There was a time when figuring out shipping rates was a straightforward endeavour: Calculate the weight of a package and the distance it needs to travel, and a simple formula would tell you how much shipping packages is going to cost you. The premise was simple: The greater the weight and the longer the distance, the higher the shipping costs.
This was a pretty straightforward process that didn’t account for the storage space required to transport an item. The fact is that even if you’re shipping a very lightweight item, package size can sometimes take up valuable real estate on a carrier’s vehicle, leaving less room for other boxes. Enter dimensional weight pricing, introduced by carriers in 2015 and altering the original formula for calculating shipping rates— and driving up costs for merchants everywhere.
If you’re an online seller, you’ve probably encountered dimensional weight pricing when shipping packages, whether you’re aware of it or not. Dimensional weight allows carriers to charge shippers more for larger, but lighter packages, and it can make your shipping costs higher than you’d like. Because when dimensional weight comes into play, it’s not just the actual weight of your package that determines carrier pricing. You now need to take into account how much space your packages will occupy on delivery vehicles.
While flat rate boxes are a fantastic way to ship, as an online merchant you already know it’s not always an option. That’s because the products you ship don’t always fit in a flat rate box, making shipping packages more complicated and less cost-effective.
So how can you anticipate these charges and develop an appropriate shipping strategy? Start by considering these five main factors that can impact the cost of shipping.
1. Package dimensions and weight
Sometimes, a flat rate box is an ideal solution, depending on what you’re shipping. These boxes can be purchased at any post office across the country, and there are three Canada Post package sizes to choose from. If Canada Post box sizes fit the items you want to ship and do not exceed 5kg in weight, you’re off to a great start. But if your shipment is heavier or the items don’t fit neatly in the box, you’ll have to start looking at less affordable options.
We’ve established that dimensional weight is a tactic employed by freight and shipping companies to ensure they don’t lose profits on lightweight packages. So how exactly does it work?
By now, you’re aware that the package size and weight will affect how much you pay for shipping. The major carriers use the dimensional weight (also referred to as DIM weight) of a package or box to calculate the shipping rate, and the dimensional weight is important because it is used to determine how much space a package will take up in the carrier’s vehicle.
It’s important to know the exact dimensions of a box as well as its weight in order to get an accurate rate, and a good rule of thumb in shipping is to always round up to the closest inch and to the closest pound before you enter the numbers into a dimensional weight calculator.
In order to calculate dimensional weight, you multiply the length, width, and height of the package or box, then divide that number by a standard divisor or DIM factor. The DIM factor represents the volume of a package allowed per unit of weight.
Postal carriers often have a higher DIM factor (166), which reduces the dimensional weight, whereas courier companies often use a lower DIM factor (139), resulting in a higher dimensional weight.
Check out the below chart to get a better understanding of the possible dimensional weight charges based on different DIM factors. All DIM factors used below are presently in use by various carriers around the world.
To illustrate, the below example is based on a box with the dimensions 20” x 10” x 12.5” and an actual weight of 10 lbs.
While the dimensional weight can be affected by the DIM factor, the actual weight is simply how heavy the item is— no DIM factor or calculation required.
Almost all carriers will calculate shipping charges based on whichever is greater: the actual weight of the package or its dimensional weight. Whichever is higher becomes the billable weight for which you will be charged. To put it simply, the bigger and heavier a package is, the more expensive it will be to ship.
With that said, it’s also important to ensure you understand the maximum dimensions and weights allowed by each carrier. If you make an error when entering the package dimensions and weight, and you exceed the below maximum dimensions or weight limit, you’re liable to additional charges such as “additional handling, overweight, or oversize” that can incur fees up to $650 in some cases.
Keep these maximum dimensions and weights handy to avoid these extra charges:
◦ Maximum length per package 108” (274 cm)
◦ Maximum weight 150 lb (68 kg)
◦ Maximum length per package 48” (120 cm)
◦ Maximum weight 150 lb (68 kg)
◦ Maximum length per package 48” (120 cm)
◦ Maximum weight 150 lb (68 kg)
When developing your shipping strategy, a dimensional weight calculator such as the Canada Post shipping calculator is your best friend. Just remember that calculations vary by carrier, so no matter which shipping company you’re using, go straight to the source for the most accurate rates. Here are some links to help you get started: Canpar shipping rate calculator, FedEx Canada rates, UPS shipping rates, DHL rates, Purolator rates.
Ultimately, no one wants to overpay for shipping, so the most important thing you need to do to avoid dimensional weight pricing is to use the correct package size for your products. Consider both, the size of the item you’re shipping and also how fragile it is, and choose your packaging accordingly. It goes without saying that fragile items need more cushioning, which takes up more space, so search for packaging that allows just enough room for the padding materials. Aim to keep the package as small as possible, without compromising the safety of its contents.
Tip: If you ship items on pallets, carriers will calculate the overall volume of the loaded pallet to generate pricing. Similar to package shipments, their rate formula takes into account both pallet size and weight, so you should prepare your pallet in a way that minimizes the amount of space it takes up in the freight vehicle.
2. Shipping destination
Where you package is going is another variable that can affect your shipping rate. Shipping zones measure the distance between a package’s point of origin and its destination. Almost all carriers divide countries and the globe into different zones for domestic and international shipping— these zones either use a numerical or alphabetical value (or a combination of those) to designate each shipping destination.
USPS, for example, utilizes eight numerically based major zones in the US (Zone 9 is designated for Freely Associated States, such as Guam, Palau and other US Territories). In Canada, however, Canada Post has 22 zones, ranging from Zone A1 to Zone J2.
For many major couriers, like UPS, shipping zones can be affected by the type of service you select. Typically, the higher the service level, the higher the zone; for example, shipping to Beverly Hills, California is a zone 247 for Standard (ground) service, whereas an Express service going to the same zip code is a zone 497. Regardless of whether you are shipping domestically or internationally, the higher the shipping zone, the more expensive a package will be to ship.
Because shipping zones are calculated based on where your package is shipped from, two different points of origin shipping to the same destination may be shipping to completely different zones. Most shipping zone calculators will ask you to enter the ‘ship from’ postal or zip code so that when the zone chart is generated, it is based on your exact shipping origin.
3. Value of contents shipped
If the products you are shipping are high-value, you may want to have your shipments insured. Most carriers will offer the first $100 of coverage for free, so if the value is below that threshold there’s no need to worry. For anything over the $100 mark, shipping insurance can be purchased to protect you if the parcel is lost, stolen, and/or damaged in transit. While useful, this service can add significantly to your shipping cost.
Each carrier has a different rate for calculating the cost of insuring your package. Typical rates can range from $2.65 to $5 per $100 of coverage: this means that a package with a value of $1000 will add an additional $26.55 on the low end, and $50 on the high end.
To reduce your overall shipping costs, choose eShipper insurance which can be added on for $0.75 per $100 of coverage, meaning that for the same value as the aforementioned, you would only pay $7.50 to insure a package for $1000.
4. Delivery times
Thanks to Amazon Prime, eCommerce customers expect fast shipping everywhere regardless of where they shop. That said, if you’re shipping packages from only one location, fast, premium shipping becomes more and more expensive as zones get higher.
For example, 1 or 2-day shipping to a customer in Zone 1 can be done through ground shipping; however, 2-day shipping to Zone 8 will require more expensive service, such as an expedited air service.
Offering your customers an express shipping option is a great way to compete with the Amazons of the world, and offering them ‘Live Rates’ upon checkout is the perfect solution to giving your customers choices, without reducing your margins and profitability.
Consider hybrid-service models which utilize air for the first mile, and then a local carrier for the last mile. This type of service can get your package from Toronto to Vancouver in 2 days without incurring an exponential rate increase.
5. Unexpected issues
While the above four variables can be fairly predictable and therefore can be considered in advance to determine your shipping rate, unforeseen problems may come up from time to time. These can range from delays in transit, to lost or damaged items, to split shipments, to additional surcharges. If a customer enters the wrong address, for example, an address correction will appear as an adjustment when the shipment is billed. While you can never predict exactly what will happen, make sure to leave a buffer in your shipping budget in case of emergency.
Keeping your costs low
While finding the smallest, most efficient packaging is one way to avoid dimensional weight pricing and keep your costs low, another way to reduce your spending is to get discounted rates on your shipments. Depending on the size of your business, however, it can be difficult to negotiate rates on your own, so your best option is to work with a 3PL provider to access savings that are normally reserved for high volume shippers. Reach out to us to learn more about how we can help you lower your shipping costs today!