Determining Shipping Costs 101 - A Guide for Retail Businesses

  • 2 min read

If you’re setting up an online retail business, you’ll need to determine how much you will charge for shipping and what shipping methods you will employ. The first step in doing this is to understand how your shipping costs are calculated.

Shipping costs are determined based on a number of factors including you/your customers’ desired service and speed, the dimensions and weights of your products, your product’s destination, and your shipping volume.

Service and Speed

In order to generate sales and stay competitive, many businesses offer free and fast shipping. Although this is a great way of boosting sales, it can be expensive as the more you expedite a shipping service, the higher your shipping rate will be.

Prior to deciding how much you charge for shipping, or if you charge for shipping, you’ll need to decide the shipping methods you’ll offer your clients (standard, express, same-day, etc.). From here, you’ll be able to get shipping quotes and determine whether you can afford to offer free or low-cost shipping.

Dimensions and Weight

The larger and heavier your products are, the more costly they will be to ship.

Every carrier company has a different method for determining shipping costs based on size and weight. Most carriers charge based on dimensional weight (DIM).

Dimensional weight is based on the package size rather than its actual weight. This means you’ll be charged more for large light parcels and less for smaller, heavier parcels.

You can calculate DIM by following this equation: (Length x Width x Height) / Divisor.

The value of the Divisor differs among shipping companies. You can expect it to be between 139-166. The higher the Divisor is, the lower the price will be.

Most major carriers also offer some kind of standardised, flat rate shipping.

With this option, you’ll select a carrier-provided, standard packaging. You’ll pay the same rate, regardless of weight and destination. Keep in kind, this usually only applies for domestic shipments.


The destination of your shipments also impacts shipping price. Not surprisingly, the greater the distance between your shipments’ origin and destination, the greater the shipping cost.

If you’re shipping internationally, you’ll also need to consider costs associated with customs clearance, additional taxes and duties, and tariffs. These differ from country to country, so make sure you’re on top of these costs prior to dispatching your shipments.


Last but not least, the volume in which you ship can affect shipping costs.

Many carriers offer discounts for large shipping volumes. This can lead to significant price reductions in the cost of shipping per individual product. Many businesses seek to benefit from these discounts by setting up warehousing and distribution processes so they can ship in bulk and store as required.

Estimating your shipping costs is a difficult process that requires the consideration of numerous factors. Your best bet in getting an accurate shipping quote is to get in touch with ISS. Our experienced logistics professionals will be able to give you an accurate quote for the shipment of your goods. Through our extensive network of shipping providers, we can also offer very competitive rates for shipping across the globe.

For more information, contact ISS today.