Shipping is shipping, right? Simply products wrapped in the proper packaging, slapped with a shipping label, and transported by a carrier to the end consumer? Think again! The reality is, there’s so much more to the process. Numerous factors are in play — for instance, why are there different cost amounts to take into consideration? And why do carriers need to know whether a parcel is being sent via business or residential shipping?
Today, many companies sell merchandise to both individuals and businesses, which adds a layer of complexity for commercial and residential shipping services when it comes to devising a smart and cost-effective shipping strategy. From the carrier you elect to utilize to adequately factoring shipping costs into pricing, there is a myriad of factors to consider along the way.
One of the bigger questions on everyone’s mind: what shipping services are right for my business? Let’s explore the differences between commercial and residential shipping, and how to decide which option best aligns with your business’s needs.
What is Residential Shipping?
Residential shipping encompasses sending products to a private or home residence — in other words, a home delivery. Sounds simple, right? Wrong. Residential shipping can actually be more intricate than it sounds. After all, some businesses operate out of homes. What’s more, those businesses may regularly receive large quantities of supplies or packaging.
A company can also be housed in a residential area, meaning shippers identify the place of business as a residential address, even if it’s a standalone building solely composed of businesses. Every municipality and metro area is different in its zoning laws too, which means contending with mixed use areas. This could look like street-level retail shops with residences above, or townhomes and offices in a shared area.
At a larger glance, it makes no difference which type of shipping services a residential delivery uses: LTL freight, parcel, white glove delivery, you name it. The bottom line is this: if it’s a residential address, you can expect a higher price point. Compared with commercial shipping, residential shipping will ultimately increase your overall cost of doing business.
What is Commercial Shipping?
Commercial shipping is defined as an order being delivered to a business address. Sounds straightforward enough, but things quickly get murky because the term “business” is relatively broad. In reality, a “business” can encompass a manufacturing plant, a store, a farm, a healthcare location, or even a place of worship. This illustrates another key difference between commercial and residential, and that’s why commercial shipments typically entail larger quantities of packages compared to their residential counterparts. They can also include FTL or LTL freight shipments.
What’s defined as commercial and residential can get pretty murky.
Just as some businesses can be categorized as residential deliveries due to their geographic location, some residences can be classified as commercial deliveries. In some scenarios, a large apartment complex (especially mixed-use properties) can be labeled as commercial by transportation carriers.
Each shipping carrier has its own set of rules and regulations that help dictate whether delivery is commercial or residential. These carriers may also rely upon a local governing body's zone designations to stipulate how to classify their deliveries.
Why Is Commercial Shipping More Cost-Effective Than Residential?
Residential shipping typically entails a lower-density region, requiring carriers to make a greater volume of stops to locations spread further apart. Residential areas also encompass more hurdles, such as narrower streets lined with cars – making them difficult for delivery vehicles to maneuver.
Oftentimes, transportation companies will utilize smaller vehicles without tailgates to navigate these obstacle-riddled streets. Smaller trucks are capable of delivering a smaller volume of packages simultaneously versus an 18-wheeler carrying a large number of parcels for a single location.
Carriers may also run into barriers surrounding weight restrictions imposed by local towns on residential roads. Additionally, drivers of shipping services must be mindful of increased pedestrian traffic in these vicinities, including children en route to school.
It’s for these reasons that residential shipping services typically carry a higher fee than commercial shipping counterparts. Commercial addresses tend to benefit from closer proximity to one another and increased accessibility via roadways. Deliveries that fall into the commercial category allow a single carrier vehicle to increase its delivery output while utilizing fewer resources. And let’s not forget how prevalent this small detail is. After all, a large portion of the costs associated with shipping stem from last-mile delivery.
Minimizing Costs for Commercial and Residential Shipping Services
Having the right tools and resources in your back pocket is key for mitigating costs associated with commercial and residential shipping services. This is especially true given the fact that economic factors, such as inflation, have caused shipping costs to rise across the board.
For instance, FedEx has increased its residential delivery rates since last year.
In a similar vein, UPS tacks on an accessorial charge for residential deliveries to businesses that operate out of homes. However, if approached strategically, businesses can effectively minimize both commercial and residential shipping costs while optimizing delivery routes.
Partnering with a third-party logistics provider is a cost-effective way to understand the shipping services landscape and devise an action plan catered to your business’s specific needs. For instance, maybe utilizing multiple carriers to handle particular segments of your customers’ deliveries is the best course of action moving forward.
Or perhaps you’ve been storing and moving inventory out of warehousing locations that aren’t located in markets close to the end recipient. Whatever the case may be, gaining a holistic picture of your shipping services needs and leveraging an expert in the logistics space will ensure you formulate an optimal plan moving forward.
Working with the right provider will also provide your business with negotiating power. As the saying goes, there is power in numbers! Depending on shipping volume, you could potentially lean on a third-party provider's relationships with their carrier network to negotiate discounted rates. By analyzing data surrounding your spending and shipping patterns, you can better distribute inventory, minimize overhead costs, and satisfy increasing customer demand.
Optimize Your Shipping Services Across the Board
Maintaining a competitive presence in today’s saturated market calls for a targeted logistics strategy that factors in all the moving pieces. Weighing your commercial and residential options and having access to expertise and technology to support decision-making is an invaluable part of successfully navigating the marketplace.
Discover how the team at Smart Warehousing can help streamline your shipping services and logistics needs while decreasing costs by contacting us today