How to Calculate Shipping Costs and Make an Accurate Shipping Estimate

73% of shoppers expect affordable, fast deliveries whenever they shop online — but is offering inexpensive (or even free) shipping options hurting your bottom line?

You want to offer the best ecommerce shipping options to your customers, but you can do only do so if you’re keeping an eye on your margins. Knowing and managing your shipping and logistics costs is critical to keeping your online business profitable.

So, what do you want to learn?

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How to calculate shipping costs

Shipping costs vary depending on a variety of factors, from package measurements, shipment type, weight, location, and more. Once these variables are calculated, a carrier will put a price on your shipment.

Here are six variables that can affect the cost of shipping for your online store.

1. Package dimensions

All major carriers use a pricing technique called dimensional weight (also called DIM weight) to calculate shipping rates. Dimensional weight takes into account the size of a package to determine the shipping cost.

DIM weight is calculated by multiplying the length, width, and height of the package or box size, then dividing by a standard DIM divisor. Shipping carriers like USPS, FedEx, and UPS calculate shipping charges based on whichever is greater: the actual weight of the package or its DIM weight. Whichever is higher becomes the billable weight for which your business will be charged.

2. Package weight

The package weight is how heavy the item is — no DIM divisor or calculation necessary. As mentioned above, if this number is higher than the DIM weight, it’ll be used to calculate shipping costs. The heavier and larger the package, the more expensive it will be to ship.

3. Shipping destination

Carriers use shipping zones to calculate shipping rates. Shipping zones measure the distance between a package’s point of origin and its destination. In the US, these can range from Zone 1 to Zone 8.

Shipping zones are calculated based on where your package is shipped from. This means that two different points of origin shipping to the same destination may be shipping to completely different zones.

As a rule of thumb, the higher the shipping zone, the more expensive a package will be to ship.

4. Value of contents shipped

If you’re shipping very high-value products, you may want to have your shipments insured. Shipping insurance offers reimbursement to senders whose parcels are lost, stolen, and/or damaged in transit. While useful, this service can add significantly to your shipping cost.

5. Delivery times

Thanks to Amazon Prime, customers expect fast shipping everywhere they shop online. However, if you’re shipping from only one location, fast, premium shipping gets more expensive as zones get higher. For example, 2-day shipping to a customer in Zone 1 can be done through ground shipping; 2-day shipping to Zone 8 will require more expensive expedited air shipping.

6. Unexpected problems


No matter how airtight your shipping strategy is, unexpected issues may come up from time to time. These can range from delays in transit, to lost or damaged items, to split shipments. While you can never predict exactly what will happen, make sure to leave some wiggle room in your shipping budget in case of emergency.


How much should you charge for shipping?

Shipping can be expensive, so ecommerce brands need to be strategic in how they go about charging customers for this line item. Just like calculating shipping costs can be complicated, so can determining how much you’ll charge customers (or justifying how little you’ll charge them).  

There are several options, ranging from free shipping, to charging what the carrier charges you (known as real-time rates), to setting rules based on certain criteria (e.g., depending on the weight and dimensions of the product, the shipping destination or zone, and other attributes). 

ShipBob surveyed hundreds of ecommerce brands and found in our 2022 State of Ecommerce Fulfillment Data Report that:

  • 25% always offer site-wide free shipping for domestic orders.
  • 24% don’t offer free shipping at all.
  • 35% require consumers to spend at least $50 USD to get free shipping. 
  • 15% require consumers to spend at least $80 USD to get free shipping. 
  • 28% charge a flat-rate fee. 
  • 13% charge real-time rates. 

Since shipping to other countries can be especially expensive, domestic shipping often comes with more incentives than cross-border orders. It’s no surprise that consumers crave free shipping, and this conversion lever can have a major effect on cart abandonment. 

That’s why many brands implement the following strategies to help offset the absence of a shipping fee:

  • Increase the product price (to pad your margins beyond breaking even).
  • Increase AOV by offering bundles or a minimum spend threshold (that’s at least 10-20% above your AOV).

Ultimately, whether you can afford to offer free shipping will depend on:

  • The price of your products (the more expensive they are, the easier this is to do).
  • Your average order value (if customers spend very little per transaction, the shipping cost may be more expensive than your products).
  • Your margins (how much have you padded into your product price to remain profitable). 
  • Your average shipping costs (if you do the order volume to justify carrier or 3PL discounts, or whether you distribute inventory to ship closer to more customers). 

Decide on a pricing strategy

The amount you pay for shipping doesn’t necessarily reflect what you charge customers. It’s often a perception game, where the tradeoff is between more overall sales and revenue, or more profit per order. 

To recap, you can:

  • Charge nothing for shipping (and making sure all website visitors know it) to increase sales and acquire more customers. 
  • Charge a flat rate to cover at least some of your shipping costs on most orders.
  • Charge on a case-by-case basis, aiming to pass the shipping cost along to the customer.

Be sure to do scenario planning to calculate these nuances based on which pricing strategy you decide. It’s worth noting that:

  • Many brands test shipping cost pricing, and try running campaigns to their email database, like “Free shipping when you spend $60” when they typically see people spend $40 per order, for example. 
  • This helps shed light on the effect a free shipping promotion has on your order volume (e.g., did you get double the orders than usual?). 
  • This is an easy way to start small without having to commit to site-wide free shipping always. 

Select a carrier & speed

Of course, some carriers will charge different shipping costs from others, and the faster the service level (e.g., when paying for expedited shipping such as an overnight service), the more expensive it will be. 

Shipping costs will ultimately come down to the locations you’re shipping from and to, and how fast the order needs to get there. To keep shipping costs low for you and your customers, it’s a best practice to use ground shipping and ship from optimal locations that are closer to the majority of more customers. 

Many brands achieve this by outsourcing fulfillment to a 3PL like ShipBob with multiple locations, and splitting their inventory across the locations that make the most sense for their customer base (which can surprisingly save brands money in many cases — see a 25% reduction in shipping costs and a 13% cost-savings to a company’s bottom line). 

Calculate costs for selected carrier & speed

Shipping carriers have shipping cost calculators on their websites. So when in doubt, you can plug in specific information about an order to understand their exact costs and even compare across providers. You can also use shipping integrations on your online store to calculate this automatically for you (from shipping software, to outsourced fulfillment providers). 

Additional charges to add

While the above covers standard orders, to be extra accurate you may consider adding charges to cover additional costs you may incur, such as:

  • Packaging if you pay for this as a separate line item (boxes, mailers, and dunnage) 
  • Surcharges for shipping heavy or larger items (which carriers charge when packages are extra heavy and large for their employees to ship and handle)
  • When signature is required (another fee from carriers when this is needed)
  • Additional insurance if the contents of the package is more valuable than the standard amount a carrier covers 

To take it a level further, you can also think through not just the shipping cost but some overhead you may want to allocate to find your true cost per order or revenue per unit, such as:

  • Any handling charges, like labor and order fulfillment.
  • Your return rate and policy to understand how offering free returns can end up costing you more money (including a second shipping label to send the product back).

Your reshipment rate for damages in transit, mis-picks, and other order errors since those end up costing you more.

Example ecommerce shipping costs

You’ve found a service to ship your product with, that’s great! Now you need to make sure your profit margins can stay high with these costs. This table below shows an example of ecommerce shipping costs with a 50% profit margin.


CostType of amount
Cost of goods$20.00
Shipping fee$3.00
Packaging cost$0.75
Credit card processing$1.00
Total cost$24.75
Optimal profit margin50%
Price to sell at:$49.50

Let’s walk through some real examples from carriers’ websites to calculate shipping costs for different scenarios. 

US standard group shipping cost example

Using USPS Retail Ground as an example:, we see that shipping a 2 lb. package to Zone 4 will cost $10.50 USD. This service is very economical as it ships in 2-8 business days (trading off cost for speed). 

*Note: These shipping costs were pulled from USPS’ website in March 2022 and are not reflective of what ShipBob charges to fulfill and ship 2-day shipping orders in the US. To get pricing from ShipBob, please fill out this form.

US 2-day shipping cost example

Using USPS Priority Mail Express as an example, we see that shipping a 2 lb. package to Zone 4 will cost $37.90 USD. This may seem expensive, but it’s because it’s a guaranteed service, providing some of the fastest turnaround times, from next-day to 2–day delivery. 

*Note: These shipping costs were pulled from USPS’ website in March 2022 and are not reflective of what ShipBob charges to fulfill and ship 2-day shipping orders in the US. To get pricing from ShipBob, please fill out this form.

International shipping cost example

Using UPSP Priority Mail International to Canada as an example, we see that shipping a 2 lb. package to Canada will cost $43.70 USD. This is a flat rate service that has a max weight restriction, making it a more economical option when it comes to international shipping costs. 

*Note: These shipping costs were pulled from USPS’ website in March 2022 and are not reflective of what ShipBob charges to fulfill and ship international orders. To get pricing from ShipBob, please fill out this form.

High-value item shipping cost example

To give an example of how insurance might impact shipping costs, we’ll go back to our USPS Priority Mail Express example from above for 2-day shipping. We know that shipping a 2 lb. package to Zone 4 costs $37.90 USD. If the contents of the package are worth $550 USD, it will now cost $48.25 USD to insure the $550 worth of merchandise, using USPS’ Domestic—Extra Services and Fees: Insurance since the cost of insurance for the $500.01-$600.00 USD range is listed at $10.35 USD.

*Note: These shipping costs were pulled from USPS’ website in March 2022 and are not reflective of what ShipBob charges to fulfill and ship 2-day shipping orders in the US. To get pricing from ShipBob, please fill out this form.

Shipping cost calculators for 3 popular shipping carriers

Each delivery service takes many of the above factors into account to offer different shipping pricing models and shipping methods. Here are the pricing models and calculators for three of the major US carriers that offer shipping services: USPS, FedEx, and UPS.

USPS shipping rates and shipping calculator

USPS is often the cheapest of the three carriers, especially for ground shipping. Because they run local routes every day, USPS already delivers to your end customer daily and doesn’t have to go out of their way to do so.

As of January 2019, USPS merged their two business pricing models (commercial plus and commercial base) into one: commercial pricing. Commercial pricing provides shipping discounts of up to 15% off retail shipping and postage prices. You need to apply for this pricing model through USPS.

To calculate USPS shipping costs, checkout  their price calculator. Here are some examples:

  • Mailing your product, or products that fits in a 12″ x 12″ x 5-1/2″ box, from Los Angeles to NYC using USPS Priority Mail 2-Day™ Large Flat Rate Box will cost you $21.50 with a normal delivery time. (update: on March 30, 2022)
  • Mailing a 6 pound 7 ounce package from NYC using USPS Priority Mail Express 1-Day™ will cost you $85.75 with a normal delivery time. (update: on March 30, 2022)
  • Mailing your product from Las Vegas, Nevada to Honolulu, Hawaii using USPS Priority Mail 3-Day™ Small Flat Rate Box will cost you $9.45 with normal delivery time. (update: on March 30, 2022)

FedEx pricing and shipping calculator

FedEx uses dimensional weight to calculate shipping prices. They offer a variety of delivery speeds, from ground to overnight and same-day. FedEx is also known for their international shipping capabilities.

One benefit of shipping items through FedEx is the FedEx Small Business program geared toward growing companies in need of shipping solutions. In addition to a rewards program and the Packaging Help Hub, FedEx Small Business members receive discounts of up to 16% on select shipments.

To calculate FedEx shipping rates, use their Rate Finder tool.

UPS pricing and shipping calculator

UPS also calculates shipping fees based on dimensional weight. Different UPS shipping options use different pricing models, ranging from UPS Ground to UPS 3-Day Select or Next Day Air.

Depending on the shipping option, small businesses can access shipping discounts through the UPS Connect program, including 20% off air and international shipments and 10% off ground.

For the most accurate UPS pricing estimates, check out their shipping calculator.

Comparing average shipping costs

For a better idea of rates across shippers, here is a comparison of retail shipping costs.* For this example, we used a product approximately the size and weight of a smartphone shipping from Los Angeles to New York City.

Shipping carrierShipping serviceShipping speedShipping cost
USPSRetail Ground7 days$8.95
USPSPriority Mail 2-Day2 days$9.30
USPSPriority Mail Express1 day$41.45
UPSUPS Ground4 days$11.71
UPS3-Day Select3 days$25.94
UPS2nd Day Air2 days$31.85
FedExFedEx Ground4 days$10.22
FedExFedEx 2-Day2 days$31.23
FedExStandard Overnight1 day$71.70

*This table is for illustration purposes only and is not reflective of ShipBob’s pricing. Shipping costs will vary based on carrier, seasonality, dimensional weight, package weight, products shipped, and a variety of other factors. Please reach out to our team to learn more about ShipBob’s pricing.

“ShipBob’s advanced software helps us quickly understand shipping costs and how to improve shipping times by being closer to where our customers are.”

Andrea Lisbona, Founder & CEO of Touchland

How small businesses can reduce shipping costs with a 3PL

For growing businesses looking to reduce shipping costs, working with a third-party logistics (3PL) provider can make all the difference.

Outsourcing shipping to a 3PL can help ecommerce businesses leverage shipping discounts not available to those who do in-house fulfillment. ShipBob is a 3PL that helps ecommerce merchants meet customer expectations and grow their business without breaking the bank.

Discounted rates

Many ecommerce businesses don’t ship enough to receive volume discounts directly from the carriers. Because 3PLs manage shipping for hundreds or even thousands of merchants, the cumulative volume qualifies for discounts from major carriers. These discounted shipping costs can then be passed directly onto their clients. ShipBob offers discounted rates and also had international locations across the globe.

“As our customer base grows, so does our global reach. Having orders shipping internationally, ShipBob’s affordable rates solved our need for international fulfillment capabilities.”

Carl Protsch, Co-Founder of FLEO Shorts

Distributed inventory and 2-day shipping

Shipping your items from a single ecommerce fulfillment center is great for customers who live nearby, but customers on the other side of the country will still have to wait longer or pay for expedited air shipping.

“From expanding into a second ShipBob fulfillment center, we are excited to be able to offer 65% of our customers with 2-day shipping, up from 32% by only having a single West Coast facility. Soon, this will be 100%. Not only is this better for our customers but we also gain a 13% savings to our bottom line.”

Pablo Gabatto, Business Operations Manager at Ample Foods

Splitting inventory between multiple fulfillment centers lowers the distance each order has to travel. ShipBob’s network of fulfillment centers in major US cities can help keep your inventory close to your customers. This allows you to provide 2-day ground shipping to more customers while keeping costs low.

“Because of Amazon, our customers expect 2-day shipping and we couldn’t find other 3PLs that can provide that. If they do, you are going to pay a lot for it. Without ShipBob, it would cost more than $100 per order to ship that fast.”

Founder of My Calm BlanketTime savings

You know the saying: time is money. Outsourcing time-intensive shipping tasks can give you time back to focus on activities to grow and scale your business. When you’re spending time packing your items and driving to the post office to wait in line, you’re missing the opportunity to grow your customer base, develop new products, market your business, and much more.

“ShipBob can process things more quickly than we could in-house and at scale. These time savings translate into cost savings as well.”

Sarah Chalos, Co-Founder and President, I Heart Keenwah

Ready to save on shipping costs while offering fast and affordable shipping? Click the link below to learn more about ShipBob, receive custom pricing, and get a demo of our dashboard.

1. How do I calculate dimensional weight?

To calculate dimensional (DIM) weight, multiply the length, width, and height of a package, using the longest point on each side. Then, divide the cubic size of the package in inches by the DIM divisor to calculate the dimensional weight in pounds.

2. Can I ship flat rate?

Yes, carriers like USPS offer flat-rate shipping as long as your item fits into one of their pre-measured boxes.

3. How do I calculate shipping costs for USPS?

You can use the USPS shipping price calculator to calculate the shipping cost of sending a package with the United States Postal Service. If you are a ShipBob customer, you’ll get automatic discounts when shipping with USPS.

4. How do I get shipping discounts?

Shipping with a third-party logistics service provider such as ShipBob can allow you to get significant discounts off of major carrier services, as well as help optimize your supply chain, which can also save you money.

5. Which is the cheapest carrier to ship with?

While they aren’t always the cheapest, the USPS is consistently one of the best-value shipping carriers.