Two identical orders at the same price can produce very different profits, and the variable is geography. Parcel carriers price by distance band and by dimensional size, and most stores charge as though neither existed.
Distance is priced in bands, not miles
Domestic parcel rates are structured around zones measured from the origin facility, with each successive zone costing more for the same weight.
A store shipping from a single warehouse therefore earns its best margin on nearby customers and its worst on the far side of the country.
Since flat-rate or free shipping charges every customer the same, the distant orders are subsidised by the near ones, and the subsidy is invisible in an average.
Dimensional weight prices air
Carriers bill on the greater of actual weight and a dimensional figure derived from the package's volume, which means bulky light goods are charged as if they were heavy.
Oversized boxes, generous void fill and standardised carton choices all inflate that figure without adding value the customer perceives.
Reducing package dimensions is one of the few cost levers that requires no negotiation with anyone, and it applies to every order shipped thereafter.
Surcharges accumulate outside the base rate
Residential delivery, remote area delivery, fuel, oversize handling and peak season adjustments are applied on top of the quoted rate.
Because they appear on the invoice rather than in the rate card used for pricing, a store can price its shipping accurately against the rate card and still lose money.
Reconciling actual invoices against expected charges, order by order, is the only way that gap becomes visible.
Free shipping thresholds reshape the order mix
A threshold raises average order value, which is why it is used, but it also concentrates the shipping cost into fewer, larger and heavier parcels.
Whether the added margin from the larger basket exceeds the added freight depends on what customers add to reach the threshold, and low-value bulky items make the trade worse.
The threshold therefore needs to be checked against the products people actually use to qualify, rather than set from a general benchmark.
Distributed inventory trades holding cost for freight
Holding stock in more than one location shortens the average zone travelled and reduces both cost and transit time.
It also splits inventory, which raises total stock held, increases the chance of a split shipment, and adds complexity to replenishment.
The point at which the freight saving outweighs the inventory cost depends on order volume and geographic spread, and it is a calculation each business has to run on its own data rather than adopt from another.