How To Price Shipping And Handling For Physical Goods

How to Price Shipping and Handling for Physical Goods

If you're running a business that sells physical goods and products, you will frequently need to dispatch your products all over the country - perhaps even all over the world. When you do this, you might pack the item yourself, or you might pay someone to do it. However you handle it, shipping and handling is an important aspect of your business, and the safety of the items you post rests partly on your shoulders, as badly packed items will often get damaged in transit.

Your shipping and handling charges are a determining factor in how competitive you will be in a niche market. Many established companies are well known for their efficiency in dispatching the product - customers trust them for their safe prompt delivery. Before you can emulate them, you need to come up with a fair pricing structure for shipping and handling as this is an additional cost paid by your customers. The costs of shipping in bulk are often cheaper than for a single item and you should consider giving your customers discounts for volume.

How do you calculate shipping and handling charges for your product? It's relatively easy, if you know the basics. There are two components in the price:

1) The handling cost which includes packing material, labor, storage and other related costs. While this cost is pretty easy to calculate and depends only on you, the most common mistake is to use the lowest price possible for packaging materials in the shipping calculation. The better way is to find an average cost for packaging materials and then source the cheapest. At least this way you still have some room to "sharpen your pencil" if your shipping quote is too high.

2) The shipping cost which is the charge for postage, freight or courier charges. These costs are not so straight forward and you need to research courier and freight charges to many destinations around the world. Bear in mind that not all shipping charges are fixed, and with a little effort you can easily negotiate an agreement with your shipping company.

Shipping and freight companies usually charge based on the weight and volume of items, the distance they are going to travel, and how quickly you want them to get there. Large volume or weight deliveries carry a premium price tag, while smaller and lighter ones cost less. If the destination is within your country, the shipping charges will be rather small compared to sending packages abroad. If you need urgent goods to be delivered quickly then you will need to pay higher 'priority' charges, whereas slow, 'non-priority' delivery costs much less.

When calculating shipping costs, don't calculate the cost of shipping to each country in the world, break it down into regions or by continent. If you are shipping small items like CD's use one shipping cost for local deliveries and cost for international deliveries. Find the most expensive shipping cost you are likely to incur and use that for all countries.

When your customer purchases a product, they will be charges the cost price for the product and the shipping and handling costs applicable for the delivery destination will be added at the checkout. A total is calculated and then charged to your customer at the end of the transaction.

You may want to consider offering customers a delivery priority for their shipment. For example:

Option 1. Standard shipping within 3 to 5 days (cheapest).

Option 2. Express 2-day shipping (average cost).

Option 3. Guaranteed Next Day 1-day shipping (most expensive).

Consider giving discounts on bulk orders. Customers will often insist on insurance for bulk orders and costly items and you should consider their request; not only does it makes them more comfortable, it saves you a big PR headache if the order goes missing. On all shipments include a clearly explained shipping, handling and return policy.

Always take care to prepare the proper documentation to suit the insurance, tax and customs regulations in force in your own country and in the destination country. If you are shipping to another country, make sure your product is not prohibited. If you sign up with a trustworthy shipping agent or courier most of the documentation will be handled by them, giving you peace of mind that your items will be delivered safely and quickly.