Shipping as a Profit Center

If you ship products to your customers, shipping and handling costs are a necessary element of your pricing equation. But shipping and handling charges can be a powerful tool: Freight charges can generate profit; inexpensive or free shipping might win over comparison shoppers.

There are several ways to handle shipping charges, and different tactics will suit different businesses. Before you decide how much to charge your customers for shipping and handling, consider the pros and cons of each of these tactics:

Tactic 1: Pay for shipping and handling costs yourself.

• Advantage: Free shipping screams "customer service."
• Disadvantage: If you ship often and in large quantities, you may lose a lot of money.

When to do it: If you don't need to ship often, it may make sense to offer free shipping. For example, if you deliver to customers only when they order an out-of-stock item, you won't have to pay for shipping very often, but customers will know the service is available if they ever need it. You also might want to offer free shipping when you introduce a new product or if you are trying to move old inventory.