Why is shipping so expensive? It’s a question that every eCommerce company and online shopper alike has asked themselves over the years!
Indeed, the reasoning behind shipping costs can be complex and opaque, fueling frustration among online merchants who’ve seen their profits reduced and customers dissatisfied due in large part to high shipping costs. The continuing rate increases every year by major couriers only adds to this frustration for eCommerce businesses.
However, having a better understanding of why exactly shipping is so expensive can help SMBs better plan their shipping strategies and maximize their profit. Here’s a closer look at six reasons why shipping is so expensive and how Easyship, a trusted partner of Fulfillrite that’s helped more than 40,000 clients worldwide with their eCommerce shipping needs, can help your own business!
How are Shipping Rates Determined by Couriers?
Before you calculate your shipping rates, it’s crucial to understand just how exactly the shipping rates are determined by couriers.
Many factors account for how couriers decide their shipping rates. Shipping itself is a complex process that has separate costs at various stages which steadily add up, hence producing higher prices.
For example: labor must be paid when orders are fulfilled, fuel costs for transportation must be taken into account. Drivers must also be paid when delivering the parcels and the like. This step-by-step process steadily and inexorably increases costs for couriers, which, in turn, are passed along to consumers and online merchants.
In addition to all of this, factors such as parcel weight, dimensions, value and destination all factor in heavily when shipping rates are determined by couriers. Bulky packages that weigh a lot take up a lot of “real estate” in delivery trucks, not surprisingly making them more expensive to ship.
Likewise, shipping a package across the United States from New York City to Los Angeles costs much more in fuel and labor costs than shipping it a few miles away, thus incurring higher shipping costs.
The good news is that almost all couriers are open to negotiation when it comes to shipping rates, something that becomes easier as your company ramps up its shipping volume over time.
Still, all of these variables and more factor in heavily when couriers determine their shipping rates. However, what makes shipping so expensive nowadays goes beyond even that. Here’s a closer look at six factors that make shipping expensive for both online shoppers and eCommerce companies!
1. Complex Courier Agreements
Courier agreements are complex. They often contain a number of small components that are not expensive alone but add up quickly.
For example, a typical courier agreement has everything from money-back guarantees to early termination charges and more, all of which increase costs quietly yet quickly and ultimately make the price of shipping much more expensive overall.
2. Fuel Surcharges
Fuel charges are a common yet little-understood cost that adds up in a major way. What are fuel surcharges, exactly? They’re the extra fees added by couriers that cover any fuel price fluctuations and often apply to both domestic and cross-border shipping.
Typically, their calculation is a percentage of the base rate and subsequently added to the price of each parcel. This way, couriers remain profitable even if fuel prices surge dramatically.
These charges, which many eCommerce companies sometimes overlook, can often add up quickly and increase shipping costs for online merchants.
3. Minimum Package Charges
Minimum package charges, implemented by UPS, FedEx, and many other major couriers, are when customers agree to pay more than their net charge based on a set minimum in their courier agreement or a discount.
Even with discounts, however, minimum package charges can increase shipping costs for online merchants. This is because the charge itself nullifies much of the discount for lighter-weight parcels, particularly those under five lbs., and those in lower zones. This, in effect, makes the discount ineffective for heavier parcels and, in turn, raises shipping prices for eCommerce companies.
4. Value Added Courier Services
Value-added services, perhaps not surprisingly, can raise shipping costs dramatically for eCommerce businesses. Many couriers hide value-added services, or accessorial fees, within their agreements. This makes it difficult to identify them quickly and clearly.
Just a few examples of these added fees include delivery area surcharges, address correction fees, residential fees and the like. Bit by bit, they can all add up very quickly for online merchants without them even realizing it!
5. Overhead Costs
Overhead costs from couriers also play a major role in making shipping expensive for online merchants.
Fulfillment center workers, truck drivers and other employees all incur expenses in the form of salary, benefits and the like. These overhead costs are subsequently passed on to online merchants in the form of higher shipping costs.
Because fulfillment and shipping is a multistage process with considerable labor involved despite the rapid automation of the logistics industry, the costs incurred at each step add up steadily for eCommerce companies.
6. Variable Parcel Factors
Finally, a number of variable factors concerning how parcels ship impact shipping costs for online merchants as well.
Parcel dimensions, weight, value and destination significantly impact shipping costs and can raise prices for online merchants. This is especially true for companies who ship out heavier, bulky items either cross-country or internationally.
Reduce Your Shipping Costs Today
Fortunately, there are solutions out there to lower your shipping costs!
Easyship, a Fulfillrite partner, offers the perfect solution to reducing your shipping costs. As the leading all-in-one shipping platform, we offer 250+ shipping solutions at pre-negotiated rates with discounts of up to 70 percent from major global couriers such as UPS, FedEx, DHL, USPS and many others.
In addition, Easyship offers guaranteed tax and duty automation, global fulfillment assistance and useful tools like our shipping rates calculator and courier comparison tool – all of which can help to cut your shipping costs!
Sign up for Easyship today to take advantage of our discounted rates from our trusted courier partners around the world!
Steve Longo is a digital marketer and freelance writer. He currently works as the Content Writer for Easyship, the leading all-in-one shipping platform for global eCommerce.