Residential vs Commercial Shipping: What's The Difference?

Small-and-midsize-business owners planning to maximize their logistics budgets often need help to choose between residential and commercial shipping costs. While you may want to pick the cheaper option, it may not offer better value. 

For example, in some cases, it could be more cost-effective to move ten parcels to the next state than a single parcel to the neighboring town. This could be because there is a greater demand for out-of-state commercial shipping in an area than for local residential shipping. 

Hence, understanding the impact of differences between residential and commercial shipping costs can save significant business expenses.

The primary difference between residential and commercial shipping is that residential shipping is a delivery method to send goods directly to a personal address. In contrast, commercial shipping is a delivery method to transport goods to businesses, not-for-profits, and other non-residential destinations.

B2C (business-to-consumer) businesses and private individuals typically employ residential shopping, whereas commercial shipping is preferred by B2B (business-to-business) providers, manufacturers, importers of raw materials, and other business suppliers.

Most commercial shippers have access to a large fleet of vehicles of different sizes, allowing them to keep costs competitive by eliminating free space in huge vans and trucks. Carriers might combine less-than-truckload (LTL) services with full-truck-load (FTL) services to provide a range of prices for businesses. FTL is usually more expensive as it requires a whole truckload of products, which implies more transportation charges. 

Other factors that impact shipping costs include

Type of product that needs to be shipped

Shipping costs can vary depending on the product’s material. As fragile products require additional packaging and care, they can take up more room on a vehicle, restricting the number of deliveries carried on a single haul. This would increase the overall cost of shipping.

Specialist products, such as vaccines or other healthcare essentials, might need temperature-controlled vehicles, implying extra charges.

Expensive products, such as high-end jewelry, might need additional security, such as in-van cameras, which can imply additional fees.

Origin and destination

The product’s travel time and journey before reaching the customer also affect the shipping cost. If the product’s transport journey to the customer is long, it will increase fuel costs too. With the increase in shipping distance, many other factors can come into play. For example, a truck that has to board a ferry and pass over international borders will incur additional costs than one that drives 400 miles cross-country with only scheduled rest stops.

Required delivery speed

Expedited delivery means paying more to ensure faster delivery of goods. As twelve percent of consumers pay premium rates for expedited delivery services, many businesses can expand their target audience by partnering with logistics providers who offer faster shipping services. [1]

Shipping and logistics is a considerable business. The overall market was worth $10.12 trillion in 2022, and forecasts suggest this value will increase to about $14 trillion by 2030. [2] Industry reports indicate that carriers' profits are increasing by 6.5% year on year [3], and continuous demand for reliable logistics could allow transportation firms to raise prices and boost those profits further.

Soaring costs mean more careful consideration when choosing the right logistics services. Between residential vs. commercial shipping, the cheaper option usually depends on the business service. Residential carriers often deliver a high volume of parcels to many locations within a relatively small area. This means multiple stops, vehicle wear-and-tear, residential traffic, slower speed limits, and numerous other factors that can increase overheads.

Residential vs. commercial shipping isn't usually the primary consideration for businesses unless they only ship occasionally. Instead, most companies want to know what the right commercial shipping option is and how to find it.

1. List the shipping requirements for your products

Before choosing the carrier and shipping options for your goods, you must be specific about your needs. This includes noting if the products are fragile, if they’re sensitive to moisture or temperature, or if you need white glove services such as secure unloading to ensure proper delivery. Figuring out precisely what you need helps you narrow down your carrier options.

2. Consider your consumer needs

After considering your minimum requirements to ensure the safe delivery of your goods, check if your target audience has any additional needs related to product delivery. A carrier must know if you ship to retailers who need every delivery before or after opening hours. If your consumers benefit from an additional service that provides assembly of goods upon delivery, ask your shipping provider whether they can offer that option.

Centering your customers promotes high satisfaction rates, discouraging potential customers from considering your competitors.

3. Create a shortlist of logistics providers

While many businesses hire big-name carriers, such as FedEx, known for shipping goods for a range of organizations, there are also plenty of less mainstream options that may provide better value or bespoke services at an affordable price. But how do you choose which logistics provider is best for your business?

You can use shipping software to get detailed shipping-related information per your business needs. Systems that help businesses find the right transportation methods, compare costs, or connect to inventory management and CRM tools can simplify and streamline the process of getting goods to their destination. 

Third-party logistics (3PL) companies often provide a full suite of managed services, including picking, inventory, order fulfillment, and returns management. Businesses usually gain access to cloud-based or on-premise apps and solutions that allow them to view reports and manage data relevant to these services.

4. Contact your shortlisted service providers

Book an appointment with a sales rep from any carrier or logistics provider you shortlist. Ensure you note any questions you want to ask beforehand and compare the answers before making your final choice.

Here are some questions to ask logistics providers.

• Do you offer discounts for repeat trips or extended-duration contracts?

If you ship regularly, a carrier offering a frequent user discount or a lower price in exchange for a fixed-term agreement might be great value.

• What experience do you have in my industry?

This is especially important when sourcing shipping for perishable or time-sensitive goods. For example, a carrier with experience in the pharmaceutical industry will know to offer temperature-controlled vehicles.

• Can you provide testimonials?

While a cheap price is important, valuable services are preferred. This means a great service at a price you can afford. Reliable, great-value logistics providers will have plenty of testimonials they can show to gain customer trust.

Any business that ships goods can save money and time by investing in shipping and logistics software solutions. Solutions range from full-service platforms that manage every aspect of logistics to cloud-based providers that source the best value shipping options anytime.