You've done a lot of hard work to get online sales. Now it's time to think about shipping. As you may have realized, fulfilling orders isn't always as simple as placing the product in a box and mailing it off. For online sellers that want to maximize profit, you need a good shipping strategy.
First, let's discuss how shipping companies decide how much you will pay for shipping.
How are shipping prices calculated?
When you print a shipping label, you may have noticed that you need to know the package dimensions and weight (unless you're using flat rate shipping). Both size and weight factor into how shipping prices are calculated when you use your own box. The larger the package and the more it weighs, the more likely you are to pay extra.
So, what is dimensional weight?
Also known as volumetric weight, the dimensional weight formula assigns a value to each package based on the package's cubic volume ( L x W x H ). The cubic volume is then divided by a certain number, which varies by carrier.
Shipping companies like FedEx, UPS, DHL, and USPS use dimensional weight for most shipments, excluding flat rate boxes.
But wait…there's more!
Let's talk billable weight, aka chargeable weight. You'd think that shipping companies would just charge you according to the dimensional weight of the package. After all, they went to all that trouble coming up with a complicated mathematical formula, right?
Well, that's not always the case. They will charge for whichever is higher — the dimensional weight or the actual package weight. That is the billable weight.
Here is an example
Martin just sold a toaster on eBay. The shipping box is 15" long x 10" wide x 8" tall. The package weighs 4 lbs.
Martin takes the package to his favorite shipping company, UPS. Like most carriers, they want to charge him for whichever is more: the actual weight or the dimensional weight. We know the actual package weight is 4 lbs. Now we have to figure out the dimensional weight.
Here is the UPS dimensional weight formula for domestic shipments:
Dimensional Weight = [ L x W x H ] ÷ 166
Martin’s package dimensional weight = [ 15 x 10 x 8 ] ÷ 166 = 7.22 lbs.
Since the result is a fraction, it gets rounded up to the nearest whole number. In this example, the final dimensional weight is 8 lbs.
Next, UPS will compare the dimensional weight to the actual weight. The actual package weight is 4 lbs. And the dimensional weight is 8 lbs. UPS wants to charge for the higher value; In this case, they will charge Martin based on the dimensional weight of 8 lbs.
Now let's see what happens if Martin uses a larger box to ship that toaster
A week later, Martin has sold another toaster. Cha-ching! This time, he puts it in a box that is 20" long x 15" wide x 10" tall. The actual package weight is still 4 lbs.
Martin takes the box to UPS.
UPS Dimensional Weight = [ L x W x H ] ÷ 166
Martin’s package dimensional weight = [ 20 x 15 x 10 ] ÷ 166 = 18.07 lbs.
Since the result is a fraction, it gets rounded up to the nearest whole number. That means the dimensional weight of this package is 19 lbs.
Again, the dimensional weight (19 lbs.) exceeds the actual weight (4 lbs.). So UPS will charge him based on the dimensional weight.
However, last time Martin shipped a toaster, he used a smaller box. As you recall, the dimensional weight was only 8 lbs. This time, he used a bigger box, and the dimensional weight has more than doubled!
Martin is bummed he has to pay so much. Next time, he will use a smaller box.
Refine your shipping strategy to save money on shipping
Since package size plays a big role in calculating dimensional weight, you should use the smallest box possible. You don't want a lot of empty space in the package. In general, the larger the package, the more you will pay.
For sellers with hundreds of SKUs or products of varying sizes, it's not practical to buy custom-size shipping boxes for each product. Instead, an assortment of boxes (small, medium, large) gives you the ability to choose the most appropriate box size for each shipment. There may be a little extra room in some packages, but it's better than being stuck with a single box size that is too large.
Small decisions like these can lead to substantial savings in the long run.
You can use our dimension weight calculator.
Read the next blog post: Cheapest Way to Ship Large or Oversized Packages.