PrintWhen handled efficiently, shipping and handling can be a profit center for direct marketers. But you must be intimately familiar with your true costs and run a smooth picking, packing, and shipping operation. You'll also need to keep sufficient inventory on hand to avoid back orders.
Shipping the entire order at one time is much more cost-effective than sending out back-ordered items in subsequent shipments. Back-order shipping and handling costs mount up and you pay those bills. And customers aren't happy with back orders no matter how much they cost you.
Try these tips to estimate your costs and calculate the proper rates to pass along to customers:
- Analyze buying habits in your stores. This should indicate what your direct customers might buy and the size of an average order. Evaluate the dollar amount, weight and size.
- Estimate the costs for packing materials, labor and shipping carriers for the average order.
- Create a chart of associated costs for shipping and handling of different size orders. Then build a buffer into your estimate that covers the range.
- Compare your charges with your competitors' and position your charges to your advantage. Develop a relationship with your shipper and negotiate better rates, then pass the savings on to your customers in the form of attractive shipping and handling rates.
It's important to present your rates clearly to customers — ideally in chart form. Reward customers who purchase more by lowering shipping and handling charges for large orders.
Customers expect to pay shipping when buying direct, but they don't always understand handling. If the mail order purchase price grows significantly higher than purchasing the same item in a store, you're likely to lose the sale. Find a middle ground that leaves you with a cushion while still pricing your products competitively. After you've gathered some selling history, you'll probably want to revise your rates appropriately.
