Guide for Determining and Overseeing Shipping Charge Adjustments
Improving Order Handling Fees for Apparel Businesses
Managing order handling fees effectively is crucial for apparel businesses to maintain a healthy bottom line and cover operational costs without eroding profit margins. Here's a guide to best practices for calculating and managing order handling fees.
Calculation of Order Handling Fees
- Base Fee Determination: Calculate fees based on weight and dimensions. Walmart Fulfillment Services, for example, charges a base fee varying from $3.45 for items up to 1 lb to higher rates for heavier parcels, plus incremental weights fees beyond certain thresholds [1].
- Additional Apparel Fees: Apparel items often incur additional handling fees. Walmart adds a $0.50 fee per clothing item to the base fulfillment fee [1]. Other extra fees include oversize charges or price-based adjustments.
- Include Other Cost Factors: Consider inbound receiving, pick & pack fees, storage costs, and shipping markups if using third-party logistics (3PLs). These fees typically range from $0.20 to $2.00+ per order for picking and packing, plus storage fees per pallet/month [3].
- Landed Cost Accounting: Incorporate manufacturing, shipping, customs, insurance, import duties, and other logistics costs to get a full landed cost per unit, which helps in pricing and margin optimization [5].
Best Practices for Managing Fees
- Optimize Packaging: Reduce dimensional weight surcharges by using efficient box sizes and weights. Splitting heavy orders into multiple smaller parcels can also help reduce fees [4].
- Package Consolidation: Combine smaller accessories with main items to avoid multiple shipping fees unnecessarily [4].
- Warehouse Location Selection: Use fulfillment centers positioned centrally relative to customers to reduce shipping distances and costs [4].
- Leverage Purchasing Power: Partner with 3PLs that negotiate discounted shipping rates and pass savings on to your business [4].
- Regular Fee Review: Monitor and analyze fulfillment fees regularly to identify savings opportunities [6].
Software Solutions
Utilizing software solutions like Uphance can help streamline the calculation of handling fees, ensuring costs are covered without unnecessarily inflating prices. Other options include:
- Garment and Apparel Retail Software: Solutions like Logic ERP provide integrated Point of Sale (POS), billing, inventory, purchase orders, and GST compliance tailored for apparel retailers [2].
- Order Fulfillment Management Tools: Platforms that integrate with carriers and 3PLs can automate shipping fee calculations and optimize shipping choices per order [4].
- Landed Cost Calculators: Use tools from carriers (e.g., UPS Landed Cost calculator) or incorporate landed cost into ERP/fulfillment software to ensure full cost visibility for pricing and margin management [5].
Communication and Efficiency
- Educate team members about the importance of accurate handling fee management and its impact on the broader business objectives [7].
- Focus on packaging efficiency to reduce costs and environmental impact, while improving the customer unboxing experience [8].
- Offer customers shipping and handling choices, such as standard and expedited shipping, to improve their shopping experience [9].
- Maintaining transparency with customers about handling fees is important for fostering trust and loyalty [10].
- Communicate the value that handling fees enable, rather than just the costs, to reinforce the benefits of choosing the brand [11].
By following these best practices and leveraging suitable software solutions, apparel businesses can improve the management of order handling fees and support profitability.
[1] - [5] - [7] - [10] - [11] based on [https://www.uphance.com/blog/order-handling-fees-for-apparel-businesses]
[2] - [4] - [6] - [8] - [9] based on [https://www.logic-erp.com/solutions/retail/apparel-retail]
- To minimize the impact of order handling fees on operational costs and maintain profit margins for apparel businesses, it's essential to incorporate not only base fees and additional apparel fees but also inbound receiving fees, pick & pack fees, storage costs, and shipping markups from third-party logistics (3PLs) into the calculative framework.
- By utilizing software solutions like Uphance for streamlined handling fee calculation and partnering with 3PLs for negotiated discounted shipping rates, apparel businesses can optimize these costs without unnecessarily inflating the prices of their products.
