How Do I Calculate Shipping Costs?

Author

Kevin Urrutia

Category

Marketing

Posted

May 09, 2023

If you’re shipping for your small business, determining postage rates isn’t quite as simple as buying a book of stamps. Just like anything else, postage can be purchased both retail and wholesale. You’ll likely want to take advantage of the wholesale rights as a business. Numerous factors determine that. In this guide, we’ll break it down for you.

Using USPS

Of all the shipping services, USPS offers some fairly complex pricing without providing as many options as other carriers. The rates are organized into three different tiers. Here they are from most to least expensive:

  • Retail
  • Commercial Base Pricing (CBP)
  • Commercial Plus Pricing (CPP)

USPS Retail Services

This is the most expensive shipping option which the post office offers. These are also the “Compare To” prices listed online when going through “Click N Ship.” Over recent years they have seen regular increases. This is the right option for sending a care package to a friend, but sending out merchandise to many clients is not the right option.

Commercial Base Pricing (CBP)

This is the intro level to commercial pricing within the USPS. Many shipping software services offer access to USPS shipping labels at the CBP rates. Often the subscription to the shipping software can pay for itself with the postage saved on just a few brands.

Commercial Plus Pricing (CPP)

This provides the best USPS postage rates. Often, a minimum shipping volume in a set period is required to qualify for CPP, but some shipping software services can give access to these rates. This can save several dollars per package, and these savings could prove critical with USPS rates regularly rising.

Cubic Pricing

Although not an official level of USPS pricing, this can be an excellent method for saving money on postage. Cubic pricing is when shipping costs are determined not by weight but by the cubic area the package takes up. There is a maximum of 20 lbs. per package, but if you regularly ship small, heavy boxes that weigh less than that, this can be a great cost-saving option.

Using FedEx and UPS

These carriers offer two overall pricing categories, but there are more options. The first option, retail, is the most expensive and clear-cut. The other option, negotiated rates, are not clear cut but can save a great deal of money.

FedEx and UPS Retail

One great thing about retail with these carriers is that it is consistent across the board. The rates will be the same whether you physically go to the store or purchase postage online. This is an essential distinction for small eCommerce sellers who don’t have to worry about whether they are getting the best rate from the correct method and instead use online and in-person services at their convenience. However, remember that retail prices are always higher, and as soon as your volume hits the minimum level, it’s a great idea to look into negotiated rates.

Contract Rates

This is complex because there’s no set way to negotiate rates with these carriers. However, after doing significant business with a page, it’s a great idea to approach them directly and ask about negotiating rates. Remember, they are available, and requesting this is entirely normal. Some carriers may even automatically offer a discount after a specific volume of business has been reached.

Special Programs

Separate from the negotiated rates are special programs allowing members of specific associations access to discounts on retail pricing. By signing up for a particular savings program directly through the company, it’s possible to get discounted retail rates without negotiating them now.

Dimensional Pricing

Analogous to cubic pricing, in that the space determines shipping charges they take up rather than weight, there are some critical differences to the USPS system. First, there is no distinction between retail and negotiated rates in choosing whether to use dimensional pricing. And second, UPS and FedEx will choose between dimensional and weight-based pricing based on which costs more. So whether you’re paying retail or on a contracted rate, if your package weighs more or takes up more space will determine your rates, and it will always be the higher rate.

What Are Ways to Save Money on Postage?

With eCommerce, shipping procedures and costs can be a make-or-break part of the business. However, by looking at every aspect of your business, including products, shipping processes, and customer expectations, you can maximize your shipping success and lower your pay overall. Here are five tips for how your business can save money on postage.

1. Flat Rates

USPS and FedEx offer this option. There are no qualifications needed to receive flat rate pricing. Depending on several factors, this can be cheaper than regular retail service through the carrier.

Both carriers restrict the flat rate postage to packages shipped using their boxes. This can be a disadvantage, but it can also help standardize shipments. The USPS even has international flat rate options.

2. USPS Regional Rate

This is determined by zip code, and items can be regional anywhere in the United States. This allows for rate reductions based on when packages are traveling shorter distances. Like the flat rate option, this requires using a box supplied by USPS, but it can be a great choice to save money on shipping more oversized items.

3. Hybrid Services

FedEx and UPS have partnered with USPS to offer hybrid services for residential deliveries. This can save up to 50% on standard rates.

Here’s how this system works. UPS or FedEx picks up the package and then hands it off to the USPS for delivery. It takes longer to arrive, but it saves significant money and has two added advantages. There’s the possibility of free Saturday delivery through USPS, and it eliminates the residential surcharge from the other two carriers.

4. Consolidators

If you don’t do a lot of shipping, you may think you won’t qualify for retail rates, but there is a way around this. A consolidator provides clients the deeply discounted wholesale rates by consolidating the shipping of many companies and leveraging that into the most favorable rates. Not all consolidators are the same, and it’s critical to research to find the right one for you if you go this route.

5. Pickups

The pickup schedule you have with your carrier can influence rates. A daily pickup might lead to a monthly fee but also a more favorable rate that saves you money.

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