Maximizing profit margins tops the goal sheet for every e-commerce business. If you’ve set a high profit bar for 2025, perhaps it’s time to explore new ways to achieve those goals—like understanding your shipping rates.
Whether you sell office supplies or children’s books and toys, tracking shipping costs is key to maintaining a healthy bottom line. In a recent article, CEO Today cited that the average cost to ship a 1–5 lb. package in the United States ranges from $5.52 to $9.06. Why the range? Let’s talk about it.
In this article, we’ll break down how shipping rates are calculated and share tips to help you streamline shipping costs, optimize strategies, and boost profit margins.
A list rate foundation
Every shipping charge begins with a list rate. This is the basic cost involved with shipping a package, calculated with factors including weight, distance, and delivery speed.
- Package weight: Typically, delivery service providers offer standard rates to deliver packages under a certain weight threshold. If you ship packages that exceed that standard weight, your list rate will be higher. We recommend consulting with your delivery service provider to confirm their rate structure for standard and heavier packages.
- Shipping distance: A general rule is the farther the delivery, the higher the cost. For example, moving a shipment from Seattle to Tacoma will cost less than a trip from Seattle to Cleveland. The longer, cross-country trip calls for more time on the road, leading to a higher shipping cost.
- Delivery speed: Providing faster shipping services will increase your list rate. Most delivery service providers offer 1-5 day ground shipping as a standard option, with faster 2-3 day or premium 1-2 day express shipping at a higher cost.
How surcharges stack up
Depending on your shipping needs, additional surcharges may be required to get orders into customers’ hands. These are any fees added to your list rate to cover costs incurred throughout the process. They’re quite common, with Forbes reporting that these fees can be 20-40% of an annual shipping budget.
Here are a few examples that may appear on your invoice:
- Fuel surcharges: These charges cover fluctuating fuel costs across ground and express shipping. Depending on your provider’s billing structure, the charge may be shown as a percentage of your list rate.
We recommend padding your shipping budget, whenever possible, to protect profit margins from rising fuel costs. Depending on your shipping volume, you could also save on fuel surcharges by bundling shipments headed to the same delivery area. Your choice of provider can also help determine your fuel cost savings. For instance, Amazon Shipping has not implemented fuel surcharges on our shipping services despite cost fluctuations. - Oversized package surcharges: This added cost is for any package exceeding the standard weight or dimensions listed by your delivery service provider. Amazon Shipping, for instance, considers 50lbs or less a standard package weight. Sometimes this surcharge is unavoidable due to the nature of the shipment. However, optimizing the packing process may help you avoid extra fees.
Our advice? Use the smallest box or padded envelope possible to minimize wasted space and save on material costs. If you’re shipping large but lightweight items—like pillows, for example—try requesting a DIM Divisor calculation to help you save. DIM Divisors are used to convert the volume of a package into its dimensional weight, represented in cubic inches per pound.
- Other common surcharges: Depending on your shipping needs, you may notice a few other surcharges on your invoice. Most delivery service providers, for example, charge a package pickup surcharge to obtain shipments from your warehouse. A delivery area surcharge can be incurred for delivering to remote or hard-to-reach locations. You may also see this listed as a ‘remote delivery area’ or ‘extended delivery area’ surcharge. In addition, residential surcharges may be charged on top of standard delivery fees to deliver packages to homes or residential addresses. Shipping during a busy season (like the holidays) may incur a peak demand or peak surcharge. Want to deliver on weekends? You may be required to pay a weekend delivery surcharge.
These and all other surcharges mentioned here are negotiable. Your final total will depend on your shipping needs, volume, and choice of service provider. For example, Amazon Shipping does not require our shippers to pay residential or weekend delivery surcharges. We also offer straightforward, simple shipping rate cards so there are no surprises when your invoice arrives.
Surcharges are a common line item on any shipping invoice—covering everything from fuel to oversized packages, pickups, and peak demand. Accounting for these and other surcharges when planning your shipping budget can help you stay ahead of the curve.
Optimize your shipping & costs
Now that you know what’s wrapped into your shipping costs, let’s unwrap a few ways to save.
One way is by monitoring overall price. While chasing the lowest upfront prices, shippers can easily fall into a “list rate discount trap.” This happens when a low list rate draws the shipper in with the promise of a good deal. Later, however, the surcharges stack up—resulting in a much higher overall price. When it comes to getting the best deal on shipping, a little extra research into a provider’s level of service and rate card structure can go a long way.
Did you know that only 27% of consumers call same-day delivery a dealbreaker? This intriguing insight reveals another opportunity for lowering shipping costs. By providing delivery speed options at different price points, you offer customers the freedom to choose how much they want to spend on shipping. The budget-conscious will often select ground delivery—keeping more money in their wallet (and yours).
Finally, the best way to optimize your shipping rates is to choose a delivery service provider that customizes pricing for your unique shipping needs. In other words, you need a provider focused on helping your business grow.
The Amazon Shipping advantage
At Amazon Shipping, we strive to help e-commerce businesses ship more and worry less. A reliable solution for ground delivery service, we’re here to lift shipping burdens off your shoulders—so you can spend more time doing what you do best.
Amazon Shipping is helping e-commerce sellers experience shipping rate transparency and access Amazon’s innovative fulfillment network. To help you save, we offer:
- No added residential delivery surcharges
- No weekend delivery fees
- Straightforward rate cards that are easy to understand
- Contracted rates for pricing consistency and high-volume discounts
Contact us today to discover how Amazon Shipping can deliver for your business.
