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Shipping and Handling Fee Best Practices

mac_n_stuff
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With eBay's current focus on reasonable Shipping & Handling (S&H) fees, I've noticed that many sellers have become concerned about the S&H fees they're putting in their listings. With eBay's new emphasis on S&H, eBay can remove a listing due to outrageous S&H charges. I've noticed that some sellers (mostly new sellers) have resorted to posting very low S&H fees. Let's face it, as buyers, we all despise that pesky S&H fee and usually feel that the fee is higher than you think it should cost. I've prepared this guide to explain the best practices sellers should use to calculate reasonable Shipping & Handling fees. After going through this guide, I hope you end up with a better understanding of why a seller might charge $10 to ship an 8 ounce item using USPS Priority mail.

Because this is a pretty long guide, I though I'd put this obnoxious bit of pandering up front. I put a lot of time and effort into researching and writing my guides. The only compensation I get from my guides is knowing that I'm sharing my knowledge with other eBay members to help you be better sellers. Please VOTE for this guide at the bottom after you've read the guide (it's okay to jump down there and VOTE right now if you don't feel like reading the whole bloody thing). I'm happy if you vote that this guide is helpful or even if you feel it isn't helpful. All VOTES are GOOD. As far as I'm concerned any bit of information you can gleen from this guide has got to at least give some amount of knowledge, so isn't it worth a vote?

We interrupt this previously posted Guide with an important update, the original guide will continue after this update.
    Offer a Shipping Discount for Multiple Purchases
    One of the first bits of advice that I'm going to give you is to set up your shipping preferences so that you give buyers of multiple items a shipping discount. eBay will automatically charge your buyer the full cost for the highest S&H, and charge the buyer half of the S&H for subsequent items. This really makes buyers happy, and is a no brainer as far as I'm concerned.

    In most cases, if a buyer purchases multiple items from you during the same transaction period, you're going to ship the items at the same time in the same package. It's truly unfair to charge a buyer who has purchased multiple items from you $35 for S&H because one item had a $20 S&H and the other had a $15 S&H. Remember you're trying to make your buyers happy so they come back and buy more from you. I just had a weekend of purchasing where I ran into this exact situation, and while I was aware the seller wasn't offering a discount, I still felt that the total S&H fee for my multiple purchases was outrageous.

    Of course, it's not always possible to offer a shipping discount on multiple purchases. For instance if you have an item that is pre-packaged and you just stick a shipping label on the item, or in the case where your S&H fee is so low that you'll end up losing money on the shipping discount. For those items, just remove the discount option when you are preparing your auction.

    A bit of advice for any buyers that might be reading this guide (of course, most sellers are also buyers), even if the seller didn't offer a shipping discount, it's a good idea to ask the seller to give you a discount (even after you've won the item). Most legitimate sellers will end up giving you some sort of a discount because they realize the S&H fee has become ridiculous. As sellers, I reiterate, it's a good business practice to give your buyers a break on shipping. Happy buyers are going to come back and purchase more items from you in the future, and that's just all goodness for your business.

We now return you to the originally posted guide and apologize for any inconvenience the update may have caused.

SHIPPING CHARGES
Let's get the "S" part of S&H out of the way because it's the easiest part of the S&H fees. Shipping fees are governed by the mail services. The USPS, DHL, Fed-Ex and UPS all base their shipping fees on the shipping method, package weight, and distance the package has to travel to its destination. All sellers should be able to get a pretty good estimate of how much it's going to cost to ship their item.

eBay encourages sellers to use the shipping calculator in your auctions. This takes the guess work out of determining the shipping costs, and buyers tend to feel they're getting a better deal based on their actual location. If you prefer to use a fixed price S&H fee, then the shipping fee should be determined based on the furthest location that you may have to ship the item.

The only other part of the shipping equation is the insurance charges. You basically have four options: required, optional, not offered or included in S&H fee. Based upon what you're selling you need to make a judgement as to which option is appropriate for your item.

Guidelines for Determining an Insurance Option
  • REQUIRED: I use this option if I'm sending a delicate item that could potentially get damaged during transit. Personally I don't use this very often, and as a buyer, I don't like it when an auction requires me to pay for insurance.

  • OPTIONAL: I use this option when sending an item that could get broken if its mishandled during transit. This option also provides your buyers with the most flexibility. If the buyer is worried about the item getting damaged during shipping, then he/she can opt to pay for the insurance. As a buyer, I really appreciate being able to make this decision for myself.

  • NOT OFFERED: There isn't much to say about this. If you're selling something very sturdy, like books, DVDs, or any of a myriad of rugged, unbreakable items then this is a reasonable option to use in your listing.

  • INCLUDED IN S&H: This is similar to REQUIRED because your essentially forcing your buyers to pay for insurance. I usually use this option when I'm shipping heavy items that already have a significant shipping fees (e.g. monitors, computers, stereos, etc.) I also use this instead of REQUIRED because it just doesn't sound as harsh as REQUIRED.

HANDLING FEE
Now here's where a lot of confusion and misunderstanding come into play for new sellers. In general, handling fees are going to vary for each seller. If you're a large company with a warehouse and employees, your handling fees are probably going to be more substantial than a one person operation. There are a number standard items that buyers should consider when calculating their handling fees. There really are a lot of factors that go into the handling fee that many buyers don't consider.

Items to Consider When Calculating a Reasonable Handling Fee
  • Packaging Materials: Containers, Boxes, Bubble Mailers, Envelopes
  • Item Protection: Packing Peanuts, Bubble Wrap, Air Filled Bags, Conformal Foam
  • Addressing Materials: Address Label Forms, Invoice Pouches, Packaging Tape, Paper, Ink
  • Effort & Fees: Packing Time, Carrier Pick-Up Fees, Driving to Shipper, Driving Time
  • Any Specialty Items: Special Packing Materials, Plastic Part Bags, ESD Bags, Special Labels (e.g. ESD, Fragile, etc.)

There are probably other shipping materials that I've forgotten, or am unaware of, but this is a pretty comprehensive list of items. As a seller, you know what materials you need and the effort it takes to ship your items. If you have to purchase materials to ship your items, you need to make sure that your handling fee takes these costs into account. If you don't take these costs into account when calculating your handling fee, then you're losing money on every item you ship.

I hope this guide has given you some insight into what it takes to calculate a reasonable handling fee. I'm definitely not advocating excessive S&H charges. I hope you are able to use these guidelines to establish your own reasonable S&H fees. If you are methodical about calculating your S&H charges, you will be able to explain to your customers why you are charging $10 to ship a 1 pound item using USPS Priority Mail when the USPS only charges you $4.05 to ship that item. I've had buyers question my S&H fees using that exact rationale, and when I've explained the factors that are included in the S&H fee they seem to understand why I'm charging more than the $4.05.

If you've found this guide helpful, entertaining, boring or even painful, please take a moment to VOTE at the bottom of the page. If you haven't found it helpful, then VOTE anyways! All votes are GOOD. I spend a lot of time and effort researching and writing my guides and your VOTE is my only compensation. I thank you from the bottom of my heart for your vote.

If you have any comments, suggestions, corrections or questions regarding this guide feel free to e-mail me. I'm always interested in updating and correcting my guides.
 
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