Let me offer my perspective as a business owner:
I had a discussion years ago with a reseller of Caspers parts. He asked my why I charged him $5.95 for a part sent to him. It shipped UPS ground. He looked up the rate chart and showed that the package clearly cost $3.31 - he felt he was being ripped off, so why am I "overcharging" him?
So I had to explain. If you have a retail store and you sell an item, you don't charge shipping, so the customer pays the sale price plus tax. Overhead is worked into each sale. That's cut and dried.
However -
If you have a business, you need to ship the items. But, the UPS charge is not what it actually cost. You have MANY other costs involved; here's a list that I rattled off the top of my head:
1. Weekly cost paid to FEDEX and UPS for the convenience of their trucks picking up the parcels.
2. Packaging: You need to purchase cardboard boxes, packing paper, bubble-wrap, gummed tape in bulk to ship packages.
3. Shipping Department: A space in your warehouse with furniture, electrical connections, a computer, and other things dedicated ONLY to shipping and receiving.
4. Shipping Department Clerk: A salaried employee there every day, all day, to handle the shipping and receiving needs.
4. Employee insurance, vacation time, sick days, training time: Costs involved in that shipping clerk. Add a total typical hourly rate of at least $21 to the cost of shipping. And that's being cheap...
5. Heating, air conditioning, lighting, maintenance, insurance, and cost of the building: That all applies to every square inch of that shipping department.
6. Packages "lost in shipping" or "damaged in shipping" or "I never got the package, it was left on the front porch". Guess who eats the cost on most of those?
7. "You should insure the package before you ship to me". Customers don't want to pay extra for this, so guess who eats the cost?
8. "I ordered this Sunday night, Next-Day-Air, and it didn't show up Monday morning! I want another one shipped TODAY or a refund". Yes, we have seen this stupidity many times. Who eats the cost?
9. The business has to pay shipping charges for the incoming raw materials, generally worked into the profit on the item. So that's usually not a concern. Unless you need an item expedited.
10. If you can't get the post office to stop by and pick up parcels, you need to send an employee out to drop off the parcels. Gas, wages, insurance...all costs added.
This was just off the top of my head during that conversation. I'm sure there were some things I missed. So, it got me thinking. I did an analysis of the money collected in shipping vs. the real costs associated with it. At that standard shipping rate then (this was back in the mid-90's) and by the end of the year, the company actually took a $24,000 LOSS in the shipping department. So I adjusted the "Shipping and Handling" charges so that the end of the year netted a zero loss. Today, even that is a difficult task.
Economics 101. If a company nets a loss due to shipping, it should not be shipping. If a company nets a loss in sales, it should not sell.
Down from soapbox. Just rattling off some observations.