In e-commerce, only after shipping do customers finally get their hands on your goods and pass judgment not only on the products themselves, but also on the speed, accuracy, and convenience of the delivery. And the customer experience counts for a lot: 73% of online shoppers are likely to avoid a brand or retailer after just one negative experience.
Shipping is a critical part of the supply chain, but it also represents a significant expense. That’s why small businesses often start out with a hands-on approach—you might take every hand-packed parcel to the post office or even make local deliveries yourself.
What is E-commerce Shipping?
Shipping is one of the final stages in the wider fulfillment process, which is itself a component of the supply chain. While fulfillment covers the period between a customer placing an order and receiving their package, shipment refers to the package’s journey from a warehouse or store to the customer’s door.
E-commerce shipment refers to the processes involved when goods purchased from an online retailer are transported to their destination. This includes receiving orders, picking and packing, printing shipping labels, and managing returns. The more products you sell, and the more delivery options and shipping speeds you offer, the more complex the operation becomes.
The success of your e-commerce shipping depends on other processes running smoothly. For instance, you need enough inventory in stock to fulfill the orders, a big enough workforce to process them, and strong communication with shipping carriers to ensure the best rates and the optimum delivery routes.
If you get it right, you can avoid issues such as late or inaccurate deliveries, expensive shipping costs, and a tangled returns process.
E-commerce Shipping Options
Now more than ever, customers are all about choice and convenience. They expect e-commerce retailers to offer a range of shipping options, in terms of price and speed of delivery. In many cases, they want shipping to be both fast and free. Let’s take a look at some of the possible options.
Same Day Delivery
If someone suddenly remembers that they need a birthday present for Grandma that very afternoon, same day delivery is their savior.
People are only going to choose this service if they really need it, so you can charge a premium price for it. But you have to make sure your warehouse or fulfillment center is able to cope with such a quick turnaround, which requires coordination between warehouse operations and shipping carriers. If you want to trial this method, it’s best to start with local delivery.
As with all these options, you must never promise what you can’t deliver—that will only lead to disappointed customers and negative reviews. 90% of shoppers say they will contact customer support if their online order doesn’t arrive on the date promised.
Source: avionos.com
Overnight Shipping
Again, this is a premium-level service, so your customers will not be too surprised if it has a price tag attached. Amazon has set the bar high with its Prime service, but it’s worth remembering that its expedited shipping is not technically free—customers are paying for a subscription (although many of them will be taking advantage of a free trial).
Of course, Amazon has rather more in the way of resources than most online businesses. Apart from requiring a technologically-advanced warehouse to get orders out the door on time, you may not be able to afford to offer free or cheap overnight shipping without hiking up the prices of your products. (More on that later.)
2-Day Shipping
This slower delivery method is still considered fast in comparison with standard ground shipping. As such, it’s perfectly acceptable for most shoppers who aren’t desperate for their orders, but they’ll likely expect the service to be free.
You’ll still need to streamline your warehouse practices in order to meet a two-day deadline, but it shouldn’t cost you as much in terms of resources. For example, you can use a slower, cheaper form of transportation. That means it may be viable to offer free shipping at this speed without eating into your profits too much.
International Shipping
If you’re planning to sell your products to customers overseas, you have to consider the specialized logistics of international delivery. Obviously, it’s going to cost more to ship parcels to other countries, especially if that involves air transport. And it’s important to find experienced fulfillment partners who can help you figure things out.
The good thing is that customers will expect to be charged a shipping fee for this service, but it’s important to look at the rates your competitors are offering and make sure you don’t price yourself out of the market. Investigate a range of carriers and define exactly how much it’s going to cost you to ship overseas (factoring in tariffs, duties, and documentation).
How to Calculate E-commerce Shipping Costs
Source: dashnex.com
E-commerce shipping costs are typically based on a range of factors such as the size and weight of the parcel, the origin and destination addresses, tracking, and insurance. If you outsource shipping to a fulfillment center, costs will also encompass handling fees to cover the labor associated with operations like picking, packing, and loading.
Just as each business is different, each shipping service will offer slightly different rates and options. For instance, some have insurance already built into the price. You could sign up for a business account—these often provide discounts, expense tracking, and other tools to help you manage shipping. There are also discounts to be had for small businesses, and those that regularly ship in bulk.
Size and Weight
You’d think that bigger or heavier packages would always cost more than smaller, lighter ones, but that’s not necessarily the case. It depends on whether the carrier charges by actual weight or dimensional (DIM) weight. The latter is a pricing technique used by most major shipping companies (USPS, FedEx, UPS) to calculate shipping costs, factoring in the size as well as the weight.
These carriers charge you based on whichever figure is higher: The weight of the package or its DIM weight. Basically, bulky but lightweight items are usually charged by dimensional weight, while small but heavy packages will be charged by their actual weight. Most carriers have a handy calculator on their websites.
Origin and Destination
As a general rule, the farther your package has to travel between origin and destination, the higher the shipping cost will be. In the continental US, most carriers base their prices on shipping zones, which range from Zone one to Zone eight. The origin address determines which zone you’re in (so two different points of origin could be in different zones, even if they’re shipping to the same destination).
Source: stamps.custhelp.com
It’s definitely worth having a network of warehouses or fulfillment centers in strategic locations across the country, as you will reduce the number of zones items have to travel through. Obviously you’ll need the right technology to coordinate them efficiently, which you can do with Brightpearl!
If you’re shipping internationally, you’ll need to include the proper customs documentation (check with your postal service to find out which forms you’ll need). Bear in mind that your customers might have to pay additional customs fees, so always include this information in your shipping policy.
E-commerce Shipping Strategies
Every e-commerce business needs its own shipping strategy, as there’s no single approach that’s guaranteed to work for everyone. Obviously, the main aim is the same; keeping customers happy and increasing your profit margins. But there are lots of aspects to consider when building your strategy.
Here are a few things to think about:
Rates and Methods
The first thing to decide is how you want to ship your products to your customers, and how much you’re going to charge them for it. We’ve mentioned that shipping is often the most expensive part of your fulfillment operations, so how will you ensure it doesn’t affect your bottom line? Will you have to pass the full cost of shipping on to your customers, or can you afford to entice them with free delivery?
You also need to think about the method of shipping. You could use the USPS for local deliveries, and FedEx or UPS for customers farther afield. The type of transport will also affect the cost—your choice depends on how fast you need the orders to arrive, and the type of goods you’re shipping. Air transportation is fastest but more expensive, while rail and sea are slower but necessary for heavy goods.
Source: dashnex.com
As your business grows and you increase the number of packages shipped per day, you might want to look at outsourcing the operation to a third-party logistics (3PL) partner. These firms have the required expertise and can negotiate the best rates with carriers, which helps you to offer a range of affordable shipping methods.
Weight
When you’re considering rates and methods, you also have to take the weight of your products into account. If most of the items sold in your e-commerce store are roughly the same size and weight, you could decide to vary your prices by location and speed, regardless of weight. But if the dimensions vary widely, you might need to add a weight-related fee in order to avoid losing money on shipping.
Either way, you should always maintain an up-to-date list of product weights and sizes and make it accessible on your central system. This accuracy will help when you’re negotiating rates with carriers, and will give you a good idea of your total costs so that you can set accurate prices for customers.
Preferred Packaging
Packaging is an important component of shipping. Its main purpose is to keep the items safe during transit, but you also need to think about keeping costs as low as possible with lightweight packaging. Again, it’s easier if all your products are a similar size, as you can buy the materials in bulk.
For example, you could use poly mailers, which are lightweight and can accommodate different volumes and weights, while bubble wrap and air pillows protect fragile items without adding much weight. Of course, there are extra considerations for packing perishable items. Keep a list of which products need which packaging, and the total weight.
Source: whattheythink.com
Another factor is the presentation of your packages, as part of the customer experience. With the current trend for unboxing videos, it may be worth making your parcels stand out with branded packaging, personalized inserts, or free gifts. Even if you can only budget for logo stickers or pretty tissue paper, it all helps with brand awareness.
Source of Packaging
There’s a lot to think about when it comes to packaging—you want it to be durable, low-waste, and possibly customized for your brand, all without incurring unnecessary costs.
You can order free packaging from some carriers such as USPS, UPS, or DHL, or you might choose to pay for packaging to get exactly what you want. It’s a good idea to ask for samples from packaging providers to make sure it suits your needs.
If you have the budget, it makes sense to use eco-friendly packaging. Not only does it benefit the environment, but it also wins you brownie points with customers. According to one report, 57% of them are less likely to buy products with packaging that is harmful to the environment.
E-commerce Shipping Methods
Offering free and/or expedited shipping is a great marketing tool for businesses. But if you’re going to offer it to customers, you need to have the right processes in place to make it happen—and calculate your costs so you can budget for it.
You don’t have to stick with just one rate or method, as we’ll explore below. For example, although free shipping is your way to entice customers, you can take the opportunity to upsell by offering the option of faster delivery if they are happy to pay a surcharge.
Free Shipping
There’s no getting away from the fact that customers love free shipping. It’s a tried-and-true method of reducing shopping cart abandonment and increasing conversions. But here’s the thing: Somebody’s got to pay for it! There are several options for how you go about this.
Source: statista.com
Firstly, you could decide to bear the full price of shipping yourself and absorb it out of your margins. Subsidizing shipping costs can work well if you have high order volume and a loyal customer base, but not if the cost is more than your margins on the item. Another option is to increase the price of your products, to cover either the whole or partial cost of shipping.
Alternatively, you could offer free shipping only to certain customers, such as VIPs or those who meet a minimum order amount. People are surprisingly willing to spend more in order to get free shipping, especially if it’s only a case of adding one more item to their cart. That makes it a good idea to promote related items, such as batteries for electronic goods or accessories to match an outfit.
Tip: You could also offer free pickup at your brick-and-mortar stores for local customers, alongside paid shipping for nationwide delivery.
Real-Time Courier Rates
Customers also appreciate a fair policy, and one of the ways to assure them you’re charging a fair price for shipping is to use real-time carrier rates. This is when you automatically pull in live pricing from carriers such as UPS, FedEx, or DHL and display them on your website via an integration.
Although those rates will fluctuate according to various conditions, you should get the best possible rates while allowing your customers to view a range of options and choose exactly what they need. You’re charging them exactly what the carrier would charge you, based on the customer’s location and delivery preferences.
Flat Rate
Flat rate shipping is another popular option, as it simplifies the order fulfillment process for both businesses and customers. As the name suggests, you charge all customers a single rate for their orders, regardless of order value or location. The challenge is figuring out what that flat rate should be, and ensuring you can cover enough of your costs without massively undercharging or overcharging customers.
Source: shippingeasy.com
You can use the average shipping and handling cost across orders in a category as a basis for setting the flat rate. This method tends to work best when most products are similar sizes and weights, because it’s harder to work out a fair price with a wide variety of dimensions.
If you’re shipping to a wide area, it may be better to use table rate shipping, where your rates get progressively higher the more zones the parcel travels through (so local customers get the cheapest rates). Or you could charge according to basket size or order weight, so you don’t shoulder the entire cost of shipping multiple or heavy products.
Local Delivery
Table rate shipping is also handy when you have a mix of local and non-local customers. On your shipping policy web page, you can display a map with a radius or a list of zip codes. Customers who are located within this area can select “local delivery” at checkout, while those outside of it will have to pay per zone.
Offering free or low-cost local delivery (or free local shipping with a minimum spend) is a great way to encourage a customer base in your local area. If you only supply local customers, you may be able to handle deliveries yourself without involving a 3PL firm. Although you’ll still need a smart software solution like Brightpearl to optimize the process.
Best Practices of Using a Fulfillment Warehouse
Growing businesses may decide to use a fulfillment warehouse or center to help them handle high order volumes and complex operations. In this approach, you store your inventory at a warehouse belonging to the fulfillment provider, who will automate and handle shipping on your behalf.
Through integration with your shopping cart, online orders are forwarded automatically for your fulfillment partner to pick, pack, and ship. It can take some of the stress out of shipping, but remember that you probably won’t get customizations like branded packaging, and you’ll be paying handling and warehouse storage fees.
Source: bigcommerce.com
Clear Shipping Costs
Whether you’re shipping in-house or outsourcing, it’s best practice to tell customers exactly what to expect, and make your policies and rates easy to understand. They don’t like hidden fees that suddenly appear at checkout, and they don’t want to have to contact customer support if the policy seems unclear or ambiguous. This often leads to cart abandonment.
The good thing is that when you use a fulfillment center, they already have partnerships with major carriers and can offer you and your customers the best rates. Ask for a list of these prices or pull them into your website for real-time information, and make sure it’s easy to find.
Display Expected Delivery Days
If all your processes are running smoothly, you should be able to tell customers the date when their parcel will arrive. Customers can then arrange their movements around this—they could request that the parcel be delivered on a day when they’ll be working from home, or ask a neighbor to receive it for them.
It also means that customers who have ordered multiple items can receive them all in one delivery on that day, which saves time and fuel and is more eco-friendly. Letting customers choose a nominated delivery day is a good strategy, but it’s harder to do if you only have your own small delivery fleet.
Although problems like supply chain delays or bad weather are outside your control, you must stick to your promises as closely as possible, and remember that early deliveries are almost as annoying as late ones—59% of all shoppers say early deliveries are an inconvenience.
Source: pitneybowes.com
Let Customers Track Their Parcel
For an e-commerce business, it’s vital to be able to track the journey of your shipments, but your customers want to know this information, too! They expect to be able to follow their package with a tracking number and receive regular updates on delivery times.
When they have realistic expectations about the arrival time, they won’t have to call your customer support team to ask where their order is. If you have the right technology, it’s even possible for customers to communicate directly with the delivery driver, to give extra instructions on how to locate their house or where to leave a package.
Tracking reduces the likelihood of missed deliveries, because customers will see the exact timings and can make sure they’re at home to receive their parcel. This means your business doesn’t suffer the cost (and the admin challenge) of rescheduling the delivery.
Return Service
No retailer enjoys dealing with returns, and in e-commerce it’s even more of a logistical challenge, with parcels being returned via traditional mail, couriers, collected from drop-off points and lockers, or online purchases being returned to a physical store.
Returns have to be brought back to the warehouse and processed, with items in good condition being re-listed for sale, and those that are faulty or damaged going for recycling or disposal.
It may be a hassle for you, but customers expect a simple returns policy, without having to pay too much for it. They’ll be looking for free returns for online shopping, especially for clothing where they can’t try it for size until they receive it. You’ll need advanced returns management to keep them happy, either from a fulfillment center or a software solution.
Source: clevertap.com
Benefits of Using a Fulfillment Warehouse
Fulfillment warehouses or distribution centers are a popular ecommerce shipping solution because they do a lot of the hard work for you—meaning you can focus on other areas of your business. You’ll have to pay for storage and handling, but you should make significant savings elsewhere, such as:
Cheaper Shipping Rates
Fulfillment warehouses ship large quantities of goods for multiple businesses, so they are able to capitalize on economies of scale. For instance, they can take advantage of bulk delivery discounts from shipping carriers. They typically have smart software including e-commerce shipping integrations that allow them to browse rates from the major shipping and 3PL companies.
Once your fulfillment provider has found you the best rates, you can then please your customers by passing on the savings in the form of free or discounted shipping. Outsourcing shipping and fulfillment also helps e-commerce businesses to scale, and it’s cost-effective as you only pay for the services you use.
Shorter Shipping Time
As well as making shipping more affordable, using a fulfillment warehouse also helps you to ship orders to customers faster. Most providers have a whole network of distribution centers in strategic locations across the country, which means you can store your inventory closer to most of your customers, and the distance the parcels have to travel is drastically reduced.
Fulfillment providers also have the necessary technology in place to optimize warehouse layout and streamline their processes. This boosts productivity and cuts the time it takes to pick, pack, and ship orders (and returns).
E-commerce Shipping With Brightpearl
Whether you’re a small business experiencing hyper-growth, or a large enterprise aiming to compete with the likes of Amazon Prime, you can’t make the most of e-commerce shipping unless you have the right software to assist you. Brightpearl is far more than just shipping software—it’s a retail operating system with a raft of tools for optimizing the entire fulfillment process (and beyond).
Built specifically for e-commerce retail, the platform encompasses inventory management, purchasing, supplier management, business intelligence, and CRM. Your business will have all the functionality it needs in one place, plus the opportunity to expand your tech stack with plug and play integrations.
Brightpearl integrates with all major carriers and 3PLs, including Shipstation, Shiptheory, and Parcelhub, alongside native connectors to Amazon FBA. You have the convenience of managing them all in one place, while offering your customers complete flexibility in terms of shipping options.
The Automation Engine selects the most cost-effective carrier and method for each order, based on the price, weight, or quantity of products.
Automation also helps you to pick, pack, and ship more products in less time with fewer errors, whether it’s dropshipping, partial fulfillment, or multi-location fulfillment. Based on your custom rules, the system will ship items in different ways for different sales channels, products, or customers, automatically choose the best location to fulfill from, and automate order splitting.
Benefits of Using Brightpearl
Here are a few more benefits of using Brightpearl for your e-commerce shipping:
Final Thoughts
E-commerce shipping is not an easy thing to get right. You have to strike a balance between offering attractive delivery options and maintaining profitability. It’s important that you do your research to find the most cost-effective carriers and fulfillment partners, and keep evaluating your processes and customer feedback to ensure you remain efficient and competitive.
All of this is made easier when you use the best software, which helps you optimize fulfillment and shipping and ensure that your part of the supply chain runs smoothly. With Brightpearl, the boost to productivity means you can offer a range of shipping options and sell on multiple channels without getting overwhelmed.