How Shipping Zones Affect E-Commerce Fulfillment Cost

Jun 2020
Nikolay Pasholok
Product Owner, Calcurates
When shipping domestically, the cost of delivery varies depending on the distance. However, the price is not calculated for a particular address but for groupings of shipping zones by ZIP Codes.

What are shipping zones? The entire country is virtually divided into 100-mile-wide areas; it's designed to help carriers calculate prices for deliveries. There are eight major shipping zones in the US and the ninth one that encompasses territories outside the 48 mainland states.

How to Calculate Shipping Zones

To understand how shipping zones are calculated, pay attention to your deliveries' origin address. The greater the distance to the last delivery point, the higher the cost; the rates go up every 100 miles of the way. The distance is always measured from the center of the zone: Shipping from the edge of one to another won't do the trick.

You may want to use an e-commerce fulfillment center that can serve both as a storage facility and the point of origin for all the orders shipped to your store. While fulfillment centers are not a necessity for small businesses, any notable scale-up is likely impossible without one. We'll mention that below.

Another thing you need to know about shipping zones is that they are dynamic: When you're shipping from two locations, you might see a difference in both the zone number and the price, even if the destination is the same.
For example, here's how a zone map looks if you send all your parcels from New York City:
As you can see, the zone demarcation is entirely arbitrary and has no apparent contours.

Carriers use special matrixes (e.g., the USPS's chart) to accurately estimate the shipping cost by zones: It shows how the zones are being allocated regarding ZIP Codes. Each carrier has its own type of charts; be sure to check in with them before planning any non-local shipment.

How Shipping Zones Affect the Cost of Shipping

In this example, there is no difference between Zones 1 and 2, but the price may vary depending on the service and carrier.

With postal shipping zones, as with any other delivery service, you get additional indexation of the shipping costs by weight and volume.

While the standard logic of "the farther you ship, the longer it takes to arrive" still stands when delivering to different shipping zones, there are exceptions. FedEx and UPS offer exact-day delivery options that mitigate the effect of the shipping zones, sometimes cutting the shipping time by several days. USPS, however, does not offer such services and relies rather on the shipping-zones list for their pricing.

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Shipping Zones by Carrier

All carriers use shipping zones as a unified way to calculate prices, but they use this system for different services. Each carrier has a dedicated page on its website that can help you understand how shipping zones work and what the different shipping zones are, specifically for that company.

How many shipping zones are there? There are nine zones in total: eight for the 48 contiguous states and one for the remaining addresses.

FedEx Shipping Zones

FedEx uses two zoning systems when determining rates, one for freight and one for the other non-flat rate services. Since many customers want to know what FedEx shipping zones are, the company made a webpage where anyone can check FedEx shipping zones by ZIP Code. There is no official FedEx shipping zones chart, but a generated table of the zones for each service provides all the information.

UPS Shipping Zones

UPS also provides an easy method of looking up shipping zones by ZIP Code. There is also a UPS shipping zones chart, but it is only used to show the difference in delivery time frames for UPS Ground services.

USPS Shipping Zones

Shipping zones are what USPS uses for almost all of their services except flat rate boxes, envelopes, Media Mail, Library Mail, and Marketing Mail. Since the carrier doesn't provide exact-day services, it is imperative to look at the zones crossed for estimated delivery time.

The company provides online documentation explaining their pricing system, so for more details concerning USPS' shipping zones and rates, visit their official website.

A Strategy to Reduce Shipping Costs: Using Multiple Fulfillment Centers

Online stores often deal with an enormous volume of orders needing cross-country delivery; however, shipping these orders can be costly. One beneficial shipping cost reduction strategy is having more fulfillment centers.

Opening an additional fulfillment center means pouring many resources into it, but with a large enough order volume, the ROI can be remarkable. Two or even three centers spread throughout the country can significantly reduce the cost of deliveries since there would be virtually no expensive zones between the facilities. That means better sales. But the business planning must be air-tight — when operating a fulfillment center, each mistake can be costly.

Keep Your Business Open for Customers from Remote Regions

Free shipping in e-commerce has become the new standard, and it puts additional financial strain on the business owners. With domestic shipping, zones make up a considerable portion of the end price, especially when delivering to remote locations. This may lead a company to limit its shipping radius, but there are better ways to deal with the excess in charges.

Above a certain point, flat rates become a cost-efficient way to ship to remote regions. Using local carriers for last-mile deliveries may cut some costs as well. When customers have the option to combine different shipping options to achieve the best value, it motivates them to complete the purchase. Automatic extensions like Calcurates come in especially handy for such tasks since it has these functions baked in.

Setting Up Shipping Zones in Magento

As with many aspects of the platform, setting up shipping zones in Magento 2 is relatively easy with extensions like Calcurates. With this solution, you won't need a dedicated shipping zones calculator, as Calcurates has this functionality built-in. Transparent rates mean greater customer experience, which always supports sales growth.

You don't need to follow complicated instructions to learn how to set shipping zones. Just install Calcurates, activate the shipping zone method of calculating rates, and they will be accounted for automatically. Get a free demo today.
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