What Are Shipping And Handling?

Virginia Miller

May 20, 2024

In this article

What are shipping and handling? We've all seen that little line item on our orders at some point, but what is it exactly? And, more importantly, why do we have to pay for it? In this post, we'll break down what shipping and handling are, why they cost money, and how you can keep those costs as low as possible. Ready to learn more? Let's get started!

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Understanding Shipping and Handling Fees

Shipping and handling refer to the costs associated with transporting purchased products to customers. This includes picking, packaging, and delivering items as well as labor, storage, and other operational expenses.

Breaking Down Shipping vs. Handling

While often grouped together, shipping and handling involve different activities:

Shipping

Shipping costs account for transporting ordered items to customers via mail, freight, or other delivery services. This includes fuel surcharges, mode of transport, delivery timeframes, etc.

Handling

Handling covers internal processes such as:

Receiving purchased products
Packaging items for shipment
Properly labeling packages
Loading items into delivery vehicles

In essence, handling refers to warehouse activities required to fulfill orders. It may also include value-added services like customization, kitting, gift wrapping, etc.

Key Factors Impacting Shipping & Handling Fees

Several key factors influence the actual shipping and handling fees sellers need to charge customers:

Transportation Distance

Delivery fees are lower for nearby customers versus longer distances. Offering faster shipping options also increases costs. As such, basing fees on geographic zones helps align with actual fulfillment expenses.

Business Size

Larger sellers can leverage volume discounts from carriers to reduce shipping costs. Smaller merchants may find certain faster shipping options too expensive based on order volume.

Product Pricing

Higher priced items allow for more flexibility in offering free shipping while still covering fulfillment costs.

Outsourcing Shipping & Handling

As order volumes grow, many sellers partner with third-party logistics (3PL) providers to handle warehousing, order processing, and shipping. Reasons to outsource include:

Difficulty keeping up with orders
Reaching maximum warehouse capacity
Lacking resources to handle seasonal spikes
Wanting to provide faster, more affordable delivery options
Expanding into new markets or geographic areas

The right 3PL provider can help streamline fulfillment, reduce costs, and improve the customer experience.

Balancing Customer Experience with Fulfillment Costs

Shipping and handling represents a key component of running an ecommerce business. Merchants must balance providing fast, low-cost delivery options with actually covering the expenses related to fulfilling orders. Understanding the key factors around shipping and handling fees allows for building a sustainable fulfillment model.

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FAQs

What are the main differences between shipping fees and handling fees?

Shipping fees account for transporting purchased products to customers, including delivery provider charges. Handling covers internal fulfillment costs like receiving inventory, packaging orders, and loading items for shipment.

How can small ecommerce businesses offer affordable shipping?

Leveraging volume discounts from carriers is difficult for smaller merchants. Expanding localized delivery zones or outsourcing fulfillment can help reduce expenses to provide cost-effective shipping.

What is a fulfillment center and what role do they play?

A fulfillment center handles warehousing, inventory management, order processing, packaging, and shipping on behalf of ecommerce businesses. They become an extension of a merchant's operations.

How do faster shipping options impact costs?

Expedited delivery times via air transport or tighter transit deadlines increase shipping rates. The further packages need to travel, the bigger the premium for faster service.

Should I include handling fees in my product pricing?

Separating shipping from handling lets merchants show customers exactly what delivery costs they will incur. Embedding fees into pricing reduces transparency on fulfillment charges.

What are some signs I should outsource fulfillment?

Indicators include falling behind on orders, reaching maximum warehouse capacity, lacking resources for seasonal order spikes, and wanting to expand into new markets or geographies.

How can I estimate appropriate shipping and handling fees?

Look at factors like transportation zones, average package weights and dimensions, delivery speed options, and outsourcing costs if relevant. Use past order data to calculate expected fulfillment costs.

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