CALCURATES BLOG

The Importance of Address Validation for E-Commerce

May 2022
Palletized Shipping and Packaging Rules for Ecommerce
Nikolay Pasholok
Product Owner, Calcurates
Calcurates is coming up with another powerful feature for Magento 2 e-commerce owners — Address Validation. Address validation checks whether the address entered by your customer at the checkout is correct and whether it is residential or commercial. The benefit is that fewer orders will be sent to incorrect addresses and surcharges for residential addresses might be applied resulting in lower shipping losses.

What is Address Validation?

Address validation confirms whether the street and its postal addresses exist. Customers using address validation can set their delivery address as a commercial or residential one. The address type can be different for each carrier. Carrier shipping rates and shipping options change based on the type of address selected.

Difference Between Residential vs Commercial Addresses

  • Residential Address
    Residential Address
    delivery to home also includes business registered to home address
  • Commercial Address
    Commercial Address
    Delivers to registered businesses only, retail stores, hospitals, fire stations, or farms. Most commercial addresses have loading dock access.
Calcurates Related Features

Why Is Delivery to Residential Areas More Expensive?

Generally, it costs less to deliver to commercial addresses. The reason why is that commercial addresses are usually less scattered and are densely saturated around each other. Residential addresses can be spread throughout the neighbourhoods. Residential addresses have more overhead costs, as it takes more time and gas to deliver shipments there.

Why Is Address Validation Important?

The address validation is important because of the cost difference between residential and commercial addresses that e-commerce businesses have to pay. Residential deliveries can add a significant amount of costs to your business. Yet, there are some ways to reduce delivery costs.

  • Exact Cost Enumeration
    Don't lose money by charging your customers for the wrong type of address. Make sure your customers understand the difference between the two and know which type of address is theirs. Make a small note at the checkout to explain shortly the differences in residential vs commercial rates.
  • Dual Carrier Labeling
    Each carrier uses a different label for the different address types. Some delivery areas can be labeled as residential for one carrier and as a commercial for another. Identify which delivery area is labeled commercial and use that carrier for less costly deliveries.
  • Route Planning 
    Reshipping of a package that got delivered to the wrong type of address might be charged extra by some carriers. Both UPS and FedEx introduced Address Correction Charge in 2020,  which is a fee to be paid for wrong address delivery. The charge is around $18.
  • Data Information
    Address Verification ensures that the address typed is correctly formatted. So that the package processing time by carriers is shorter and the delivery faster. This minimizes the number of failed deliveries.

How are Residential Surcharges Applied Based on Different Carriers?

The residential surcharge is a fee applied for delivering shipments to home addresses. The fee is usually around $5.
  • FedEx Residential Surcharge
    The only service shipping to residential addresses is FedEx Home Delivery, its residential surcharge is $4.00 (included in the base rate).
  • UPS Residential Surcharge
    UPS residential surcharge is similar to that of FedEx. UPS services delivering to residential addresses are UPS Ground and UPS Air, both costing around $5.00.
  • USPS Residential Surcharge
    USPS doesn't charge residential surcharges. Many e-commerce businesses use USPS hybrid services to avoid residential surcharges. Have a look at these hybrid services that cooperate with USPS and delegate the final stage of delivery to USPS; UPS SurePost, UPS Mail Innovations. or FedEx SmartPost.

How to Validate an Address for E-commerce in Calcurates?

When requesting live rates from carriers with Calcurates you may enable automatic address validation for certain Shipping Areas before sending request to the carrier. Alternatively, you may request rates with a fixed address status (residential or commercial). If the address is successfully validated its status can be displayed in the order.
With Calcurates it is also possible to set up Shipping Rules based on address type to apply your custom surcharges for residential addresses and discounts for commercial ones or restrict shipping methods for a certain address type.
Along with Dimensional Shipping the Address Validation feature helps e-commerce to increase the accuracy of shipping rates and achieve cost-effective shipping.
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