Guide to Shipping & Handling

With the ever-present speed and convenience of online shopping, not many people stop to think about the number of actual shipping touchpoints required to get a package to their home.

Those touchpoints are pieces of the overall shipping and handling process. When asking “How much does shipping cost?” it’s important to understand that shipping and handling refers to more than just delivery costs.

But knowing how much to charge customers for shipping and handling can be very challenging. Read on to learn how to calculate shipping and handling costs and manage operations, whether in-house or through a 3PL.

What is shipping and handling?

Shipping and handling is the process of preparing and packing an order and then sending it to a customer. You will often see shipping and handling as a set of fees incurred on top of the order value and taxes. It covers logistics costs like labour, packing supplies, inventory storage, transportation, and delivery.

Shipping vs. handling: what’s the difference?

While shipping and handling often get grouped together, individually they refer to two different components of the overall shipping and fulfilment costs associated with delivering an order: shipping is the postage or the cost of the shipping label for the package (unique to the weight, dimensions, destination, and carrier/service used), and handling is the labour needed to pick, pack, and transport the package.

Shipping vs. mailing

In the simplest form, shipping refers to transporting packages, while mailing is used to send letters and envelopes through the post office. Here are a few examples illustrating the differences between shipping and mailing:

• You’d need to ship inventory from your manufacturer to your fulfilment centre (likely a freight shipment).
• You’d need to ship a direct-to-consumer package of a pair of shoes from your fulfilment centre to the end customer (likely a parcel shipment).
• You need to mail a birthday card through your local post (in an envelope with postage).

Why you can’t overlook shipping and handling

Shipping and handling should be just as important to you as it is for your customers. It has a major effect on customer acquisition and loyalty.

Top 4 factors that go into forming a shipping and handling strategy

1. Capabilities and resources
   Your business size and resources directly affect your shipping and handling cost model.

2. Geographic constraints
   Understanding where your orders are shipping to can help to identify where to ship from.

3. Products sold
   The product attributes affect your overall logistics strategy.

4. Tech stack
   Integrating your ecommerce platform with your shipping and handling solution can streamline and automate shipping and order processing.

Challenges to shipping and handling

Many ecommerce businesses often don't realize the countless hours spent on shipping and handling. Those who recognize this may look to outsource fulfilment to a 3PL, which can help brands focus more on growth than logistics.

How to calculate shipping and handling costs in 4 steps

1. Determine your delivery time

The delivery methods you offer customers will impact rates and conversions. Experimenting with various offerings can reveal what resonates with your customer base.

2. Get estimated costs

Minimizing costs by working with different couriers can help you compare rates for the best value.

3. Determine if any shipping costs will be factored into the product cost

A blended cost may work for more expensive products, helping to waive shipping fees for customers.

4. Add handling costs

Your handling costs encompass the operations within a fulfilment centre, which can be gauged through monthly operational expenses.

Table of Costs Associated with Shipping and Handling

3 shipping options that customers expect

1. Flat rate shipping
   Charges the same fixed shipping rate for every order, reflecting the average cost across orders.

2. Two-day shipping
   Achieved by expedited air shipping or ground shipping, ideal for orders travelling shorter distances.

3. Free shipping
   Can be achieved through various means, including increasing the product price to absorb shipping costs or setting minimum thresholds for free shipping promotions.

Shipping couriers

USPS

Offers competitive prices for ground shipping.

UPS

Provides various shipping services, allowing for price estimation through their calculators.

FedEx

Pricing varies based on delivery speeds, with tools available for cost estimation.

DHL

Best known for international shipping capabilities with a rate quote tool for import and export.

Conclusion

Shipping and handling are critical pieces of your logistics strategy and overall ecommerce business. From offering the right delivery methods to obtaining favorable shipping rates, it’s essential to keep customers happy and costs low.