In the eCommerce business, shipping costs are a major differentiator. Cutting down on those costs can increase conversion rates and increase profitability. This is why every inch of a package matters because an extra one inch can cost you significantly.
Package weight is one of the main elements to calculate shipping costs other than package size, destination, and the recipient’s address.
A few years back, shipping carriers changed their rules for calculating shipping costs using the size of a package, along with its weight. It is a hybrid concept called “Dimensional Weight” or “DIM Weight,” for short.
There are several ways the dimensional weight can affect your shipping costs, and understanding each aspect will help you reduce those costs.
How Package Weight Affects eCommerce Shipping Costs?
When calculating your shipping costs, you need to figure out the cost of various weight combinations of items before shipping.
Shipping carriers have the expertise in saving space and lowering costs. Based on the dimensional weight and distance, they ship packages in trains, trucks, and planes.
The larger and heavier the package, the more space it occupies and the less room it leaves for more parcels. It means less profit for the carrier.
Based your shipping rate on package dimensions, accurately calculating dimensional weight pricing reflects the carrier’s actual cost to deliver.
When shipping your packages, a carrier will charge you for its actual weight or dimensional weight, whichever is higher. The dimensional weight is calculated using a formula, including the length, width, and height of a package, and a rate called the DIM divisor.
The details of all the weight factors for calculating the shipping costs of your eCommerce store are below:
1. The Dimensional Weight of Packages
As mentioned in the beginning, the concept of DIM weight is about space management. Because of the limited space in a shipping delivery truck, carriers take into account the DIM weight of packages to figure out the package density and shipping costs. It means a carrier will apply the DIM method even if you ship lightweight packages.
You need to multiply the height, length, and width of a package when calculating the DIM weight, considering its longest points on every side.
The following are the steps to calculate the dimensional weight:
- First, a shipping carrier takes into account the cubic size (inches) of the package to find out the DIM weight (pounds). While measuring the parcel, the carrier will check for any misalignment or bulge in it. Such issues may cost your business higher shipping costs.
- Carriers calculate a package weight based on its dimensions instead of its actual weight to boost their profit margin. They consider the closest whole number when it calculates the DIM weight.
DIM Weight Calculation (Source: www.efulfillmentservice.com)
- Subsequently, the carrier calculates the cubic size of the parcels by multiplying the dimensions. A cubic foot is 12″ x 12″ x 12″ or 1728 cubic inches. One cubic foot may seem small, but it is actually a spacious box.
- The sizes of most eCommerce parcels are less than 1 Cubic foot and do not require dimensional weight pricing. The most familiar eCommerce box size is 18″ x 16″ x 6″.
- In the final step, the carrier uses a DIM divisor or dimensional factor to divide the cubic size of a package. Global carriers such as FedEx, UPS, and DHL set DIM divisors, which represent cubic inches per pound.
Dimensional Weight can affect your eCommerce business in the following ways:
Dimensional weight pricing increases the costs for packages that are bigger than 1 cubic foot and weigh quite light. Seasoned shipping carriers find ways to minimize the impact of dimensional weight pricing. Here are a few things that you can do before handing over the shipment:
- Check your items and the boxes before initiating the shipment. Can those products fit into smaller boxes? A general rule is smaller boxes are likely to reduce your shipping costs.
- When using a software application, it is generally set to 1 cubic foot by default for parcels if you have not already entered any data on dimensions. If you know that measurement of your box is below 1 cubic foot, choose those packages. You need not do anything different when shipping.
- If you are aware that your boxes are larger than 1 cubic foot, choose large packages and enter the dimensions. A quality software tool can help you compare the size, weight, and distance when calculating the rate.
- If you offer free shipping to your customers, then calculating shipping costs through dimensional weight pricing can be a little challenging. In reality, free shipping does not exist. Customers will pay for the shipping either through higher product prices or you have to absorb the cost to increase sales.
Eventually, it comes down to the profit margin that a seller feels comfortable with. If you sell a few thousand pieces of clothing items, then even a small margin can add up to a significant profit. However, if you are selling a few hundred handmade handbags, a reduced profit margin can cause financial trouble for your store.
Also, review your sales history and figure out the location of your customer base. If you are based in New York and sell winter clothing to customers in Washington, high shipping costs might prevent you from offering free shipping or a competitive price. Although, customers expect free shipping these days, incurring such high shipping costs will leave barely anything as the profit margin.
Example:
Let’s try to understand the calculation of DIM weight pricing better. Assume that the length, width, and height of your packages (in inches) are 20, 10, and 10, respectively.
Also, we assume that the DIM divisor is 100 cubic inches per pound.
Now, the volumetric weight = 20 x 10 x 10/100 = 20 (or equal to 20 pounds).
If the actual weight of the item is 22 pounds, your shipping carrier will calculate the cost for 22 pounds. However, if the actual weight is less than the volumetric weight or equal to 18 pounds or less, then your shipping carrier will determine the shipping cost based on 20 pounds (the volumetric weight) as it is higher than the actual weight.
2. Actual Package Weight
The weight of a package is about the heaviness of a product. Here no DIM divisor or calculation is required.
According to the example above, if the actual weight of a parcel is higher than the DIM weight, the carrier will calculate shipping costs based on it. The bigger and heavier the parcel, the higher the shipping cost.
3. Surcharge for Large/Oversize Packages
Major shipping carriers name this surcharge differently. However, all of them apply it to parcels that have lengths bigger than 96 inches or 130 inches in length and girth. Keep in mind that this surcharge could result in a minimum billable weight of 90 pounds. It means you will bear more costs.
If you sell products that are large in size, you may not find a way around the shipping cost, but you could make it relatively cheaper by shipping in two packages.
When shipping, the dimensions of your packages could make a real difference to your costs than the weight. So, you need to optimize shipping for the items you sell.
4. Impact on Price
Now, what do all the calculations have an impact on the price? If the dimensional weight is higher than the two values, the carrier will use it in place of the actual weight to calculate the actual cost to ship your packages.
This is why you need to eliminate unnecessary packaging or keep it to a minimum. This way, your packages will take up less space and might lower your shipping costs.
How Global Shipping Carriers Determine Shipping Costs based on Weight?
Currently, major carriers FedEx, UPS, DHL apply 139 cubic inches/pound as their DIM divisor for both domestic and international shipping.
These carriers take into account most of the factors explained in the previous sections to calculate shipping costs. Here is how they do it.
FedEx Shipping Cost Calculation
FedEx uses the DIM weight to calculate shipping costs while offering various shipping options, such as ground, first overnight, standard overnight, priority overnight, and others.
FedEx runs a Small Business Center to help start-ups and small businesses that seek affordable shipping solutions. Besides, the members of the FedEx Small Business Center can get as much as a 30 percent discount on shipping.
You can check the FedEx Rate Finder tool to calculate their shipping costs.
UPS Shipping Cost Calculation
UPS also applies the DIM weight for calculating shipping costs. The shipping costs will vary depending on the range of UPS shipping options, including UPS Ground, UPS 2nd Day Air, UPS Next Day Air, 3-Day Select, and others.
Similar to FedEx, UPS offers small business shipping discounts on ups.com. Through this program, small businesses can get reduced shipping rates with 40 percent off UPS daily rates, regardless of how frequently or how much they ship.
Check the UPS shipping calculator to find out accurate shipping costs.
DHL Shipping Cost Calculation
To determine the DIM weight, DHL uses inches and pounds as mentioned below:
- It multiplies the length, width, and height of a package in inches.
- Divide the total by 139.
- The shipper rounds up to the next whole number and you get the DIM weight in pounds.
Here is the DHL freight shipping cost calculator.
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