The Cost of Residential and Commercial Shipping

Most customers don’t realize that there is a price difference between residential and commercial shipping rates. If they do, they likely assume it’s more expensive to ship to businesses since most things are more expensive for businesses such as internet access or satellite TV.

However, when it comes to shipping and delivering goods, this is one of the rare exceptions where business services can be significantly cheaper than their residential counterparts.

Residential vs Commercial Shipping

What is Residential Delivery?

A residential delivery results in the final delivery of a package to a home or private residence, including home-based businesses. Examples of residential deliveries would be condos, apartment complexes, or single-family homes. These delivery types are typically slower than commercial deliveries due to the amount of ‘stop-and-go’ the delivery company has to make in order to satisfy all of their deliveries.

What is Commercial Delivery?

Commercial delivery results in the final delivery of a package to a commercial address, usually a business or other public location that’s not a private home or residence. Examples of commercial deliveries would be to malls, shopping centers, or other non-retail businesses. For larger shipments, warehouses and big-box retail stores will usually have a loading dock that aids in the delivery of packages and goods for the business, especially from larger vehicles like 18-wheelers or box trucks.

Why There is a Cost Difference

Unlike most things relating to businesses, shipping is generally cheaper to a business address than to a residential address. The reason for this is that it costs more on average to deliver to a residential location due to multiple factors, including the distance between destinations. A residential neighborhood usually doesn’t have sequential delivery stops. As a result, these deliveries take more time, which results in higher costs to residential customers due to higher operating costs for the delivery company. In some cases, a package may only need to be delivered to one address on a street without any other stops. This causes an inefficiency in the delivery process since multiple deliveries aren’t able to be completed with fewer stops.

What Is Last-Mile Delivery?

Last-mile delivery refers to the time a package is out for delivery until it is marked as ‘delivered’ to the end customer. It is the most expensive and time-consuming portion of the shipping process. Depending on how a shipper is transporting packages, like via airline or overnight freight trucks, a package can travel great distances in a relatively short amount of time.

The last-mile delivery, however, is inefficient due to multiple stops that result in smaller rates of package offloading. This is especially true with deliveries to residential customers in more rural areas where package deliveries can be miles apart.

On the other hand, when a business is located in a commercial strip center or mall, deliveries can be handled for multiple customers at once. Since businesses are usually clustered together within close proximity of each other, deliveries are able to be routed more efficiently. This saves both time and cost for the delivery company, resulting in lower delivery prices.

How to Verify an Address

Verifying whether an address is residential or commercial is easier than ever thanks to CASS-Certified software solutions, and in particular Residential Indicator Indicator (RDI) tools, that flag whether an address is residential or commercial. There are a few different ways to validate an address type. Real-time, single address verification shows pertinent data for one address at a time. Custom solutions are available for businesses that need more robust verification methods.