DMA Offers Guidelines for Setting Fulfillment Costs

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SAN FRANCISCO -- The Direct Marketing Association issued guidance to DMers in establishing charges for shipping, handling and other fulfillment costs yesterday at its Annual Catalog Conference at the Moscone Center here.


The guidance, which is an addition to the DMA's guideline for ethical business practices, states that "postage, shipping, or handling charges, if any, should bear a reasonable relationship to actual costs incurred."


The new recommendation suggests that when establishing and substantiating shipping and handling charges, companies should:


· Determine what costs will be covered and substantiate their method so they can easily respond to consumers, regulators or others who inquire about charges. Ideally, a fulfillment cost study should be conducted with help from an impartial outside expert. Semi-direct costs such as warehousing and returns processing or indirect costs such as item replacement are much tougher to substantiate and should be clearly documented.


· Exact charges should be disclosed clearly and conspicuously in advance of the order. Charges should be prominently displayed and readily visible. When ordering online, shoppers should receive shipping information early in the order path.


· In continuity programs, in which shipping costs may differ from month to month depending on the order, an estimated range of costs should be provided before sign-up. When each order is shipped, the exact shipping and handling charge should be stated clearly.


· If a company eliminates a separate shipping and handling charge and concurrently builds the cost into the price of the product, the offer should include a term such as "shipping included" rather than "free" shipping.


· When a company offers free products and the consumer pays only for shipping and handling, the offer should disclose clearly and near the word "free" the costs of shipping, the entire plan for which the consumer is obligated and the total cost that consumers will pay.


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