What are Shipping Zones? And How Do They Affect Order Fulfilment?

What is the number one thing that you would change about online shopping?

That's what the Wunderman Thompson's Future Shopper Survey asked consumers worldwide. And well, the response may surprise eCommerce brands that think everything is going well. 

Nearly half of the consumers (48%) want their online orders to arrive faster. And right behind that, 43% are looking for cheaper shipping. 

Naturally, for eCommerce retailers, the challenge is figuring out shipping costs and ways to reduce them.

But before you sit down to optimise shipping costs for order fulfilment, it's vital to grasp a key concept— shipping zones.

In this blog, you'll find the basics of shipping zones with answers to common questions. It's your guide for shaping the right shipping strategy for your online store. Let's simplify it for you!

What Are Shipping Zones?

A shipping zone is a specific geographical region created by dividing a total delivery area into different zones. The zone number typically corresponds to the distance. Higher zone numbers indicate a greater distance from Zone 1. Every zone encompasses a set of post codes.

Carriers and postal services create their own zones for delivering products to customers. They use it to determine the distance packages travel from one point to another. It enables them to calculate the cost of shipping for a specific item.

Why Are Shipping Zones So Important for eCommerce Retailers?

Understanding shipping zones is crucial as each zone comes with shipping costs and delivery times. Greater distances typically mean higher delivery costs. When shipping locally, you might only deal with one zone. However, you're likely to cross various shipping zones for national or international logistics. These zones simplify the process for carriers and help you in effective budgeting of shipping expenses.

The efficiency of shipping zones benefits all the stakeholders involved by speeding up delivery. Shipping zone map has a massive contribution to this, making it easier to set standard prices for each shipment. These prices are decided based on the specific origin and destination zones.

Here's an illustration of what a shipping zone map may look like:

In eCommerce, small businesses often deal directly with courier companies instead of fulfilment centres because it's more cost-effective. Understanding how these zones operate, and their associated costs empowers you to secure more affordable shipping rates for your packages. 

Essentially, it's a strategy to make shipping faster and more economical for everyone involved.

Why Are Shipping Zones Important?

• Helps customise shipping costs based on distance, ensuring fair pricing.

• Assesses the feasibility of cost-effective shipping options and identifies necessary adjustments.

• Provides accurate delivery estimates for customer satisfaction.

• Simplifies cost calculations for effective budgeting, especially for broader shipments.

• Enhances overall operational efficiency of shipping processes.

• Offers faster and more affordable shipping, offering a competitive edge. 

• Helps test their effect on profits and apply measures to reduce shipping costs.

• Influences inventory distribution, minimising storage costs and improving order fulfilment speed.

Top 10 Things to Consider While Estimating Shipping Zones

1. Shipping zones are dynamic. They are subject to changes in your business location or carrier choice. Stay informed to prevent unexpected cost discrepancies.

2. Utilise tools like order history and location analytics to analyse customer data. Identify clusters of customers in specific regions to understand where your orders originate.

3. Identify regions with high concentrations of customers. These areas may require dedicated shipping zones for more competitive zone rates and faster delivery times.

4. Review and test shipping zones to ensure they match actual costs and delivery times. If required, adjust zones based on real-world data for more accuracy. 

5. If offering expedited shipping, create zones closer to the origin for faster delivery. 

6. Categorise countries or regions for international shipping zones. Consider customs regulations, shipping routes, and import/export duties.

7. Integrate shipping zone information into your eCommerce platform. It automatically calculates shipping costs at checkout based on the customer's location.

8. Communicate shipping zones and corresponding rates to customers during checkout to avoid surprises.

9. Ensure your shipping zone strategy is flexible enough to accommodate business growth and changing customer demographics.

10. Periodically review shipping zones. Analyse shipping data, customer feedback, and carrier updates to refine shipping zone lists.

How Do Shipping Zones Affect eCommerce Order Fulfilment?

Shipping zones impact the cost and speed of shipments in the fulfilment process. As the distance between the warehouse and the customer increases, shipping zones expand, causing higher costs and longer delivery times.

Thus, understanding the impact of shipping zones is essential for every eCommerce business's delivery management and financial performance. Let's break it down for you. 

What Is the Correlation between Shipping Zones and Fulfilment Cost?

Some shipping companies do charge you flat rates. But most carriers determine their charges based on the shipping zone of the point of origin and destination of the package. 

This means, customers in Zone 1 or Zone 2, experience faster delivery and lower shipping fees. Those in distant zones, such as Zone 7 or Zone 8, may face longer delivery times and higher shipping costs.

Besides distance, zone rates for shipping depend on the package's volumetric weight and dimensions. For lighter packages, the price increase from one zone to another is smaller. While for heavier packages, the increase is more substantial.

Fulfilment costs are inherently tied to such zone-based carrier rates. That's why eCommerce businesses must consider pricing structures when calculating overall fulfilment expenses.

What Is the Impact of Shipping Zones on Your Ability to Provide Free Shipping?

Ensuring free shipping for your customers is a smart business move. But let's be real about how shipping zones can influence this and what it means for your business and your customers. 

Here's a straightforward take —

Free shipping is a fantastic way to keep customers happy and prevent abandoned carts. However, it comes with challenges, especially when packages journey across multiple shipping zones in Australia. That's why businesses need to assess its financial implications beforehand. 

Offering free delivery to closer shipping zones and class makes sense. It creates an opportunity to entice customers to order more frequently. But to extend the perk of affordable (and even free!) delivery across international shipping zones and safeguard your margins, certain strategic measures are a must — 

1. Minimum Order Requirement

Establish a minimum order value for customers to be eligible for free shipping. This ensures the benefit aligns with profitable orders. Say, free shipping on all orders above $100. 

2. Incorporate Shipping Costs

Absorb your shipping costs into the product cost, considering the average cost per delivery. So, if you sell a product for $20, and your average cost for delivering it to a customer is $5, you adjust the product price to $25.

3. Strategic Application of Free Shipping

Rather than a one-size-fits-all approach, apply free shipping based on specific criteria. Maybe it's for nearby zones or for orders that hit a particular value. This way, you maintain the appeal of free shipping without stretching your budget. 

4. Customer Expectations and Transparency

Be transparent with your customers. Communicate when free shipping applies and when it might not, considering factors like order value, shipping zones, or promotional periods. Transparent communication builds trust and helps manage customer expectations.

5. Promotional Periods and Zone Inclusion

Businesses can introduce free shipping as a promotional strategy for specific periods or targeted shipping zones list. 

Finally, outsourcing fulfilment becomes a game-changer when faced with uneven geographic distribution. This not only reaches more customers but also facilitates offering free shipping seamlessly.

Thus, while universal free shipping is appealing, its practicality depends on the shipping zone chart. A thoughtful approach ensures you provide value to customers without compromising business sustainability.

Top 4 Strategies to Use Shipping Zones for Optimising Order Fulfilment

Online businesses seek ways to reduce shipping zone rates without risking order fulfilment speed. You must be, too! But how can you use shipping zones to your advantage? How can you create a well-thought-out eCommerce order fulfilment strategy that truly delivers?

Here's how —

1. Distribute Inventory across Multiple Fulfilment Centres

Ever heard the saying, "Don't put all your eggs in one basket"? Well, the same logic applies to your inventory. The key strategy here is to place inventory in multiple warehouses. This reduces the distance between your products and customers.

Choosing a fulfilment centre close to your office or the arrival port of your products may seem beneficial. However, having more fulfilment centres enhances the efficiency and cost-effectiveness of order fulfilment.

Why? 

Fulfilment centres are responsible for storing, picking, packing, and shipping inventory. Expanding its network brings products closer to customers. This strategic move absorbs initial shipping costs and unlocks reduced per-order shipping expenses. The result? Reduced fulfilment costs and decreased transit time. 

In contrast, relying on a single fulfilment centre makes it challenging to offer one- day or two-day shipping without costly options like air freight.

In other words, 

Fewer Centers, Higher Zones, Higher Charges

Limited fulfilment centres result in higher shipping zones and increased delivery costs.

More Centers, Lower Zones, Lower Charges

A strategic increase in fulfilment centres lowers shipping zones and reduces shipping costs. 

Yes, there are perks. But do consider some potential pitfalls, too. 

There can be a potential increase in carrying costs tied to managing inventory in multiple locations. Thus, balancing faster fulfilment benefits and added expenses is the key to making this strategy work.

Moreover, splitting your inventory among different fulfilment centres brings challenges in inventory management. You must be cautious to ensure the right products are in the closest warehouse to avoid shipping delays. 

Multiple fulfilment centres, possibly with 3PL guidance, let you store inventory strategically, fulfil orders locally, and slash shipping zone rates for faster delivery. Modern 3PLs even integrate logistics automation solutions into supply chain management to help you improve your operational efficiency. 

2. Implement Strategic Warehouse Locations

Spreading inventory across multiple warehouses in Australia can bring significant savings. It reduces the number of Australian shipping zones for businesses handling a large product volume. 

However, handling inventory across multiple fulfilment centres can pose challenges for many retailers. 

The strategic selection of fulfilment warehouse locations acts as a silver lining. It allows you to position your products within a few shipping zones of all your customers. This ensures a two-day delivery range for the majority of your customer base.

Consider this example. An Australian eCommerce brand starts with a single fulfilment centre in Sydney. But, customers in Perth, located on the opposite side of the country, have to cross many shipping zones. Consequently, the shipping costs and delivery times increase. 

To address this, the business decides to establish a new fulfilment centre in Perth. Now, customers in Perth receive their order from the nearby facility, reducing shipping zones. This makes shipping more cost-effective and speeds up the delivery process for customers in Western Australia.

While the benefits are clear, strategic warehouse placement requires careful planning:

Geographic Analysis

Conduct a thorough analysis of your customer base. Identify clusters and regions with higher order concentrations. 

Shipping Zone Mapping

Work with shipping carriers to create a shipping zone map for potential warehouse locations. 

Scalability

Anticipate future growth and expansion. Choose warehouse locations that match your current customer distribution. Ensure they also align with your business's growth trajectory.

3. Zone Skipping 

Zone skipping is a smart shipping strategy. It groups packages based on regions and sends them out in a single shipment. 

Sending individual parcels through different shipping zones increases shipping costs. Zone skipping overcomes this by combining packages in larger shipments. The consolidated shipment is then directly transported to the specific region. This SKIPS multiple zones and sortations and the shipper is charged a regional rate.

How Zone Skipping Works:

Consolidation

Zone skipping typically begins with consolidating shipments in a centralised fulfilment centre.

Direct Shipping

Instead of sending individual packages to various shipping zones in Australia, the consolidated shipments are sent directly to the destination zone, reducing the number of shipping zones traversed.

Last-mile Delivery

Upon reaching the destination zone, the packages are distributed locally for last-mile delivery to customers.

4. Partner with a 3PL Service Provider

Opting for a 3PL to handle your eCommerce fulfilment opens up a world of possibilities in choosing where your products get shipped from. Top 3PLs, such as PACK & SEND, provide strategically located warehouses. This gives your business a geographic footprint that's challenging to achieve through self-fulfilment.

With their know-how in eCommerce and logistics, top 3PLs can assist your business in using effective practices for shipping, minimising costs, and improving efficiency.

Benefits of Leveraging PACK & SEND's Expertise

1. Multi-Carrier Solution

Integration with the world's top carriers creates a unified shopping cart shipping solution. Seamlessly offering the best rates and diverse delivery options enhances the customer experience.

2. User-Friendly eCommerce Platform

PACK & SEND offers a versatile, scalable, and fully integrated platform. It automates processes, saving businesses time and money in the order fulfilment journey.

3. Distributed Inventory Across a Network

A national network of 100+ micro storage centres enables retailers to hold stock in various locations across Australia. It saves costs and reduces transit times without requiring substantial capital investment.

4. Rapid Pick, Pack, and Delivery

From order placement to swift delivery, PACK & SEND handles the entire process efficiently. They tailor services to fit the specific needs of businesses, irrespective of size.

5. On-Demand Dispatch

Thanks to PACK & SEND's on-demand dispatch feature, orders reach clients within the optimal time frame, contributing to high customer satisfaction.

6. Innovative Fulfilment Systems

PACK & SEND employs modern technological fulfilment systems. It helps you monitor stock, fill orders accurately, and dispatch them to any location.

7. Versatile Fulfilment Services

PACK & SEND's Fulfilment services cover a broad spectrum. From handling small product ranges on shelving to managing pallets of cartons or unloading full containers of inventory.

Wrapping Up 

Understanding the dynamics of shipping zones is essential for eCommerce brands seeking to streamline their shipping processes. But crafting an efficient shipping strategy can be daunting. Entrusting it to a reliable 3PL can transform it into a hassle-free experience. 

Take the first step towards seamless eCommerce fulfilment. Request a quote today!

Frequently Asked Questions (FAQs)

What are shipping zones?

Shipping zones are geographic regions established by shipping carriers to determine shipping costs and delivery times based on the distance between the origin and destination.

How are shipping zones determined?

Shipping zones are typically determined by the distance between the point of origin (e.g., a warehouse or fulfilment centre) and the destination address. Carriers use specific criteria, such as post codes or region classifications, to assign areas to different zones.

Are shipping zones universal?

No, shipping zones are not universal. Each shipping carrier may have its own set of shipping zones and classes. Additionally, zones can vary between countries and carriers.

How many shipping zones are there in Australia?

The number of shipping zones in Australia depends on the shipping carrier. Carriers often divide the country into multiple zones based on distance and other factors. It's recommended to check with specific carriers for the most accurate information on Australian shipping zones.