Maximising 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, choosing a parcel delivery service provider with a knack for balancing shipping costs and reliable service is key. But if you aren’t sure what options are available and how shipping costs are determined, how can you make a truly informed business decision?
In this article, we’ll explain what’s involved in determining shipping rates and share tips to help you streamline costs, optimise 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 parcel, typically calculated with factors including weight and parcel dimensions, distance to travel, and delivery speed.
- Parcel weight & dimensions: Typically, parcel delivery service providers offer standard rates to deliver parcels under certain weight and dimension thresholds. If you ship parcels that exceed those standards, your list rate will be higher. We recommend consulting with your provider to confirm their rate structure for standard and heavier parcels.
- Shipping distance & speed: Often the farther the delivery, the higher the cost. However, providing faster shipping services will also increase your list rate. Most parcel delivery service providers will offer a standard speed and premium express shipping at a higher cost. Amazon Shipping, for example, offers domestic shipping with next-day delivery in the UK, France, Italy, and Spain. We also offer 2-3 day service options in the UK.
How surcharges stack up
Depending on your shipping needs, additional surcharges may be required to transport your parcels. 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. While these are common in the industry, they do vary by delivery service provider:
Fuel surcharges: These charges address fluctuating fuel costs across ground and express shipping. Depending on your provider, this charge may be shown as a percentage of your list rate.
We recommend incrementally increasing your shipping budget, when 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 parcel surcharges: This added cost is for any parcel exceeding the standard weight or dimensions listed by your parcel delivery service provider. (Amazon Shipping, for instance, considers 20kg or less a standard parcel weight.) This surcharge may be unavoidable due to the nature of the shipment. However, optimising the packing process could 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 parcel into its dimensional weight, represented in cubic centimeters per kilogram. - Other common surcharges: There are a few other surcharges that you may notice on your invoice. Most delivery service providers, for example, charge a parcel pickup surcharge to obtain shipments from your warehouse. A delivery area surcharge can be incurred for delivering to remote or hard-to-reach locations. Residential surcharges may be charged on top of standard delivery fees to deliver parcels to homes or residential addresses. Shipping during a busy season (like the Christmas holiday) 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. To learn more about what makes our shipping rates stand out, click here.
Surcharges are a common line item on any shipping invoice—covering everything from fuel to oversized parcels, pickups, and peak demand. Accounting for these and other surcharges when planning your shipping budget can help you stay ahead of the curve.
Optimise your shipping & costs
Now that you know what is wrapped into your shipping costs, we can 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.
Finally, the best way to optimise your shipping rates is to choose a parcel delivery service provider focused on helping your business grow. In a 2024 survey, 81% of consumers stated that positive delivery experiences prompt them to order from a brand again. Therefore, your choice of delivery service provider has a direct link to profitability. We recommend choosing a provider prepared to deliver the detailed tracking your customers want, customise pricing for your unique shipping needs, and offer dependable service that makes your brand synonymous with reliability.
The Amazon Shipping advantage
At Amazon Shipping, we strive to help e-commerce businesses ship more and worry less. A complete solution for reliable domestic shipping service, we work to lift shipping burdens off your shoulders—so you can spend more time growing your business.
Amazon Shipping is helping e-commerce retailers put the power of the Amazon fulfilment network behind their business. Contact us today to discover how we can deliver for you.
