Every Friday, we answer a common question about fulfillment, shipping, or business. This week’s question comes from one of the fans who entered our giveaway contest for a copy of the board game Gloomhaven. Today we will answer the following question: “why do shipping rates differ between carriers?”
Why Shipping Prices Vary in General
Shipping looks simple, but it can be shockingly complicated. In fact, dealing with the complexity of shipping is why businesses like ours exist and help companies succeed. Even still, you may wonder, “why haven’t shipping rates stabilized across carriers by now? Every company has access to every other company’s rates!”
To understand why shipping prices differ by carriers, you need to understand how shipping prices are determined in the first place. Ultimately, it comes down to a few main variables: the size of the package, the weight of the package, the destination and its proximity to the sender, and how fast it needs to get there. Believe it or not, there are a lot of different ways you can send the same package.
Packages with an identical size or weight can cost carriers different amounts of money. This is because they have different vehicles with different sizes that consume different amounts of fuel. What’s more, packages do not go straight from sender to receiver. They bounce around in a zig-zag pattern from hub to hub based on what’s efficient for the carrier. (Though to their credit, carriers do a good job of simplifying their cost structure through shipping zones.)
Why Shipping Prices Differ by Carrier
“Even still,” you may say, “UPS, FedEx, the USPS, and DHL…they’re all doing the same basic thing. Their vehicles are similar and they have hubs all over the place. Shouldn’t the costs be the same?” With open shipping markets like EasyShip making it very easy to compare postage, this is a reasonable question.
To answer that question, think of postal carriers like airlines. There is no shortage of flights from Los Angeles to New York City. Those are two really well-connected cities, so you have your choice of different airlines with ever-so-slightly different prices.
The business model of postal carriers these days is really similar. Each carrier has its own advantages and disadvantages. UPS is really close with Amazon. DHL is particularly talented with international shipping. The USPS has low rates because it is subsidized for by the US government. You get the idea!
These subtle distinctions, as well as differences in vehicles and hub cities, mean they can charge different prices for the same service. This is why systems like Fulfillrite intelligently help shippers choose carriers based on cost, or, when appropriate, other factors such as reliability.
When you go to ship your next package, take a moment to appreciate the different variables at work. One carrier might be a better fit for your need than another, and it is always good to examine your options before overpaying on a shipment. This way, you can save as much money as possible. And if the additional decision-making sounds like a hassle, you can always rely on services such as Fulfillrite to take that burden off your hands 🙂