Why one number is useful
A single cost per parcel makes several decisions easier: setting shipping charges at checkout, comparing carriers, judging whether a fulfillment provider is competitive, and deciding which products are worth shipping at a given price. The risk is building the figure from the carrier invoice alone, which leaves out costs a business pays anyway. The word “landed” here means the cost of getting the parcel packed and handed over, measured fully, not just the postage.
This article is about which items belong in the figure and how to calculate it. How the carrier’s own charges are built up is covered in the separate breakdown of shipping costs.
The components
Carrier charges
Include everything billed per shipment: the base rate, billable weight adjustments, fuel and other surcharges, and optional protection such as extra declared value. Use net amounts after discounts and credits. For a stable figure, take at least several months of invoices, since single weeks can be distorted by unusual orders or one-off adjustments.
Packaging materials
Count the box or mailer, void fill, tape, labels, inserts and any branded materials used for a typical parcel. Costs of less than a cent per item still belong if they are consistently used, but a rough allocation is acceptable for small items.
Labor
Labor is often the least visible part. Estimate the time to pick, pack, label and hand over a typical order, then multiply by the fully loaded hourly cost (wages plus employer costs). Time varies with order size, so a measured sample is more reliable than a guess. If the work is done by the owner, assign a reasonable hourly value anyway, otherwise the figure will look better than the reality.
Fulfillment or 3PL fees
If an outside provider does the work, include their pick fee, pack fee, packaging charges and any per-order handling. Storage and inbound receiving fees are usually allocated across units or orders rather than treated as per-parcel costs, and are often shown separately.
Software and equipment
Label printers, scales, pack stations and shipping software subscriptions can be spread across the number of parcels shipped in the period. A monthly cost divided by monthly parcels gives a per-parcel share.
Claims, losses and returns
A portion of parcels will be lost, damaged or returned. These cause replacement costs, refunds and extra postage. The simplest approach is to use your own history: total cost of such events over a period divided by parcels shipped. Return label costs and the handling of returned goods are significant enough to be tracked separately in many businesses.
A worked example
Suppose a business ships a typical small order. After reviewing a few months of data, it finds the following average costs per parcel:
| Item | Cost |
|---|---|
| Carrier charges, including surcharges | 6.40 |
| Box and filler | 0.85 |
| Label and tape | 0.15 |
| Labor (3 minutes at 18.00 per hour) | 0.90 |
| Allowance for claims and losses | 0.20 |
The labor line is 3 / 60 x 18.00 = 0.90. The total is 6.40 + 0.85 + 0.15 + 0.90 + 0.20 = 8.50.
The carrier bill accounts for 6.40 of this, about three quarters of the total. A business that compared 6.40 against what it charged customers for shipping would understate its true cost by 2.10 per parcel. The figures here are illustrative, not typical benchmarks, and your numbers will differ.
What to leave out, or handle separately
- Product cost and marketing. These belong in margin calculations, not in the cost to ship.
- Rent and general overhead. A business can include a share if it wants a fully loaded view, but should be consistent about it and clear about what is in the number.
- One-time events. A single large claim or a one-off rate adjustment can be excluded or smoothed so that it does not distort the average.
- Duties and taxes on international orders. These are usually kept apart, since they depend on the destination and on who pays them under the sale terms. Import duties and similar charges are explained elsewhere.
Averages, ranges and segments
An overall average hides a lot. A business shipping light parcels locally and heavy ones across the country will find that the average describes neither. Splitting the calculation by weight band, zone, service level or product group shows where costs concentrate. This is also the basis for fairly assigning costs, which the article on cost allocation takes further.
It is also worth reporting a range as well as a mean: the cheapest typical parcel and the most expensive typical parcel. That tells you how sensitive the average is to a change in order mix.
Keeping the figure current
Recalculate at least quarterly, and whenever something major changes, such as a new carrier contract, a change in packaging, or an annual rate rise. Data analysis tools can automate the work, but a spreadsheet and a few months of exports are enough to start. Treat the output as an informed estimate. Its main value is in the comparisons it allows, not in its precision.