Compass ®

Location, location, location: residential vs. commercial

The Compass Expert clarifies questions about addresses.

Encourage your customers to request deliveries at their workplace. It's convenient for them – winning their loyalty – and cheaper for you, which is one way to save money for your business.

Real estate agents and retailers know that location matters. And it matters to shippers, too. In fact, a common question your expert hears from UPS customers is: How do I know if a shipping address is residential or commercial, and why does it matter?
The answer is simple:

  • A residential delivery goes to a home, including a business operating out of a home.
  • A commercial delivery goes to a business.

No need to memorize that distinction. Your UPS shipping system automatically determines the category of a destination.

It's an important determination because it costs a little less to ship to a commerical address. That's because it's less expensive to deliver to densely clustered commercial addresses than to residences often scattered throughout sprawling suburban neighborhoods.
Save money
You can take these two steps to reduce costs – and benefit your customers.
"First, when it makes sense, businesses should encourage their customers to provide their work address vs. their home address for delivery," says Mark Sauer, a marketing analyst for UPS. "This benefits the shipper with a lower shipping cost, and the customer typically benefits by receiving packages earlier in the day. And since during regular delivery hours many people are at work more than at home, first-delivery attempt completion at commercial addresses is higher. This benefits everybody."
Sauer offers one other piece of advice to customers with home-based businesses who either ship or receive packages from a residential address: Use The UPS Store®.
"It's a commercial delivery every time, so the rate is lower," Sauer says. "Every location of The UPS Store can provide a mailbox with a real street address and many locations offer secure 24-hour access to mail and package deliveries. Plus, The UPS Store can handle all shipping needs, from documents to surfboards."

Are you making the most of UPS? Find a location of The UPS Store nearest you.

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Reader Comments

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Justin Franks October 27, 2015
Rates should be based on address density of the destination ZIP code, not whether it is "residential" or "business". I have to pay more to get something shipped to my house, but the car wash 100 meters away does not. Neither does the Chinese take-out place 150 meters away. If addresses are spread out -- like my aunt in North Dakota who has only two neighbors less than a mile away -- then charge more. If thousands of houses are packed in side by side in 80-foot wide lots (still suburban), then charge less.
Compass Guy December 24, 2014
iGeaux, I will have to research how UPS bills the "not classified or pending" addresses. But if you are charged residential rates for a medical center or shopping mall, I would suggest you contact your account manager and discuss these charges because they don't sound correct. Sometimes there is a fine line between residential and commercial, but not in the instances you've used as examples here. Those are commercial addresses.
iGeaux December 24, 2014
Two questions for you Compass Guy. If an address has a status of Not Classified or Pending, which shipping rate will be incurred; Residential or Commercial? What criteria does UPS use to determine the classification? We ship thousands of packages and incur thousands in "ancillary charges", such as Residential Surcharges, when many of the addresses are shopping malls, medical centers, corporate high-rises, etc. Your response is eagerly anticipated and greatly appreciated!
Compass Guy October 28, 2014
Mark, if you process packages with a later version of WorldShip, it can distinguish all addresses within the United States and Canada as residential or commercial. Of course, anybody who runs a business out of their home thinks a delivery should be classified as commercial, and I understand that. If you are charging the body shop, though, and suspect it's residential, I would charge them the higher residential cost. But, again, if you ship frequently, WorldShip might be your best bet and should take the guesswork away.
Mark October 28, 2014
This definition explanation of how to determine business vs residence is absurd. The real question here is HOW to tell whether or not someone has given you a business name which works out of their home? For example, we ship to a lot of body shops. So, if Billy Bob calls in an order to his shop, but he doesn't tell us is in his backyard, how do I determine whether or not it's a backyard shop? Even when you ask the customer (retail customers rarely tell the truth about the business address), they still argue that it's a business. That's not the point. Is the address in a commercially ZONED area? That's what I need to figure out. Surely there's a way to determine which zoning classification is attached to every address?
Compass Guy September 19, 2014
Bill, the information you received is bogus. No matter whether UPS delivers to a residential address or a commercial address, all packages have a day-definite delivery guarantee.
Bill h September 19, 2014
Staying at hotel in the district Just told this is a residential address and no guarantee for delivery. Bogus
Lawrence Hughes June 17, 2014
The UPS explanation for additional charges for "residential" deliveries is nonsensical. I live in New York City, is a large apartment building, 215 apartments, and a full-time doorman that receives all UPS packages. The neighborhood is filled with densely clustered addresses, and is the antithesis of what UPS describes as "sprawling suburban neighborhoods." Moreover, doorman buildings have an exceedingly high rate of first-attempt deliveries. In contrast, commercial addresses in the suburbs are in fact sprawled out all over, and are not as densely clustered as deliveries to urban residential addresses. To me, the UPS explanation simply reflects a bias of its writer, and represents another example of suburbanites trying the excessive costs of living and working in the suburbs onto those of us who prefer the greater efficiencies of being in central cities.
michelle March 4, 2014
For our business we use UPS Worldship and although it can obviously be programmed to detect residential vs commercial locations per UPS designations, UPS chooses not to do this automatically. Now every customer has to be called residential even though they are businesses in commercial buildings.
The Compass Guy August 24, 2011
Hi, author of the post dated 7/21. If I’m interpreting your comments correctly, you are commenting that, when using a Batch Import of addresses or orders, the import doesn’t recognize whether an address is residential or commercial. In UPS WorldShip’s Mapping Tool (for imports) there is a “Residential” indicator. So if you have an address list saved and there’s an indicator in your list that an address is residential, you can map your indicator to WorldShip’s “Residential” indicator. To do this, simply drag your “State” field to the “Residential” indicator. I’d also suggest that you turn on Automatic Address Classification as outlined in the Compass Step by Step guide you can find here: You could also go to the Address Book and click “Send Addresses for Classification.” This will trigger a batch Residential/Commercial classification for all addresses. Remember, only U.S. and Canadian addresses can automatically be classified by WorldShip. One final thought: If you're looking for more help with integration of WorldShip into other systems, you should contact your Account Executive for assistance. E-mail me if you need more help: Best – the Compass guy.
Anonymous July 21, 2011
It appears that this part of the software is only useful when manually inputting addresses. It does not appear to function with batch imported orders, or address book imports. As a result, you may face additional corrections.
The Compass Guy April 7, 2011
Aroma1, hi. Many thanks for your contribution. I can help put customers in contact with their UPS representatives. Simply use our "Ask the Expert" area to send me a request. be sure to include your UPS account number. Regards, Jerry
The Compass Guy April 7, 2011
Hi folks, the Compass Online guy here. Thanks for all your comments. PPWH: Our expert here tells me that, when it is installed, WorldShip doesn’t automatically “know” the status of any address. The user must enable WS to determine whether an address is residential or commercial. Here are a quick couple of ways to do this. You can send your entire address book for classification using the Address Book Editor (select “Tools” and then “Address Book Editor”). Next, you will find buttons on the lower right where you can validate addresses. Simply select “Send Addresses for Classification.” Probably the easiest method for a WS user who is shipping to U.S. or Canadian addresses is to have WS check the address classification as part of the shipping process. This feature must first be activated by the user. Select “Tools” then “System Preferences Editor.” Now select the “Miscellaneous” tab. Then, check the “Classify Ship To Address as Residential or Commercial” check box for the classification to occur during shipment processing. Select “Apply,” and “OK,” then close the System Preferences Editor. Does this help? Regards, Jerry
Aroma1 March 11, 2011
We too run a business from our home. If you are running a business from your home it may be very easy for you to be designated as a Commercial site. Contact your Account manager. We followed their requirements and were designated a Commercial site. We have a separate dedicated entrance for our business, have our business hours posted and our name outside. They have other requirements too but check with your Account Manager and if you don't have one of those, request one! Hope this helps UPS is a great choice for your customers.
smarthab March 10, 2011
The way a delivery is rated should be the same as an outbound shipment. I moved my business home and my inbound was rated residential and my outbound commercial since I paid for pickup service. My driver dropped off and picked up at the same time in a suburban neighborhood. I ended up driving shipments 40% of the time. My rep said if I dropped my pickup service then my outbound rates would become residential also. I consider this a conflicting policy. And how does a system automatically determine a public entrance? There are plenty of businesses in business parks who lock their door during parts of the day. We never locked our door but didn't have an obvious 2nd door.
wifiglobaldepot March 10, 2011
It is a shame that for small customers like us that we have a business at home, spend over $10K a year on UPS still we have to pay them a differential when we ship or receive products. On average we pay over $50 a week extra to UPS for them to not even ring the bell but drop the boxes on driveway and many times get mess up with rain. UPS really does not care about our business, just MILK US. I hope our managers get a contract with another courier that does not over charge us for delivering to our address, in the meantime my advice is to use USPS as most as possible
southpaw48 March 10, 2011
This really bothers me because we are in a rural area, there are lots of other businesses (4 within a mile) not clustered, and just because we operate a business out of our home, we're not a "business" delivery. We do a lot of seasonal shipping with UPS, but this is one reason why we also ship a lot by USPS who provides packaging and free pickup and delivery.
PPWHCREW March 10, 2011
This is a continuing problem with shipping with us. WorldShip will say address is Commercial, when we know it is residential. Esp in the case when there are apartments above a business. 2 times in the last month, UPS charged us for "incorrect classification" and after complaining it was corrected. WorldShip needs to be corrected for these situations.