same low price. The only variable is delivery speed, with faster options costing more. This makes flat rate shipping perfect for heavy products going to distant destinations.

Free shipping

No doubt your customers love free shipping—and it can provide a competitive advantage. Clear costs enhance trust and curb cart abandonment. However, free shipping poses profit margin challenges. To implement it, you must plan how to cover the costs. You can calculate shipping costs and build them into your product prices, but you risk losing cost-conscious shoppers. If you accept lower margins, your bottom line may take a hit. Setting a minimum purchase to qualify for free shipping may prove to be a more successful strategy for many online retailers.

International shipping

Shipping across borders can be complex. It is challenging to calculate shipping costs due to the multitude of intricacies involved. To do this correctly, you must precisely calculate the landed cost—this encompasses the total expense of shipping your product from your location in Country A to your customer's doorstep in Country B. Beyond typical transportation charges, you must consider duties, taxes, currency conversions, export filing fees, and any additional costs like those associated with remote delivery areas.

What are the factors in shipping cost?

Carriers base their rates on package dimensions, weight, delivery speed and distance to the destination. They may also add extra fees for shipments with special handling needs or deliveries to remote areas. Furthermore, specific delivery requirements like insurance or signature confirmation may incur extra fees. You’ll need to understand these factors to accurately calculate shipping costs.

Dimensions

Although rates are set by weight, distance and speed, your package’s physical measurements – length, width and height—are important considerations when calculating shipping costs. Large packages consume more cargo space, and can be cumbersome to handle. Carriers establish size limits for packages, and exceeding them will result in a surcharge for additional handling. Precise package measurement or using carrier-provided shipping boxes helps avoid most size-related problems.

Weight

Heavy packages are challenging to handle and drive up fuel costs, resulting in higher shipping costs. Accurate weighing is imperative to calculate the correct shipping cost because shipping rates increases per pound. Carriers have set weight limitations, and exceeding them means extra handling charges.

Destination and shipping zone

The farther your package has to travel to reach its final destination, the more you can expect to pay. All carriers use zones to calculate shipping costs: the higher the zone number, the greater the distance from the point of origin. Although zones vary somewhat from one carrier to another, Zone 1 applies to deliveries within a 50-mile radius, while Zone 8 applies to deliveries farther than 1,800 miles or more within the contiguous 48 states. Higher zones apply to shipments to Alaska, Hawaii and U.S. territories such as Puerto Rico or Guam. Zones for international shipments are more complex.

Surcharges

You can’t accurately calculate your shipping costs without taking surcharges (additional charges to offset specific carrier expenses) into account. Carriers may impose surcharges on a shipment for a variety of reasons: the most common surcharges are for residential deliveries, delivery area surcharges, fuel surcharges and demand surcharges. Total surcharges can often reach 30-40% of your shipping cost. Be mindful of these fees and strategies to cut their impact on your profits.

Shipping insurance

Insurance may not be top of mind when you calculate shipping costs, but in some cases it may be a wise investment. Most carriers provide coverage of declared values up to $100 free of charge, and you can increase the amount for a modest upcharge. However, the carrier’s liability may be limited and coverage may not apply to certain high value items such as jewelry, tickets or computer chips. For more extensive coverage it may make sense to purchase insurance from an insurance agent or broker.

Product packaging

Packaging is a built-in cost for virtually every shipment, but it’s easy to overlook when you calculate shipping costs. Stocking various box sizes, tape, and packing materials can be costly. For small businesses, free carrier-supplied packaging is often the most cost-effective choice. Custom packaging tends to be reserved for high-value products due to its expense.

What are some potential unexpected shipping charges?

To maintain cost efficiency, it's wise to regularly audit carrier invoices. Mistakes can happen, and occasionally you may spot an unfamiliar charge. Here, we’ll go over a few of the less common shipping charges that may appear on your bill.

Re-weigh fees

Carriers automatically weigh and measure all incoming packages to verify the accuracy of the labeled weight. If the weight on the shipping label is less than the actual weight, the carrier will bill your account for the higher, correct weight. You may also be charged a fee for this correction. If the package is very light for its size, the carrier will apply the dimensional weight, in which case you will see a higher shipping charge on your invoice.

Customs delays fees

Shipping across borders entails a lot of documentation, and every detail must be checked and verified for accuracy before your packages can be released from customs. Missing or incomplete documents, vague shipment descriptions, or inaccurate valuations can lead to shipment delays. In addition to high international shipping charges, you may be charged fees for storage until your shipment is cleared.

Damaged item or lost item costs

No one anticipates incurring double shipping charges for one item but sometimes packages get lost, damaged, or stolen during transit or after delivery. With declared value coverage, your carrier is liable for losses they caused, but you may only receive a fraction of the cost to replace and re-ship the item. Given the high cost of lost, damaged, or stolen shipments, it's wise to invest in insurance and extra cushioning for fragile products.

How to reduce shipping cost

Although carriers set the rates, shipping is a cost within your control. With careful planning and discipline, you can make your shipping process more streamlined and cost-effective.

  • Understand your shipping spend. When you dig into the details you may discover simple ways to save.
  • Use free carrier packaging. Big savings don’t get easier than this.
  • Optimize your packaging. Avoid getting hit with DIM rates or additional handling costs.
  • Take advantage of flat rate shipping. Pay less to ship heavy items that fit into flat rate packages.
  • Minimize use of express delivery. Overnight shipments can cost two to three times more.
  • Use multi-carrier shipping software. Quickly identify the best shipping option for every package.

How can you prepare to save on shipping and mailing costs in 2023?

Don’t waste time researching rates and logistics; let Pitney Bowes shipping software do the work for you. Simply enter your package dimensions, weight, and destination to compare the full range of options from major carriers. Plus, you’ll get deep discounts that aren’t available anywhere else, visibility into your shipping spend and the ability to set rules to prevent overspending.

 

 

i Morning Consult https://pro.morningconsult.com/analysis/e-commerce-shipping-costs-speed

ii Baymard Institute https://baymard.com/lists/cart-abandonment-rate

iii DigitalCommerce360 https://www.digitalcommerce360.com/2023/02/27/shipping-cost-ecommerce-retailers-consumers/