How to calculate and reduce international shipping costs

As a retailer, you know that selling internationally opens up exciting new opportunities for growth. But with those opportunities come some tough challenges – managing international shipping costs being one of the biggest. Whether you’re shipping to customers just across the ditch or halfway around the globe, those shipping expenses can add up quickly and, if not carefully managed, start to eat into your profits.

While shoppers love finding new products from around the world, high international shipping fees can often be a deal breaker. That’s why it’s crucial to keep your costs under control without compromising the customer experience.

To help you navigate these challenges, we’ll break down the key factors influencing international shipping costs and provide some practical tips on managing and reducing them. By keeping these costs in check, you can offer competitive rates while still turning a profit and keeping your customers happy.

Table of contents

• What factors into international shipping costs?
• Carrier and service selection
  • How to calculate carrier and service costs for international shipping
  • How to reduce carrier and service costs
• Packaging
  • How to calculate the cost of packaging for international shipping
  • How to reduce the cost of packaging
• Customs duties and taxes
  • How to manage customs duties and taxes for international shipping
• Shipping zones and rates
  • How to reduce international shipping costs in different zones
• Insurance and additional fees
  • How to calculate additional fees for international shipping
  • How to stay in control of your additional fees
• Next steps: Optimise your processes for low-cost international shipping

By understanding how each of these factors contributes to the overall cost, you can make more informed decisions to manage your expenses and offer more competitive shipping rates for your customers. Let’s look at the common factors and what you can do to harness low-cost international shipping.

Carrier and service selection

The carriers and level of service you offer will significantly impact your international shipping costs. Premium services like express shipping will come at a higher price, which can increase the charge for your customers. However, offering these options can be enough to get shoppers to click ‘buy now’ if they value quick delivery.

It might be easy to stick to a single carrier that you trust, but it’s important to explore better deals and service options with different carriers. Your favourite domestic partner might not be the best international courier, either due to their lack of reach or higher costs.

How to reduce carrier and service costs

You can reduce the international shipping costs by optimising you carrier and service selection:

• Negotiate carrier rates – International shipping carriers are often open to negotiations if your business can promise consistent orders. If you find you’re frequently using the same carrier to service customers in a particular region, this is a great opportunity to chat about bulk rates.
• Use regional carriers – In certain regions, local or regional carriers may offer more competitive rates than global providers. Explore local options that meet your shipping needs – but make sure you assess whether it’s the most cost-effective move for your business.
• Offer a range of shipping options – Customers love having the flexibility to choose what works best for them. Give your shoppers more choice at checkout by offering multiple service levels – standard shipping for cost-conscious buyers and express for those who prioritise speedy deliveries. Additionally, consider adding margins to express shipping options to cover your costs and push these extra expenses onto the customers who choose them. This can help protect your profit margins while still offering customers the convenience of fast shipping.

Starshipit Tip: With Starshipit, you can seamlessly manage multiple international carriers, allowing you to compare shipping rates in real-time and use automated rules to select the most cost-effective option for each order. This multi-carrier approach means you’re always using the best service at the best price, helping you save on shipping while offering your customers a range of delivery options.

Starshipit also allows you to easily add margins to specific shipping options at checkout, ensuring you’re covering any extra costs like express shipping without impacting your bottom line.

Packaging

Packaging plays a huge role in determining international shipping costs, with both size and weight directly influencing what you’ll pay.

Most carriers calculate shipping fees using dimensional weight (DIM weight), which factors in the size of the package alongside its actual weight. Larger or irregularly shaped packages often incur higher fees, and in some cases, packages over a certain size might even be classified as freight, significantly increasing shipping costs.

Retailers often make the mistake of using oversized boxes, which can unnecessarily increase the DIM weight and drive costs up. Similarly, overpacking items with excessive padding can increase package weight without making much difference for product protection. Not following specific carrier guidelines, especially for regulated items like perfume or electronics, can also lead to higher fees.

How to reduce the cost of packaging

You want to reduce the size and weight of your packages as much as possible without compromising its durability. To do this you should:

• Choose the smallest possible package - Use a box that fits snugly around your products to reduce excess space and prevent extra DIM weight charges.
• Use lightweight packing materials - Swap out heavier fillers like bubble wrap with eco-friendly and lightweight alternatives like air pillows or biodegradable packing peanuts.
• Consolidate orders - combine orders going to the same location into a single package wherever possible to reduce the overall number of shipments and packaging used.

Starshipit Tip: Using Starshipit, you can consolidate orders going to the same location, meaning less packaging is used overall and customers don't receive multiple shipments. This not only improves the customer experience, but also reduces your shipping costs.

You can also use Starshipit’s Recommended Packaging feature to take the guesswork out of packaging. This feature uses machine learning to automate the process of selecting the most cost-effective packaging based on item dimensions. This ensures you’re always using the optimal box size for each order, further reducing unnecessary costs and making your shipping process more efficient.

Customs duties and taxes

Customs duties and taxes are inevitable when shipping internationally but understanding how they work can prevent any surprise costs and ensure smooth delivery. These fees vary based on the destination, the nature of the product, and its origin, but navigating them doesn’t have to be complicated! The key is staying compliant with local regulations and having the right processes in place to manage these costs effectively.

One common mistake retailers make is failing to provide the right paperwork or overlooking region-specific rules, which usually results in costly delays. Not only will this leave you with unhappy customers, but it can also drive up your shipping costs.

How to manage customs duties and taxes for international shipping

To estimate the customs duties and taxes associated with your shipments, here’s what to keep in mind:

1. Determine the product’s HS code – the Harmonised System (HS) code classifies products and is required to calculate the duties. Always make sure you’re using the correct HS code for each item.
2. Check the destination country’s duty and tax rates – each country has its own customs duties and taxes, usually calculated based on the product’s value, category and origin. Online customs calculators, like the one provided by Canada Border Services Agency, can help you estimate costs.
3. Choose between DDP and DDU:
   1. Delivery Duty Paid (DDP): You, as the seller, pay the duties and taxes on behalf of your customers, simplifying the process for them but potentially increasing your costs.
   2. Delivery Duty Unpaid (DDU): The customer pays the duties and taxes when the package reaches their country, which reduces your immediate costs but requires them to settle fees before receiving their order.

While customs duties and taxes are unavoidable, there are ways to reduce the impact they have on your bottom line. When thinking about how you’ll structure your pricing for international orders, remember to factor in these costs to avoid eating into your profit margins.

It’s also important to note that international regulations are constantly changing, and certain products may have additional restrictions or tariffs. It’s crucial to stay on top of these regulatory changes to stay compliant and avoid unexpected costs for you and your customers.

Starshipit Tip: Starshipit supports both DDP and DDU options, allowing you to easily tag orders and manage customs costs accurately. Additionally, Starshipit also automates your customs documentation for certain carriers, ensuring that your orders are shipped with the correct paperwork and HS codes. This reduces errors, helps avoid delays, and keeps you compliant with international regulations – saving you both time and money along the way.

Did you know global fashion retailer MESHKI automates their DDP and DDU by using Starshipit? Find out more in this case study!

Not factoring in these zones when setting your international shipping rates can lead to surprise costs, or even losing money on long-distance deliveries.

How to reduce international shipping costs in different zones

One of the best ways to achieve low-cost international shipping is to reduce the distance your package has to travel. We aren’t talking about warping time and space; we’re talking about using regional fulfilment centres in your busiest target markets. Using a fulfilment centre can be a key factor in scaling your business in a cost-effective way.

You could also consider turning your physical stores into mini-fulfilment centres, enabling you to ship your products from the store located closest to your customers. Using a ship from store strategy will speed up delivery for shoppers while reducing the travel distance and costs of shipping in that zone.

Starshipit Tip: Easily manage multiple warehouses and fulfilment centres with Starshipit to ensure that orders are automatically shipped from the location closest to your customer. This includes in-store fulfilment, where you can rely on your stores to fulfill and ship orders. This reduces shipping times and costs with less distance to travel, making your cross-border shipping more efficient and cost-effective.

Insurance and additional fees

Because there’s more uncertainty in international shipping, customers may want to add insurance on the rare chance their package goes missing or is stuck in the Suez Canal for a month or two. Each carrier will have its own insurance options listed in its service levels but be aware that some budget options may not include it at all. It’s also best to check the liability level to ensure any payouts can actually cover the cost of the impacted goods.

How to calculate additional fees for international shipping

To ensure you’re covering all your costs:

• Review carrier insurance options – Check whether insurance is included in the carrier’s standard service or if it requires an additional charge. Also check the coverage limit and make sure they match the value of the goods you’re shipping.
• Add handling fees if necessary – If your team spends extra time preparing international orders, it may be worth adding a handling fee to cover these operational costs. Include this when calculating your overall shipping rate.

How to stay in control of your additional fees

Compare the cost of insurance from different carriers and determine if it’s more cost-effective to handle insurance yourself, especially if you’re shipping high-value items. Also be aware of potential surcharges, such as fuel or rural area fees, that carriers may apply to international shipments. Once you’ve added up all these costs, be sure to add a margin to each order so they don’t impact your bottom line.

Starshipit Tip: With Starshipit you can add custom margins to your shipping rates, ensuring that additional fees like insurance, handling and surcharges are factored in automatically. This helps you stay in control of your costs and protect your profit margins, all while providing accurate pricing for your customers.

Next steps: Optimise your processes for low-cost international shipping

There’s a lot to take in when it comes to reducing international shipping costs for you and your customers. Let’s recap some of the actions you can take optimise shipping overseas:

• Learn how international shipping is calculated – From dimensional weight to customs charges and taxes, there’s a lot to add up to get the final international shipping cost.
• Take charge of what you can control – You can’t do much about duties and taxes, but you can optimise your packaging, negotiate better rates and harness the power of shipping automation to reduce your staffing costs.
• Avoid common mistakes – Relying on one carrier, overlooking regulations and ignoring the power of software solutions will drive up your international shipping costs.
• Learn from other businesses – MESHKI combined its eye for fashion with our shipping expertise to improve their operations.

To see how Starshipit can help you reduce your international shipping costs, search through our range of powerful automation options. From automatic label printing to assigning orders to the right carrier, these automation rules are here for you to make the most of.

If you’re ready to see how automation can reduce your international shipping costs and boost your bottom line, start a 30-day free trial today.