Friday, November 13, 2009

Why do online sellers charge handling fees?


Someone wrote a guide on eBay that said sellers should NEVER charge a handling fee. I wrote a rebuttal there and I'm adding one here.
If a seller is cleaning out Grandma's attic, hopes to make more profit than they would at a garage sale, has access to a furniture store giving away free bubble wrap, lives within a mile of a post office and feels capable of giving customers what we call ACTUAL SHIPPING--in other words, charging no more for shipping than the seller must pay to ship the item at the post office window--I salute that seller. This is a great policy. The buyers will love it.
But if you are a seller who is running a business, who must buy wholesale goods to resell, you may not be able to adopt this business model. If you are an artisan who buys materials for crafts, makes said products and must factor in materials, labor, shipping and packaging, I think it is unlikely you will be able to charge actual shipping and stay in business. Wait, I'm getting to the best part. If you are said artisan who receives many small orders that ship in small envelopes with a lot of bubble wrap, just kiss off the idea of charging actual shipping. You will have to factor these expenses into your shipping and handling or your merchandise. Period. Am I wrong? Anyone out there able to refute me? If you have found a way, share it. But I assert that handmade artisans won't be able to keep product prices low and maintain an Actual Shipping policy for very long. The constant search for free packaging materials will wear you out unless you are receiving goods in the mail every day. Even then, did you ever try to recycle TAPE? Uh-uh, darlin', it will not stick.
I do charge a handling fee and the fee varies depending on the merchandise. I came by my fee structure honestly. I added up what we spend on tape, boxes, bubble wrap, etc. in the course of a year and divided that dollar amount by the number of packages we ship in a year. When I did this back around 2004 or 2005, this math equation told me to charge US $3.00 per package. So I implemented a US $3.00 handling fee. The recession has made that impossible so now I charge around US $1.00 or less. "Gee," you may ask, "isn't that hurting your business?" That's an understatement. The bottom line isn't pretty, but I am hoping to wait out the economy. That could be another entire blog post, so we won't go into that now.
BACK TO HANDLING FEES. There are some variables I take into consideration. When I wrap a handmade stone castle that requires a lot of TLC and bubble wrap, I will usually charge a higher handling fee. The more fragile an item, the more likely I am to charge up to US $5.00 for packaging. I don't go over US $5.00 yet I know there are people who charge more than that. If I order from someone who charges more than US $5.00 for handling, I assume they have their reasons and I will generally accept their judgment.
But once I ordered some toiletries for which I paid a US $10.00 handling fee. I assumed the seller's handling fee was justified until two plastic bottles arrived in a Tyvek envelope without cushioning. That, my dears, is just plain wrong.
I think the variable that kills a budget the most is the tendency to receive small orders. Orders that weigh over 13 oz., require Priority packaging in the United States if they go through the postal service. You can get those boxes and envelopes for free from the post office. But if you sell lots of breakable glass beads, requiring a small bubble mailer, maybe an extra layer of bubble wrap and/or a gift box, you must pay for those packaging components yourself and those things are not only expensive, they add up quickly. Jewelry designers have my sympathy. So do soap makers, whose shipments are always somewhere between a little bit heavy to a lot heavy to...sinking a battleship heavy.
Okay, dollars and cents.
Here are some of the expenses I consider when I calculate a handling fee. These are amounts I collected a couple of years ago, so they are just approximations:
  • US $27.00 or so for a six-roll pack of cheap, clear packaging tape. The stronger kind of packaging tape costs more. Strapping tape is even more expensive. And please do not even think about using masking tape. It falls off in the mail. Ditto for "scotch tape" unless you use the old-fashioned, hard-to-find, very shiny scotch tape. It's usually sold in a red plaid carton or package. Not the green plaid; that is "magic disappearing" tape and that is fine for wrapping a birthday present, but not for mailing packages. Tape is a big issue. I use tape on every package I mail. The cost for one of the components used to make packaging tape went up a few years ago and therefore the cost of tape rose.
  • US $3.00 to US $4.00 for a ream of printer paper. Recycled is cheaper but thinner. I use paper for printing mailing labels off my computer.
  • US $15.00 to US $49.00 for a pack of 25 bubble wrap mailers for books and blank journals. The biggest of such envelopes can cost almost US $2.00 each, but they are more durable and stable versus brown kraft paper over bubble
    wrap. I use first class plastic or Tyvek envelopes for yarn and the latter is pricey but if you ship yarn in a paper envelope, the envelope can break open, the yarn can roll out, the package can get wet and ruin the yarn and so on. Sometimes I use two manila envelopes, one over the other for strength, and use extra tape. Depends on what I'm mailing. I have had a very high success rate with my packaging--and by that, I mean, minimal complaints come through--although once in a while someone will tell me I over-package. But I'd rather have a complaint for over-packaging than for under-packaging.
  • Up to US $3.05 for a cardboard box. Fortunately, we usually skirt that cost by either recycling the boxes that come into our home or by using Priority Mail boxes that the post office provides free of charge. By the way, I have had dozens of eBay customers insist on Parcel Post rather than Priority Mail because they think it will save them money. Surprisingly, Parcel Post might raise the packaging fee, might cost the same or even more in shipping, might save them only 38 cents, and/or take up to three or four weeks to arrive. Sometimes I patiently explain this to the buyer and they understand and they trust me. Other times, I write up an invoice for them showing the Parcel Post option as legitimately higher than the Priority option and just let them choose. Okay, I'm a smart-aleck. I admit it.
  • 26 cents per square foot for bubble wrap. That sounds cheap until you realize how many square feet it takes to cover a birdhouse.
  • US $20.00 a bag for loose fill packing peanuts.
  • Around US $20.00 to US $75.00 for one or two printer ink cartridges, depending on type, brand, quantity, etc. Long story on this one. I find that recycled ink cartridges either burn out more quickly or do not work at all. That's just my experience.
  • US $16.00 a month to have an eBay store although I have since closed it. You can sell on eBay with or without a store. See their site for a detailed explanation. And when I had a store, I paid about US $60.00 a month to list 500 inventory items in addition to auctions. Note that this US $60.00 estimate changes somewhat depending on whether you use gallery photos, list items for under US $25.00 versus over US $25.00 and/or you are a powerseller. These fees have changed for me since I now list much more of my merchandise on other web sites. But those other web sites also have fees.
  • Commissions to the web site if something sells, depending on which site we're talking about. Not all sites charge a commission.
  • Another commission to Paypal and I realize many people are not fond of Paypal, but for a seller, it is a godsend because it eliminates a lot of bookkeeping. If I must spend time on bookkeeping, that is time I could have spent finding, designing, creating, investing in or shipping merchandise.
  • US $10.00 a month for a business checking account. Plus the cost for blank checks.
The worst expenses of all are computer expenses. Printer ink tops the list. If only we could use Chanel No5 in our printers instead, we would save a bundle there. Then there are hardware, software and internet expenses. Since beginning this business, I have had to replace my computer once and my camera and printer twice. My funky old monitor is still hanging on but that cannot last forever. I use McAfee virus protection, file back-up services, Comcast internet connection, a Yahoo web site and picture hosting, etc. Overall, it's a lot. In fact, I grow disgruntled writing this, so I will stop for now.
No, wait, a word about the post office.


Travel to and from the post office varies in cost. It was a huge eye-opener for me when I learned about a seller in an urban area who must take packages to the post office by bus. What a hassle! I can just see him making his way down the aisle of the bus and banging each and every knee with his humongous shopping bags filled with packages to mail. Do you think that seller is making a ton of money and should absorb the cost of bus fare? Most buyers would say, "Yeah!" Well, be careful what you wish for. If that seller IS absorbing the cost, he may go out of business soon if he's not careful. I sure hope you didn't like his merchandise too much, since it may not be available next year.
I have been getting my packages picked up off my doorstep for years now and love the convenience of it. The one type of package the USPS will not pick up is International First Class, which saves customers money, but actually costs the seller more in terms of time, money and effort. I rely on someone to take those packages to the post office for me and I cannot necessarily get these mailed within 24 hours.
Are you thinking, "So what? I live in Australia, and I will not pay for faster Priority mail just so you can get free package pick-up!" No, you are not saying that because my Australian customers are super nice and patient and are happy to pay whatever it takes for shipping. Since 2003, I have never had a disgruntled Australian customer. They trust me. They say "cheers!" a lot and I like that. And if I offer to save them money by using First Class, they wait patiently until I can get someone to take their package in. Bless those Aussies!
But my point about package pickup and post office visits is this: just because it is easy for me or for you to get to the post office doesn't mean it is easy for everyone. Just because your post office is close by doesn't mean some seller in North Dakota isn't having to drive 20 miles round trip. So sellers, please take this into consideration when you set up your online business. And buyers, please cut your seller some slack when you are thinking, "Just take it to the post office! What's the big deal?" Your life in your town and your gasoline prices are not the same as everyone else's. And did you ever consider that a number of buyers and sellers are disabled? Maybe that's why they like to shop online.
Any seller who is running a business must pass part of the cost onto the buyer and this is just obvious. How you pass the cost along is up to the seller. But if you don't do it, you will go out of business. My advice is to be honest, pass along whatever cost seems fair, apply the cost to the merchandise or the shipping or both, hope people like your products enough to pay a decent amount for it and then....well, then bite your lip when someone gets snippy. Sometimes a customer places a large order with me and the shipping calculator goes through the roof. I take pleasure in giving that person a hefty rebate. Often they appreciate it and often that is the best I can do for them. So perhaps what it boils down to is this: calculate your costs and do the best you can for as long as you can. The day you learn you are giving away too much for too little is the day you will wonder if you need to fold the business.
dj runnels
Life's an Expedition
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