When you own an e-commerce business or any other type of company that ships out a lot of packages to customers, it can be challenging to set shipping and handling rates that cover your costs without scaring away your customers. To estimate your handling charges, add together the annual expenses related to your shipping department, such as labour costs, packaging supplies and warehouse rent, if applicable. Then, divide that total by the number of packages you send out per year. For example, if you spend $4,000 per year on your shipping department and you send out 1,000 packages, the average handling cost for each package is $4. To cover your expenses, you may want to add a $4 handling charge to every order. Multiple charges can put off some potential customers, however. With that in mind, you could roll your handling charge into your shipping charge so shoppers only see a single fee. Passing your shipping and handling costs to your customers is the surest way to cover those expenses. However, there are other pricing models you may want to consider. For example, some businesses offer free shipping for purchases over a certain amount to encourage customers to spend more. Other businesses offer free shipping in exchange for a monthly fee to help build brand loyalty. In still other cases, businesses offer free shipping as a way to attract new customers.