What to Charge for Shipping & Handling!

I was recently asked, “How do you figure out how much to charge for shipping & handling?” -- So ...

Here are some methods you can use to determine the amount to charge for “shipping & handling” in your advertising.

I could give you a bunch of doubletalk about computing the per-piece cost of the shipping containers (or envelopes), extrapolating the number of man-hours involved in making each shipment and multiplying that figure by the average shop-cost per manhour, then factoring in a proportionate amount for overhead based upon the gross overhead less such overhead as may not be directly related to the shipping process divided by the number of pieces shipped in a given year ... as some big companies have been known to do - or - I could just tell you the truth.

“Handling” is a cover your butt term. — It actually goes back to some of the original “Truth In Advertising” rules and regulations.

Let’s say that you list only a “shipping” charge in your advertising ... say $3. An order arrives but, because the buyer is so close to you, it only costs you $2 for actual “shipping” costs. Rightfully, the customer would be entitled to a rebate or refund of the unused portion of the “shipping” charges you have already collected; since you paid less than what you charged them as a specific cost.

By adding the non-specific term “handling” to your price quotation, any possible difference between the actually shipping cost and the amount you collected from your customer isn’t subject to rebate or refund.

If you are shipping by UPS, FedEx, or some other such carrier; or by the Post Office Parcel Post service, the amount you charge may be determined by adding-up the different charges for shipping to each delivery zone ... then dividing by the number of zones. — The result will represent an average shipping cost ... if you expect an equal number of orders from each delivery zone.

When you don’t expect to receive an equal number of orders from each delivery zone, the ‘mailorder statistics’ for your industry will tell you what percentage of your orders will come from each state. — Multiply the ‘cost’ of shipping to each state by the percentage stated in the statistics ... use the percentage as a “whole number” when doing your multiplication; not a percentage. Add-up all those numbers and divide by 100. — The result will be your ‘average’ cost of shipping.

Then again, some marketers simply ask for the ‘cost’ of shipping to the farthest delivery zone ... knowing that by adding the term “handling” to their advertised offer their butt is covered.

If you are using a flat-rate carrier ... such as Post Office Mail ... your shipping cost will be the same for all of the delivery zones. In that case, use the highest flat-rate cost ... such as First Class Mail. Then, covering your butt by using the term “handling” in your advertising, you can ship by First Class or any of the lower classes ... bulk, book rate, etc.

Of course ... if you don’t want to go to all that trouble ... you can just do what most of us do. — Look and see what others, selling products similar to yours, are charging for “shipping & handling” and charge the same.

No matter how you calculate your “shipping & handling” charges, some of your customers will pay you more than it costs you; others will end-up paying you less. — The difference ... plus or minus ... will go to your bottom line. Either adding to your profit, or costing you some of your profit.

Jim

Copyright 2000 - PHLANDER Company


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