Understanding Shipping Costs In Ecommerce Pricing

If you're in search of a 3PL, you're going to want to read this: A brand once sent me a 3PL quote and said, “Looks solid. $1.50 pick and pack. Way better than the $2 quote we got elsewhere.” I asked, “Did you check the additional fees section?” Here’s what we found: Additional $2.00 per order for handling fees Additional $0.50 per order for labeling fees So while 3PL A advertised $1.50, the actual cost for a simple one-item order was closer to $4.00. Meanwhile, 3PL B quoted $2.00, and actually meant it. When people talk about "hidden fees" in this industry, this is exactly what they are referring to. Instead of presenting the full cost up front, some 3PLs show only a portion of it and bury the rest in fine print. Another common example is shipping quotes. Some providers will exclude fuel, residential, or delivery surcharges, making their rates look lower. Those missing dollars are often enough to sway a brand's decision in the wrong direction. So, how do you protect yourself? In your RFQ, include your last 100 orders and ask each 3PL to provide two things: 1. The total fulfillment cost [including order processing, pick and pack, labeling, packaging materials, and anything else that would appear on the invoice] 2. The total shipping cost [including all surcharges, such as fuel and delivery area fees] If you do this, you are no longer comparing pricing sheets. You are comparing sample invoices.

Dimensional weight pricing (DIM) can catch you by surprise if you’re not watching your box sizes. But with a few smart steps, you can actually turn this into an advantage: • Measure and optimize box sizes. Too much empty space drives up your bill. Right-sized packaging reduces wasted filler and keeps costs down.  • Choose materials carefully. Thinner, sturdy boxes can still protect your product without adding bulk or weight.  • Consolidate shipments when it makes sense. A snug, combined shipment can sometimes cost less than multiple oversized packages.  • Run the numbers. Analyze how frequently you get dinged by DIM charges. Tracking these fees sheds light on where you can cut extra inches or switch to a different box style.  • Test different options. If certain products push you into higher DIM rates, consider adjusting packaging or exploring other carriers with lower surcharges for your shipment profile. Simple tweaks can generate sizable savings at scale, especially for those shipping big volumes via UPS or FedEx. The key is consistent, data-backed adjustments—each package is an opportunity to shave off extra weight or find a better fit. Have you refined your packaging strategy to tackle DIM costs? A little focus on parcel dimensions can mean less sticker shock on those invoices and more control over your bottom line. #DIMPricing #ParcelShipping #UPS #FedEx #Transportation #Logistics #Ecommerce #BusinessInsights #Packaging #Optimization

“I got 90% off base shipping rates. I know a guy, I can connect you.” RUN. 🚩 When merchants ask for advice on how to optimize costs, there is always someone who “knows a guy” or someone who claims to be an amazing negotiator who can grind down your carrier. If you hear that, you should run. This isn’t exhaustive, but here are the real ways to save on shipping costs: 1) Is your inventory in the right place? Understanding where your demand comes from will dictate where to locate your inventory.  Placing your inventory in the right place drives down the distance that a package travels, and therefore drives down your cost.  If you aren’t doing a network analysis before you start, you are already off on the wrong foot. 2) Can you leverage scale? One reason 3PL’s exist is that they are points of aggregation. Labor can be shared across multiple accounts for order processing, and a carrier can pick up packages from multiple brands at one location, reducing the total cost. 3) Can you utilize multiple carriers? Different carriers focus on different weight bands and locales.  There are great carriers for lightweight packages and better ones for heavier products.  Regional carriers might serve one region really well, but not be nationally focused. 4) Do you have the technology in place to realize these gains? It’s a non-negotiable to have a system that can dynamically route orders to the correct fulfillment location.  Ask if your provider uses "rateshopping." This should not be hardcoded based on zip code. It should be dynamic based on your inventory levels and the location of the buyer.  Second, if you are utilizing multiple carriers, you want to ensure you have software that can shop for rates in real-time, looking at packages, destinations, and rates from the carrier. 5) Can you optimize your packaging materials? It is expensive to ship air.  Making sure you have the right boxes and are creating denser packages drives better returns. If someone’s “advice” for better rates is to talk to “their guy,” they are full of it. Run. There are concrete ways to optimize costs.   It takes great software and a plan to make it happen. There are also so many talented consultants who can help you with this (a few come to mind below). Nate Skiver, Kathleen Sullivan Garman , Robert Clemons, Timur Eligulashvili, John McClymont, Aaron Alpeter