What are Ecommerce Shipping Zones?

Shipping Zones

Carriers such as FedEx, UPS, and USPS use shipping zones to determine the shipping cost of a package. Zones relate closely (but often not exactly) to distance traveled. In the continental US, most carriers break down the country into seven shipping zones, (numbered 2-8).

ECommerce businesses need to pay attention to shipping zones. Zones affect your fulfillment costs and delivery time.

A clear understanding of shipping zones should inform your fulfillment strategy. When you use zones to your advantage, you can reduce shipping costs and even offer free shipping.

Shipping Zone Definition

A shipping zone is a segment of delivery territory. Each zone is within a certain distance range from your point of origin. The higher the zone, the farther it is from the point of origin. Each zone includes a set of ZIP codes.

For example, if a package originates at Red Stag Fulfillment’s Knoxville warehouse, the origin ZIP code starts with 377. ZIP codes with the first three digits of 376-379 are in Zone 2 for UPS. Those deliveries wouldn’t travel far from the point of origin. A shipment to a ZIP code starting with 970 would go to the West Coast. That is Zone 8 for a UPS package shipped from Knoxville. A shipment to Hawaii falls into Zone 45.

Shipping zones aren’t fixed. A map showing shipping zones will be different for each point of origin. The simplest way to explain zones is the distance between two points. The further your fulfillment warehouse is from your customer, the higher the zone. 

The ZIP codes used to determine shipping zones are a proxy for distance. FedEx breaks down its zones by distance like this:

Zone  Miles from point of origin to delivery address
1,801 or more within the contiguous US

Each shipping zone represents a different price. For example, a 5-pound package shipped by FedEx Ground costs $9.87 to ship to Zone 2, $12.92 for Zone 5, and $14.97 for Zone 8.

Shipping zones allow delivery companies to charge the right amount for each package delivered. An order going to Zone 2 will use less gas, driver time, and wear and tear on equipment than one shipping to Zone 7.

Differences in pricing for different zones can add up. That’s particularly true if you’re shipping a high volume of eCommerce orders. See below for ways to reduce your shipping costs.   

Shipping Zones by Carrier

Each carrier sets its own shipping zones. There is some variation in which ZIP codes are in which zones for each carrier. In addition, different services offered by the same carrier can have different zones. For example, FedEx has eight different zones for FedEx Ground and FedEx Home Delivery. However, FedEx’s express services such as Standard Overnight and Priority Overnight have 16 different zones. 

One of the factors that will determine the best carrier for your fulfillment is shipping zones. Here are some resources to help you figure out shipping zones. 

FedEx Shipping Zones 

FedEx publishes its rates by weight and zone. The information is updated at the beginning of each year with new rates. You can find detailed FedEx shipping rate information on their website. FedEx rates for 2020 are here.

In addition to published rates, carriers may offer negotiated rates to high-volume shippers. Ask your fulfillment warehouse if you can benefit from negotiated shipping rates.

UPS Shipping Zones

UPS lets you input your ZIP code for a customized shipping zone chart. You can download the chart as an Excel spreadsheet. The zone chart shows which ZIP codes fall into each zone for shipments from your fulfillment location. It doesn’t include pricing.

Use this UPS tool to calculate the price to ship an individual package.

USPS Shipping Zones

The US Postal Service offers many fixed-rate services. Shipping a package via Priority Mail with Flat Rate Pricing costs the same no matter how far it travels. However, zones do affect the pricing for other USPS services. You can use this USPS tool to get a zone chart for your ZIP code. You can also download the chart as an Excel file. This chart shows you zones only, not pricing.

How Do Shipping Zones Affect ECommerce Fulfillment?

Shipping zones affect eCommerce fulfillment in two dimensions: money and time. The cost to send a package is the metric most directly affected. Carriers set a pricing structure based in large part on the zone. A higher zone number also means you may have a longer delivery time. However, the relationship between shipping zones and speed of delivery is not linear. The weight of a package can also affect pricing in different zones.

Here’s what you need to know about how shipping zones will affect your eCommerce fulfillment.

Fulfillment Cost

Each carrier sets rates based on zone and weight. The farther a package travels from your fulfillment center, the higher the zone. The higher the zone, the greater the cost to send a package. See links to the rate charts above for rates by shipping zones.

There are several ways you can leverage shipping zones to reduce your eCommerce fulfillment costs. The next section provides details on these strategies.

Delivery Time

If you want to know how long it will take for an order to reach your customer, shipping zones won’t give you the answer. A parcel sent to Zone 3 might arrive in one or two days, not three. Packages sent to Zones 8 or 9 are often delivered in five days. In addition, two packages going to the same zone might have different delivery times.

Carriers use shipping zones to set prices. Delivery time is a separate determination. It is generally correct that a delivery to a larger zone will take longer. However, these zones can’t give you an accurate picture of your delivery times.

Weight and Shipping Zones

Higher zones have a bigger impact on pricing for heavier items. For example, FedEx Ground charges $9.87 to send a 5-pound package to Zone 2. The same package costs $10.96 to send to Zone 3, an 11% price difference. 

Heavy items naturally cost more to ship. The FedEx Ground rate for a 35-pound package going to Zone 2 is $17.82. However, if that heavier box goes to Zone 3, the cost goes up to $21.92. That’s a 23% difference. If you sell bulky items that are subject to DIM weight pricing, the same principle applies. You will see larger price jumps between shipping zones based on your DIM weight.

If you sell products that are heavy or bulky, shipping zones should be part of your fulfillment strategy. Reducing shipping zones can make a big difference in your shipping costs. Consider using one or more of the strategies below to reduce the number of zones your orders travel.

Use Shipping Zones to Reduce Your Fulfillment Costs

When your eCommerce business was small, you probably handled fulfillment by the seat of your pants. You either self-fulfilled from your own warehouse or found a local fulfillment company. As your business matures, however, your eCommerce fulfillment strategy is vital to its continued growth. 

There are several fulfillment strategies that allow you to effectively do zone skipping. Zone skipping is moving products closer to their final destination. Shipping charges are lower because carriers take them through fewer shipping zones.

Multi-Modal Shipping

The purest form of zone skipping is multi-modal delivery. A batch of orders are shipped by FTL or LTL freight to a delivery hub closer to the end consumers. From this hub, carriers deliver individual orders. Because freight shipping has lower rates, you reduce your overall fulfillment costs.

The downside of a multi-modal approach is that it can add to delivery time. If fast delivery is important to your customers, consider one of the other fulfillment center strategies.

Multiple Fulfillment Centers

Another approach to get your products closer to your customers is to distribute from multiple warehouses. Many of the best fulfillment service companies have more than one warehouse location. 

It may seem intuitive to choose a fulfillment company close to your office or to the port where your products arrive in the US. However, this is rarely the best eCommerce fulfillment strategy. Placing your inventory in more than one warehouse can position you for faster, cheaper fulfillment. There is a cost to ship your products to multiple warehouses. However, your shipping costs for each order will be lower. It’s likely that shipping from multiple fulfillment warehouses will reduce your overall fulfillment costs.

Amazon is the king of this strategy. The biggest eCommerce platform in the US also has the most fulfillment warehouses. In its push for ever-faster delivery times, Amazon has attempted to move products closer and closer to its customers. If you use Fulfillment by Amazon, you get access to the company’s large network of warehouses. This also comes with faster delivery.

There are downsides to using multiple warehouses, however. Your products can be stored in locations in many different states. This can cause sales tax nexus headaches. Dividing your inventory among more warehouses can add to your carrying costs by forcing you to hold more inventory. In addition, dividing up your inventory creates inventory management challenges. What if you don’t have the right products in the closest warehouse? You might still end up sending orders through many shipping zones.

However, a refinement to the multiple warehouse strategy can give you most of the benefits with few of the headaches.  

Strategic Fulfillment Warehouse Locations

If you ship a high volume of products, it might make sense to place your inventory in many warehouses around the US. The amount you save by reducing the number of shipping zones could be substantial. However, many eCommerce businesses would be stretched thin by the need to stock several warehouses.

However, you can take advantage of zone skipping through fulfillment without spreading your stock thin. By choosing strategic fulfillment warehouse locations, you can place your products within a few zones of all of your customers. At the same time, you can get within two-day delivery range for most of your customers.

Red Stag Fulfillment is able to ship to 97% of US households in two days or less from just two locations. We chose our national fulfillment warehouse locations in Knoxville, TN, and Salt Lake City, UT, because they allow us to ship our clients’ orders through the fewest shipping zones.

How to Give Your Customers Free Shipping

Free shipping is the gold standard of eCommerce fulfillment. Free shipping is the best way to overcome resistance to placing an order for delivery. Because of this, one of the biggest challenges for online sellers is to find the sweet spot for this perk. That’s the point where you can offer free shipping without bumping your prices up too much or squeezing your profit margin too tightly. 

Reducing the number of shipping zones your orders travel is a good way to reduce your shipping costs. Lower shipping costs make it easier to offer free or reduced-cost shipping. And that’s a great way to expand your eCommerce business.

Shipping zones article and permission to publish here provided by Jake Rheude at Red Stag Fulfillment. Originally published on Supply Chain Game Changer on February 19, 2020.