Bad puns aside, this part is vital. Once you’ve selected your ecommerce platform, you’ll need to determine a carrier and a game plan for labels, inventory management, packaging and fulfillment – plus budget for shipping expenses and overhead margins. Having a solid shipping strategy is nearly as important as the product you’re selling, and there are several components that should be considered before choosing a carrier and assessing additional software and logistics.
Product Size and Weight
The size and weight of your products will affect your packaging decisions and shipping costs directly. Your shipping provider will need to know these details in advance as every carrier calculates dimensional rates in their own way, and some may have weight limitations. Your strategy will also differ depending on whether your products are all similar in size and weight or if they vary widely. If your products are extremely heavy, you may need extra assistance from your carrier or need to look into freight options.
Distance & Location
How far you are looking to ship will affect your rates, timing and carrier selection. Some small businesses may decide to only ship locally, but in most cases, you’re looking at shipping nationwide, and depending on your product and customer base, sometimes internationally. Where you are shipping to is important to determine when selecting a carrier and determining the shipping costs you’d like to offer.
Shorter shipping times are preferable on the customer’s end and help provide a great experience, but what you sell may influence shipping times as well. If your product is temperature-sensitive, like perishable food, you may have limited shipping options. You’ll also have to decide if you want to offer overnight or expedited shipping for an additional cost to your customers.
The amount and volume of product that you ship may dictate the solutions you choose. For example, the price of an established and trusted carrier like FedEx may work fine if you have smaller volumes of product, but if your volumes become large, you might need to consider a multi-vendor option that can ensure speed at competitive prices. It’s worth noting that professional fulfillment companies can often negotiate better rates with carriers if you work through them.
Your shipping costs will either become one of your business expenses or get passed onto the customer. It’s a tough choice to make when you need to make a profit, but 36% of shoppers will abandon their cart due to high shipping price. You have a few pricing strategies to choose from, including flat rate shipping, table rate shipping, free shipping and live rates.
Flat rate shipping is when the cost isn’t impacted by product weight, shape or size. To determine your flat rate, it’s best to base it on your most frequented shipping location (or adjust over the first 90 days as data rolls in). Flat rate shipping can be set on a product level or a cart level to offer your customers the expectation of checkout costs before they are even in the shopping cart.
The lowest cart abandonment occurs when a site offers free shipping (even lower when accompanied by free returns). In this instance, the shipping cost is padded into the product’s cost, and that amount is determined by the average number of products in an order.
These rates are calculated “live” (in real time) from the carriers directly and are typically calculated based on distance and dimensions. How far your package is traveling and its size and weight help determine these costs for customers. These are usually the highest rates.
Table Rate Shipping
Using table rate shipping allows you to create complex shipping rules for the products in your ecommerce store. You can configure multiple rates based on shipping zones, location, product specifications, weight, number of items and so on.
This is the fun part – in our opinion – and where quality takes a stand, but there is a lot to consider before jumping into custom packaging design. You’ll need to make sure that your packaging is durable and suitable for your product, even if that means adding protective elements. If it doesn’t arrive in good condition, you can guarantee they won’t be ordering again. You’ll also need to determine what box sizes and colors are available through your carrier, if they allow outside custom sourced materials and what the associated costs are.
From there, you get to consider how to make your brand shine. Create a memorable customer experience with branded boxes, custom tape or special in-box items like stickers, thank you cards, care instructions or product portfolio materials.
Logistics and Fulfillment
Once you have figured out how you’re packaging your products and what you’re charging, you also have to determine how best to get the product to your customer within their chosen shipping class (ground, 2day express, overnight priority). You’ll need to determine how quickly you can fulfill an order on your end, either with research or past experience. As we learned above, there are Third-Party Logistics companies available to do the heavy lifting for you (pun intended), but if you’re just starting out, it’s likely you and/or your team will handle this directly.
When an order comes in, you’ll need someone designated to confirm order details, properly package items, print labels, schedule carrier pickup or dropoff and verify delivery. This person or persons will ensure quality and timeliness to help meet – and hopefully exceed – customer expectations.
Some or all of your ecommerce inventory may come from different vendors. If these vendors are holding inventory to send to your customers at their warehouse instead of supplying you with product directly, they are considered drop shippers. The third-party seller will dropship the product directly to the customer when it’s ordered from your online store.
Dropshipping removes warehouse and inventory costs, making it easier to scale, but it also creates lower margins and leaves you entirely dependent on your suppliers for fulfillment, so you’ll want to vet your partners carefully. When working with drop shippers, it may prove even more vital to use shipping software for tracking separate shipments in one place.
Like your pricing strategy, whether or not you offer returns is a difficult decision to make, and whether you offer free returns is even more difficult. When you offer free returns, you all but guarantee that more people will try your product and that your conversions will increase, but you’re also risking the cost of every returned package. And as you’ll soon learn, shipping isn’t cheap.
Using shipping software is valuable in helping process return labels to include in your packages or upon customer request.