Learning how to sell products online is rewarding because you get to build a business around what you’re passionate about. You can create your own online storefront, develop an eCommerce marketing plan, and reach customers who appreciate your brand.
Understanding how to start an eCommerce business includes embracing the nitty-gritty, too, like shipping and handling. It’s important to have the basics of shipping down so you can develop realistic financial projections in your eCommerce business plan. This includes what shipping services to consider, common shipping charges, and how to print shipping labels at home if you don’t have a physical location.
Read on to learn the essentials of eCommerce shipping and handling, including recommendations for minimizing expenses.
What Is Shipping and Handling?
Shipping and handling is the process of putting physical products in eCommerce packaging and preparing them for eCommerce shipping companies to deliver to buyers. It involves everything from retrieving merchandise inventory from shelves, getting items in boxes, and staging packages for shipping trucks.
Handling and shipping also frequently overlap with kitting. This is the process of bundling individual goods that are relevant to each other in the same package. Different types of eCommerce businesses use kitting to improve warehousing efficiency, streamline order processing, and increase eCommerce sales.
If you leverage a subscription box business model, shipping and handling includes making sure you have enough custom subscription boxes on hand. Consumers of subscription box products expect a certain level of quality from their purchases, and this is no exception.
Well-defined shipping procedures are also part of any warehouse management process flow. A warehouse process flow is a diagram showing stages that items brought into a warehouse, like work in process inventory, go through. It’s necessary for peak operational success and especially when training new employees (see what is warehouse job).
Your warehouse organization strategy should define how and where shipping is completed. Shipping and handling is the last stage of daily warehouse operations, before carriers or your 3PL service picks up packages (see 3PL meaning).
What Are Shipping and Handling Fees?
Shipping and handling fees are the costs associated with picking, packing, and delivering a product. Each stage of the supply chain incurs a cost, and carriers profit by moving products from a seller to a buyer.
Many resources are required to move products from warehouses (see what is warehouse) to retail stores or customers’ addresses. Shipping fees vary based on a variety of factors--combinations of which are unique for any given business.
It’s important to research what your typical shipping and handling fees will look like. Your expenses will depend on the products you sell, the carrier you use, and whether or not you have access to bulk shipping discounts. Despite this wide degree of variability, you can use common shipping rates to make reasonable expense estimates.
If you’re shipping via media mail, your rates may be as low as $1.76 per item. Products that weigh one pound or less typically cost $5 or less to ship.
If you’re shipping products the size of mugs, books, or apparel, you usually pay between $7 and $12 per item. Items that are shoebox-sized may run between $14 and $23 for shipping, with heavier or larger items being $29 or more.
All of these costs may vary based on the shipping service you partner with, any applicable discounts, and fluctuations in market demand. Make sure you discuss the best shipping rates available with a representative from the company of your choice.
Is Shipping and Handling Taxable?
Yes, shipping and handling fees are taxable in most cases. This is particularly true if the item being shipped is taxable. In many instances, a sold product being taxed will mean the associated shipping and handling fees also incur a tax.
However, there are a few exceptions to this general rule. If the sale of an item is not taxable, there may not be a corresponding shipping tax. This may change based on various local or state laws that dictate whether or not shipping and handling is taxed even if a product isn’t.
There is usually no shipping or handling tax if the state in which a product is sold doesn’t impose such taxes. Refer to your state’s tax or revenue office for complete details on shipping taxes.
How Much to Charge for Shipping and Handling
Figuring out standard shipping costs when starting an eCommerce business can be challenging. You want to charge enough to cover the expense, but not so much that buyers end up shopping elsewhere.
If you’re wondering how to calculate shipping costs, the answer will depend on multiple factors. What you’re shipping, its weight, destination, ship date, package size, and taxes all play into the final fee.
A reliable shipping expense also depends on the carrier you select. Three of the largest and most widely used shipping services are USPS, FedEx, and UPS.
Some shipping services provide lower rates for air parcels; others offer competitive ground rates. Consider the nature of your products and what they need to reach customers intact, and go with the shipping service that’s the best fit.
While you can adjust your expenses as your business grows, it’s good to have a baseline plan for shipping charges. There are numerous approaches for determining shipping fees based on your given business model:
- Free shipping. Some business owners provide free shipping for all products to entice new customers. Many shoppers expect free shipping as well, simply because it’s become so ubiquitous recently. This model works perfectly for large or expensive products because carriers often provide lower rates for companies that do more business with them. Business volume may be calculated by weight, shipped units, or another factor.
- Flat rate shipping. Providing a flat rate for customers simplifies your work because every package is the same cost. This model works well for businesses that sell small products or kits.
- Price-based shipping. Charging a shipping rate based on how much a customer buys is another popular method. Depending on what a business sells, shipping may decrease with a higher basket size, or be eliminated altogether once a purchase amount is reached.
- Real-time shipping costs. This shipping model works well for products with seasonal demand and high variability. Because more people may be shopping for a given product during a limited time frame, this can drive shipping costs up. Real-time cost calculations prevent business owners’ expenses from eating into their profits.
- Weight-based shipping. Where weight variability drives at least one defining characteristic of a product, weight-based shipping may suit you best. This prevents some or all of your revenue from being consumed by shipping costs. Determining shipping costs by weight is more common with large and bulky products.
Shipping Your Way to Success
Getting your shipping process down pat is a pivotal moment in your business. This is true whether you’re selling food online, researching wholesale items to sell, or running a B2B business. Customers will be thrilled and remain loyal when you deliver goods quickly, which is a deciding factor for most shoppers.
If you're selling coffee online, learning how to sell baked goods online, sell whiskey online, selling liquor online, or sell beer online, just know that there are much stricter regulations for the sale and transport of alcohol so you'll need to factor in additional handling costs.