Running a small business is hard enough without spending hours researching shipping costs. Unfortunately, finding the cheapest shipping rates is a key part of your business.
The cheapest shipping rate for e-commerce store owners is usually USPS, but there are a few exceptions where FedEx or UPS is cheaper. Prices change based on package destination, weight, dimensions, and delivery speed.
There is no universal answer to this question, so it is important to work out all the details before deciding which shipping company will work best for your business. Read on to learn more about different situations that factor into which of the three major shipping carriers offers the cheapest shipping rates.
How to Get the Cheapest Shipping Rates
While not every shipping company’s prices are the same, every company uses the same factors to determine its prices. When you are trying to estimate the shipping price for your packages, you will need to know:
- Origin and destination
- Delivery speed
- Package weight
- Package dimensions
These factors determine how the shipping carrier will calculate the price to ship different parcels.
Origin and Destination
The further a package has to travel to reach its destination, the more it will cost to ship it. The distance a package must travel also determines which shipping speeds and methods are available, and it is the one factor that cannot be changed.
Shipping companies use zones to determine their shipping cost. The shipping zone number is dependent on how far the package will travel from its origin to its destination. For example, a package that journeys up to 50 miles remains in Zone 1, but if it travels 51–150 miles, it is now in Zone 2.
Not every shipping method uses shipping zones. Flat rate shipping options will be the same price despite the length of their trip.
For shipping items under 8 pounds, USPS Priority Mail with Commercial Rates will usually be the cheapest option. Packages above that weight will be cheaper using FedEx Ground.
Speed is a major factor when it comes to determining costs. Customers are more likely to buy from a business that can get their product to them as quickly and cheaply as possible.
It is good to know that shipping companies understand this struggle. If shipping as quickly as possible is important to your business, you will want to keep these general rules in mind:
- For packages under 10 pounds needing to be shipped in two to three days, use USPS Priority Mail.
- For packages with a two-day shipping deadline, use UPS Second Day or FedEx two-day shipping. USPS will not guarantee delivery in this range.
- For next-day or overnight shipping, use UPS Next Day Air Saver or FedEx Standard Overnight.
Customers often choose the free shipping option when shopping online if it is available. Normally, the financially feasible way to offer free shipping to your customer is to cap it at a certain shipping speed and ensure the free shipping is only offered when order totals cost enough for the free shipping to make sense.
Package Weight for Cheapest Shipping Rates
Unless you are shipping flat-rate, you will need to weigh your package to calculate shipping costs and get the cheapest shipping rates. This can easily be done on your own with a package scale or at your local shipping retailer.
USPS is the cheapest option for shipping light items. If the package is under one pound, you will want to use First Class Mail or Media Mail (if the contents fit Media Mail requirements). For packages that weigh one to 10 pounds, Priority Mail will be a better bet.
FedEx and UPS are the best options for shipping anything beyond this weight. These carriers do not have a weight limit of 70 pounds like USPS, and you can ship items up to 150 pounds with either carrier. UPS surcharges start at 70 pounds, but the extra fee is lower than FedEx’s.
The last shipping price factor is a package’s dimensions. Shippers use this equation to calculate the dimensional weight of the package: Dimensional weight = (Length x Width x Height) / DIM divisor. The DIM divisors are set by the carriers.
Each shipping company uses a different divisor.
- USPS’s DIM divisor is 166.
- FedEx’s DIM divisor is 139.
- UPS’s DIM divisor is 139 for daily and 166 for retail.
Because USPS has the largest consistent divisor, you will get a lower dimensional weight, and therefore your shipping cost will be lower. To keep your dimensional weight low, make sure that you are using the smallest possible package for your shipment.
Comparing FedEx and UPS
FedEx and UPS are often compared, and at first glance, it can be hard to tell these two companies apart. They are both staples when it comes to shipping, building reputations on reliability and specialization. There are, however, a few key differences.
FedEx consistently has cheaper retail rates under the following circumstances:
- When shipping locally
- When shipping long-distance
- When shipping internationally.
It is worth noting that rates between FedEx and UPS level out after the two-day mark.
If delivery speed is a major factor in your business, then UPS has a better reputation for packages arriving on time. This is likely due to their more expansive vehicle fleet. They have a better presence outside the United States, so international packages are also more likely to arrive on time.
Comparing UPS and USPS
Both UPS and USPS are popular options when shipping overseas, but UPS’s tracking system is known to work better. Reliable tracking is important because it boosts customer morale and faith.
Heavier packages, typically anything over 13 pounds, are cheaper to ship through UPS. They are also less restrictive when it comes to what you can and cannot ship, but you should always check with local representatives when shipping anything hazardous.
USPS is rarely beat under the following circumstances:
- When shipping lighter-weight packages.
- Unlike UPS, USPS delivers on weekends.
- USPS is also the most direct way to deliver to a PO box.
If you use UPS to ship to a PO box, they will add an extra fee. FedEx requires you to ship to a PO box using SmartPost, which uses USPS at the end of delivery.
Cheapest Shipping Rates
While shipping has its unavoidable costs, there are ways to avoid the most expensive shipping options. You can easily save on your packaging fees by following these easy tips:
- Avoid unnecessary surcharges
- Keep packaging minimal
- Stretch out your delivery speed when possible.
If you can manage it, make time to drop off packages at the store instead of paying for pickup.
Each shipping company offers its loyalty program. These can be a great way to immediately cut your costs using discounts and rewards, especially when you favor one company over another.
FedEx Business Account
If you open a free business account with FedEx, you will receive discounted shipping rates for Express, Ground, Home, and Freight services that range from 15 to 70 percent (not including surcharges). FedEx also has a rewards program where you can redeem points for gift cards and merchandise.
UPS Small Business
UPS offers a similar account for small business owners, but instead of an overall rate, their discounts increase based on the number of packages you ship in six weeks. Discount rates start at 20 percent for Ground shipping, and you can save up to 50 percent on Air and International Express Services.
USPS Loyalty Program
The loyalty program for USPS also works on a tiered basis, but they offer rewards instead of discounts. For example, you receive:
- $40 shipping credit for every $500 spent
- $50 shipping credit for every $500 spent (when you spend $10,000 annually)
- Commercial base pricing (up to 20% off retail) when you spend $20,000 annually
Because each carrier has its own loyalty program, it is important to explore each closely to determine which might work best for your e-commerce store.
Conclusion – Cheapest Shipping Rates
The internet has done wonders for small businesses. Entrepreneurs are no longer bound to a narrow market, and they can now reach customers across the nation. Determining shipping cost can be a stressful endeavor, but a small amount of research can save you a lot of money.
It will become easier after your first few shipments when you figure out which factors are most influenced by your e-commerce business needs. Make sure you stay up to date on any pricing changes in the shipping industry, and you should be set. Also, check out our other post about how to save on shipping.