How Do I Calculate Shipping Costs?
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If you’re shipping for your small business, determining postage rates aren’t quite as simple as buying a book of stamps. Just like anything else, postage can be purchased both retail and wholesale. As a business, you’ll likely want to take advantage of the wholesale rights. That is determined by numerous factors. In this guide, we’ll break it down for you.
Of all the shipping services, USPS offers some fairly complex pricing without offering as many options as other carriers. The rates are organized into three different tiers. Here they are from most to least expensive:
- Commercial Base Pricing (CBP)
- Commercial Plus Pricing (CPP)
USPS Retail Services
This is the most expensive shipping option, and is what the post office offers. These are also the prices listed online as “Compare To” rate 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 in terms of sending out merchandise to many clients, it 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. Oftentimes the subscription to the shipping software can pay for itself by the postage saved on just a few labels.
Commercial Plus Pricing (CPP)
This provides the best USPS postage rates. Oftentimes a minimum shipping volume in a set period is required to qualify for CPP, but there are some shipping software services that can provide access to these rates. This can save several dollars per package, and with USPS rates regularly rising these savings could prove critical.
Although not an official level of USPS pricing this can be a great 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 packages that weigh less than that, this can be a great cost-saving option.
Using FedEx and UPS
Both of these carriers offer two overall categories of pricing, but there are more options. The first option, which is retail, is the most expensive and quite 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. Whether you physically go to the store or purchase postage online, the rates will be the same. This is an important distinction for small eCommerce sellers who don’t have to worry about whether they are getting the best rate from the right 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.
This is complex because there’s no set way to negotiate rates with these carriers. However, after doing a large level of business with a carrier, it’s a great idea to approach them directly and ask about negotiating rates. Remember, they are available and it’s completely normal to request this. Some carriers may even automatically offer a discount after a certain volume of business has been reached.
Separate from the negotiated rates are special programs that allow those who are members in specific associations access to discounts on retail pricing. By signing up for a special savings program directly through the company it’s possible to get discounted retail rates without having to negotiate them directly.
Analogous to cubic pricing, in that it is when shipping charges are determined by the space they take up rather than weight there are some key differences to the USPS system. First off, there is no distinction between retail and negotiated rates in choosing whether to use dimensional pricing. And second, UPS and FedEx will both choose between dimensional pricing 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 what your rates are, 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 what you pay overall. Here are five tips for how your business can save money on postage.
1. Flat Rates
The USPS and FedEx offer this option. There are no qualifications needed to receive flat rate pricing. This can be cheaper than regular retail service through the carrier, depending on several factors.
Both carriers restrict the flat rate postage to packages shipped using their own boxes. This can be a disadvantage, but can also help with standardizing shipments across the board. The USPS even has international flat rate options.
2. USPS Regional Rate
This allows for rate reductions based on when packages are traveling shorter distances. This is all determined by zip code, and items can be regional anywhere within the United States. Like the flat rate option, this requires using a box supplied by the USPS, but it can be a great choice to save money on shipping larger items.
3. Hybrid Services
FedEx and UPS have both 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 the USPS for delivery. It takes longer to arrive, but saves significant money and has two added advantages. There’s the possibility of free Saturday delivery through the USPS and it eliminates the residential surcharge from the other two carriers.
If you don’t do a lot of shipping you may think that 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 its critical to do the research to find the right one for you if you go this route.
The pickup schedule you have with your carrier can influence rates. A daily pickup might lead to a monthly fee, but it also might lead to a more favorable rate that ends up saving you money.