Shipping zones, also referred to as postal zones, are regions of the United States, single countries, or a group of countries that share one common shipping price. Your ecommerce company can choose the shipping zones where you offer service and set shipping rates that reduce costs for your company and your customers. By understanding shipping zones, you can offer customers faster and cheaper shipping options, driving more business to your DTC store and minimizing business expenses.
Shipping zones are an essential consideration when it comes to order fulfillment. In essence, they refer to the distance that a shipped package travels, from the origin point to its final destination. Shipping zones are defined based on the origin point, so any given region may fall into a different zone depending on where a package is shipped from. These postal zones are used to define shipping contracts and pricing with various carriers. The price of shipping any individual package is based on the destination zone.
Within the United States, there are eight shipping zones used by the three main carriers: FedEx, UPS, and USPS. Zone 9 includes the Freely Associated States, which are the Republic of the Marshall Islands, Palau, and the Federated States of Micronesia. International shipping relies on further shipping zones outside the borders of the United States and associated island nations.
For example, a carrier could have one shipping zone for most countries in the European Union when the origin destination is in the United States. You may choose to offer flat-rate shipping to a particular zone or country. You can also calculate each package's actual shipping and handling rate based on your carrier's rate for any specific country or destination to determine what portion of the shipping charge to pass on to customers.
FedEx, UPS, and USPS use roughly the same calculations for postal zones. However, the prices for each vary by carrier and your contract with the carrier. In general, the specific zone is calculated by measuring the distance between zip codes rather than direct mileage. These zones are as follows:
The point of origin of any shipped item will always be Zone 1, and the destination zone number depends on how far away the customer's address is. Occasionally, remote locations will fall into a higher shipping zone because of the logistical challenges of reaching the area.
FedEx provides a zone list and rate sheet for shippers. You can enter the origin zip code and download either a domestic or international shipping zone chart for use in Excel or another spreadsheet program. Each class of service, including Same-Day, 2-Day, and Ground, has its own rates per shipping zone.
UPS offers shipping rates for domestic and international zones. You can download zone charts for use in your spreadsheet software from your zip code for the 48 contiguous states. Zone charts are also available for international and more remote shipping options.
USPS offers a domestic zone chart for any zip code pair by entering the origin and destination zip codes. Similarly, you can calculate postal price zones for international destinations. For many smaller ecommerce businesses, USPS zones are particularly important. USPS zones offer cheaper, reliable shipping domestically and internationally. They also offer accessible flat-rate shipping options.
Shipping zones are calculated dynamically based on the origin of your package. This means that if you have one fulfillment center, that local address will always be the origin point for calculations. If your merchandise is held at several geographic locations with a fulfillment provider, however, it's different; you may have significantly reduced shipping costs to areas closer to each fulfillment center.
If you outsource fulfillment to a third- or fourth-party logistics (3PL or 4PL) provider, you'll likely have more flexibility in choosing the location of your fulfillment center. You can use information about the locations of your customers to find the most cost-efficient option for your business, then pass those savings on to your customers. To reduce transit times and save more on shipping costs, you may split your inventory with an ecommerce fulfillment provider across multiple fulfillment centers, a strategy called multi-warehousing.
Multi-warehousing has benefits that go beyond faster shipping times and lower costs. Learn more about multi-warehousing strategy.
In general, the higher the zone, the more expensive it is to ship a package. The package’s weight can affect shipping costs by postal zones, too. Shipping carriers use both actual and dimensional weight; customers pay by whichever is greater. Dimensional weight is calculated based on the dimensions of the package itself.
The major carriers also offer flat-rate shipping, in which the weight of the package is not factored into the price. Instead, there is a single cost for shipping a box of a given size—provided by the carrier—to its destination, regardless of its weight. In this case, the fees vary only by the destination zone. Flat-rate shipping may be the cheaper option for ecommerce vendors shipping heavy items. The cost of each shipment, however, is always lower for lower-numbered postal zones.
3PLs and 4PLs often have negotiated lower rates with the carriers by leveraging the volume of orders they ship on a daily basis. Ecommerce companies can lower their shipping costs by partnering with these fulfillment partners and using their negotiated rates.
Shipping zones also affect delivery speed. When a package is sent to a nearby shipping zone, it will generally arrive in fewer days than a package sent to a higher zone. Due to large ecommerce providers offering fast standard shipping, many customers have come to expect their order to arrive in only a few days.
By outsourcing fulfillment to a 3PL or 4PL, you'll have more flexible options when selecting a fulfillment center or multiple fulfillment centers that can provide faster and cheaper shipping to customers in various locations. In essence, you could eliminate or significantly reduce high shipping zones in heavily populated areas by choosing multiple fulfillment centers.
Understanding shipping zones is important to improve your bottom line and offer the best rates to customers. However, managing it all on your own can be complicated. We can help to make it simpler for you. Connect with a fulfillment expert at Airhouse to learn how we can help you to optimize shipping zones and shipping times to save money and help your business grow.
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