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Handling Fee For Small Businesses Explained (+ Examples)
Are handling fees becoming a major cost? Find out how your store can reduce handling fees and increase conversions today
Want to turn handling fees into a competitive advantage for your store? This article breaks down handling fees, examples for eCommerce stores, and how they can impact customer expectations. Plus, explore how Easyship can help your store reduce handling fees, whilst increasing sales today.
What is a Handling Fee?
Handling fees are charges that cover the extra costs connected to packaging an item and prepping it for shipping. Instead of your store paying extra fees for fulfilling orders, your customer can cover the costs when you add a handling fee to the total cost of the order.
Shipping and handling fees may sound similar, but they differ greatly. The cost of shipping is the amount your store pays to ship an order to the customer. Handling fee calculations take into account everything outside the shipping fees when your store packages and ships products.
If you don't charge handling fees to your customers, shipping and handling costs can start to rapidly build as your store scales successfully. The more orders you generate, the more money you can potentially lose on handling costs. Tracking and calculating handling fees can be a crucial practice when determining costs and boosting profit margins.
What is a Handling Fee on Etsy?
While handling fees on Etsy aren't required and you don't need to add one to your listings, you may want to add an optional handling charge. When you add a handling fee on a calculated shipping profile, it will be added to every item on the customer's order. If you are not careful, this can quickly add up and you can even potentially lose sales.
Examples of Handling Fees for Online Stores
A handling fee means an amount you can charge your customer once per order, on top of the price of the products they order and shipping fees. It covers any costs or expenses related to fulfillment, especially packaging costs and labor. In general, handling charges for online stores come from:
1. Storage Costs
These fees will be the amount that a warehouse charges for you to store your stock. A simple method to work this out per individual product ordered is by dividing the total cost of storage by the amount of stock you have at the warehouse over a given time period.
2. Packaging Costs
Packaging materials costs can include everything required to ship a product safely and seamlessly. From padded envelopes to packing peanuts, there are a wide range of materials available for products of all shapes and sizes. While some such as newspapers can be found cheaply or even for free, the prices of more specialist and durable materials can quickly add up. Especially if your store is growing quickly!
3. Labor Costs
If you have a team fulfilling orders for your store, you can calculate handling labor fees. Start by tracking the average number of minutes it takes to prepare each order for shipping, then multiply this by the team's hourly rate. However, if you're working alone, you may think you are reducing costs by not having any handling labor outgoings.
While this may pretty much be the case if you are only quickly prepping a few orders a day, once you store starts to scale you could be faced with a huge commitment. To work out this opportunity cost of your valuable time, calculate the amount you would reasonably expect to earn per hour. Keep track of the time it takes to prep orders for shipping and apply this hourly rate as a handling cost.
Handling Fees and Customer Expectations
Customers will want to know what they are being charged and why. A handling fee that is unreasonably high can convince customers to look into similar products offered by your competition. This makes communicating these fees clearly and transparently potentially crucial in helping to build customers trust and boosting conversions.
Alternatively, you can include your handling fees in the overall price of your products, that way the customer won't be able to see the handling fee at checkout. Another method to reduce the impact of handling fees on conversions can be to offer free shipping thresholds, encouraging customers to bundle purchases for perceived savings. This can also help drive sales while meeting customers' free shipping expectations.
Hack Handling Fees for Maximum Profit
Handling fees can help your store grow by maintaining profit margins and covering the cost of increasing sales. If costs like storage, labor, and packaging materials will increase while you grow, then handling fees can be crucial for effective scaling.
Optimizing your shipping process can be crucial in reducing the cost of prepping order shipments for your online store. Developing effective standard operating procedures (SOPs) can create a standardized workflow that ensures every order is consistently shipped ASAP.
Make handling fees your competitive advantage by offering customers a delivery experience they love. From fast delivery to free shipping thresholds, get ahead of the competition stuck charging extra and boost conversions with Easyship's FREE shipping calculator. Get an instant estimate of your costs and compare exclusive pre-negotiated rates from over 250+ couriers worldwide.
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Are handling fees becoming a headache as you scale? Sign up for a Free Easyhip account today and start optimizing your shipping process in minutes. From automating label generation to exclusive shipping rates with up to 91% off, transform shipping into your store's competitive advantage.
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