What Is a Handling Fee? Calculate Your Handling Fee Easily

In the simplest terms, the handling fee is an amount charged to a customer on top of their order subtotal and shipping fees to cover the additional costs of packaging a sale and preparing it for shipment. Your customers will have to pay the handling fee if it’s included in the total price. It’s critical to appropriately calculate handling costs on your purchases if you want to keep your expenses under control and your profit margins intact.

You must consider how handling fees may affect customers and sales in addition to your personal interests. For example, if your handling fees are seen as excessively high, your clients may be dissatisfied.

A handling fee is an additional charge added to a customer’s purchase subtotal and delivery costs. It covers the cost of fulfillment-related charges, such as packing fees based on required labor. It can, however, also include

  • Warehouse storage costs: This is the fee charged by the warehouse for keeping your goods on-site.
  • Postage, taxes, fuel charges, and additional expenses for particular shipment options, such as expedited delivery, can all affect shipping prices. Keep in mind that the cost of shipping is heavily dependent on package weight and location when determining how much to charge for shipping. There may be a difference in carriers—for example, USPS vs. FedEx—so that’s another factor to consider.
  • Boxes, protective materials, and tape may be included in packaging expenses. It might also include other minor features, such as branded tissue paper or stickers, to help your business stand out.

Handling fees are charged only once per order and are not added to each individual product. That said, fees may vary depending on whether you’re shipping domestically or internationally—if you’re shipping outside of your country. This is because you may need to factor in additional expenditures for overseas fees, such as insurance or additional packing supplies necessary to protect the item as it goes abroad. You don’t want international shipping prices to eat into your profits, so keep that in mind.

Some sellers include the handling charge in the total price, while others add it to the invoice as a distinct line item. Make sure it’s clearly stated on the invoice if you’re going to list it as a line item. This way, your customers won’t think you’re overcharging them.

Why Are Delivery and Handling Fees Important?

Handling fees allow you to keep your profit margins while also covering the additional costs of selling. You’ll have to charge handling fees if things like inventory carrying costs, packing materials costs, and labor hours for order fulfillment haven’t been considered.

Are the Handling Fees All the Same? 

You’ll need to figure out the average cost depending on your company’s circumstances.

How to Calculate Handling Fees

Calculating your handling fees is a rather simple process, although it does take some mathematics. 

To compute labor-based handling fees, you’ll need to do the following:

  • Calculate how long it takes on average to prepare each item for shipping.
  • Subtract 60 from the total.
  • Then, multiply the result by your hourly rate.

If your handling fee appears to be too high in comparison to competitors, or if you’ve had consumer complaints, it’s time to review your fulfillment costs. For example, you may need to investigate strategies to reduce labor expenses by improving the efficiency of the operation. Alternatively, you may need to switch to less expensive packaging materials.

You may want to include shipping and packaging charges once you’ve computed the handling price based on labor. That way, you’ll know you’ve covered all of your shipping and handling costs.

Calculate Handling Fees for Small Businesses

Depending on the size of your company, you may have staff or you do it yourself when it comes to getting orders ready for dispatch. You might not think about adding handling expenses if you fulfill orders on your own, as many small business owners do. Your time, on the other hand, is precious and part of the overhead expenditures of running an e-commerce business.

Calculate how much time it takes you to pack an order. Then figure out how much you’re willing to work for an hour to pack the stuff, and that’ll be your hourly charge. Finally, use the same formula as before:

[60] x Your Hourly Wage / Average Number of Minutes It Takes You to Package an Item

Your “opportunity cost,” or the time you could have spent creating revenue, is the result. As a handling fee on orders, use the amount of your opportunity cost.

Points to Consider When Calculating Handling Fees

  • Analyze what your top competitors charge to get a sense of how much you can charge. To persuade more customers to buy from your own online business, try to equal or undercut them a little if it’s financially possible.
  • For clients that require their products sooner, consider implementing rush delivery alternative solutions on your website. It will take you more time and resources, but it will also allow you to charge more for shipping and handling.
  • Another option is to charge more shipping and handling fees for larger, bulkier shipments. For example, if your average package weighs more than 25 pounds, you may decide to charge an extra 10 to 20 cents per pound for parcels that weigh more than 25 pounds.

FAQs

What is the meaning of handling fees? 

A handling fee is defined as a fee charged to a consumer to cover expenditures not related to the goods or shipment.

How much should I charge for the handling fee?

If your staff is paid $10 per hour and it takes them 15 minutes to package an item, the handling expense is: 15/60 = 0.25; 0.25 * $10 per hour = $2.5.

What is the average handling fee?

A handling fee is a charge that is applied to a customer’s subtotal at the time of checkout and there is no average for that. 

Why do I have to pay a handling fee?

To respect the time and effort of your seller’s staff and shipping officers, you are requested to pay a handling fee at the checkout. 

Conclusion 

You can differentiate your company from competitors, increase profits, and gain more insight into your own business by breaking down and correctly calculating what you should be charging for shipping and handling, and by using best practices when determining your postage and handling fees. Need more help? Don’t hesitate to contact us!

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