When you start up an eCommerce business, or indeed any business, shipping and handling costs can seem confusing. How do you know what to charge? You might be tempted to charge a flat fee and leave it at that. This would be dangerous for your business. You need to understand how to calculate shipping costs, so why not try using a shipping solution, like Fetchy, to do this for you. Otherwise you’ll be charging too much or too little, and that’s no way to run a business.
If you’re using small boxes then you can generally get away with budgeting a dollar for packaging, but these costs can vary massively. It shouldn’t cost more than 50 cents for a padded envelope, but the costs of shipping something in a box can vary anywhere between 75 cents and $5. Be sure to look into how much packaging can cost and factor these costs into your budget and shipping costs.
The actual postage costs are quite easy to work out. This is because the internet is packed full of postage calculators that can work out the cost in an instant. Most postage providers, such as the USPS, FedEX, and UPS, have their own shipping calculators. Fiddle around with them and see how much you can expect to pay for postage with your deliveries.
Handling costs can be difficult to calculate, because they change whether or not you have employees. If you do have employees, then you should multiply how long it takes them to prepare an item by how much they are paid per hour. If it takes them 15 minutes to package an item, then your handling costs are around $2.50 as 15 minutes/60 minutes is 0.25, which – when multiplied by $10 an hour – comes to $2.50.
You might feel you don’t have handling costs if you work by yourself, but that’s not the case. You need to put some value on your own working time. You might start out and see that you could make $2.50 profit from selling an item and think it’s worth doing. If you were to spend 20 minutes preparing that item for shipping though, then your profit works out at a meager $7.50 an hour – minus the time it takes to find an item, buy it, and then create a listing for it.
Determine how long it would take to prepare an item for delivery. Then create a minimum amount per hour you would be willing to work preparing and shipping items. That forms the hourly rate. Then use the same formula we used to calculate handling costs before getting your “opportunity cost”. An opportunity cost is the time you could have been doing other things that would have made money. This should be your handling costs when calculating shipping.
This all sounds very complicated doesn’t it? The good news is that it doesn’t have to be. With a service like Fetchy on your side, you don’t need to worry about calculating shipping costs. They can take care of everything for you by connecting you with a range of couriers and calculating your costs. So let Fetchy do the hard work while you continue raking in the profits!