Developing a Solid Shipping & Fulfillment Strategy
When starting an e-commerce business one often thinks once you have a solid product and marketing plan, the rest is easy. Truth be told, how you go about fulfilling your customer’s orders can be one of the most challenging aspects of running your business. Without a solid fulfillment plan, you could ignite fires that in the end cause you to loose customers. Backorders, lost or damaged packages, lost money on shipping rates, inability to scale- these are all problems that can drastically hurt your bottom line and your customer retention. Not to mention- a real pain to deal with. In this article, written by Thea Earl, originally published by shopify.com, you will read about the basic things to consider when shipping and fulfilling your online orders.
The Beginner’s Guide to Ecommerce Shipping and Fulfillment
You put a lot of effort into making sure your customers have a great experience. You approve the images, you tweak your store, and you write the emails, all with the goal of leaving your customers happy.
But when it comes to shipping, it can feel like you’re handing your brand over to a stranger.
With some thought and planning, however, it doesn’t have to feel that way—which is a good thing, because shipping is a key part of your business. It’s the point where a customer finally experiences your product in person, and it can also represent a major expense in your business, depending on your shipping strategy.
That’s why it’s so important to map out a defined shipping strategy. Since the world of shipping and fulfillment can seem complex when you’re not familiar with it, we’ve got an overview of everything you’ll need to know to make the best choice for your business.
Shipping Strategy 101
There are some basics that set a foundation for the rest of your shipping. While you can come back and change each of these later on, as you learn more, these are the key decisions and steps that make up your high-level shipping strategy.
Your shipping rates and methods. Are you going to pass the full cost of shipping on to your customers, or will you offer free or flat-rate shipping to absorb some or all of the cost? By the end of the post, you’ll have more information on how to make this choice for your business.
Product weights. To streamline the process, measure and update the weight of each product you sell. Having that information set up will help you get a good sense of your total costs, and pass along accurate prices to your customers.
Choose your preferred packaging. While there’s more to be said about what kind of packaging is right for your products, once you’ve selected it, you can add that information to your CRM so you can calculate accurate shipping prices.
Set Your Shipping Rates and Methods
Before you can ship products, you’ll first need to decide your pricing strategy for shipping. There are several common methods, but your choice should always be informed by the underlying financials of your business.
Offer Free Shipping
Offering your customers free shipping is one of the best ways to reduce shopping cart abandonment. However, as you might suspect, shipping is never free. Someone always has to pay. To make free shipping work, you have a few options.
- Increase product prices to cover costs for shipping (customer pays).
- You pay the full price of shipping out of your margins (you pay).
- Increase prices of products slightly to cover partial costs of shipping (you and your customer pays).
- Offer a discount code to certain customers for free shipping.
Additionally, you can also try offering free shipping on a minimum order amount. This strategy can help offset the costs of shipping by helping to increase your average order size, but you’re still the one paying for it out of your margins.
Charge Real-Time Carrier Rates
Another effective shipping strategy is to charge real-time carrier rates for shipping. Ecommerce platforms like Shopify integrate in real-time with various carriers like USPS and Canada Post (among others) to generate shipping options and live pricing from various carriers. This allows your customers to choose and pay for the exact service they want.
Charge a Flat Rate
The last popular option is to offer flat rate shipping. The best practice for this option is to try and make sure that you don’t drastically undercharge or overcharge your customers. Flat rate shipping works best when you have a fairly standard product line of items that have similar sizes and weights. Flat rate shipping tends to become complicated and less effective if you sell a wide variety of products with different sizes and weights.
Calculating Shipping Costs
All shipping couriers base shipping rates on a variety of factors including:
- Package size
- Package weight
- Origin country
- Destination country
Plus additional shipping options like tracking and insurance.
It can be difficult to compare services exactly as they all offer slightly different options, and every business will have their own unique variables.
Below we have compiled a list of shipping calculators to some of the largest and most popular shipping couriers so that you can begin comparing pricing and options. If you’re based in the US or Canada, you can pay for USPS, UPS, DHL Express and Canada Post shipping through Shopify and receive pre-negotiated rates. See example rates here.
Consider Your Margins
To be successful at e-commerce, you always need to keep an eye on your profit margins. Because shipping represents a significant expense for e-commerce merchants, if you don’t do your research, you could end up losing money on shipping.
Before you can ship your products, you’ll need to package them for safe transport. So what options do you have? There are a few common options for packaging including boxes or envelopes (padded or unpadded). For many businesses and products, you’ll a box as well as some other packaging materials to safely ship your products.
You may also want to try thinking outside of the box (no pun intended) and look at other packaging options. For example, poly mailers can be a great way to mail products that don’t need a lot of structure or cushioning, like clothing.
Poly mailers offer multiple benefits. They’re lightweight, which reduces your shipping costs, and they can adjust to different volumes and weights depending on what’s included in the order. For example, the same size of poly mailer could accommodate one pair of socks, or five, and you wouldn’t be overpaying on packaging weight or dimensions for the single pair.
Keep it light and small
Because the cost of most shipping options is based on size and/or weight, do your best to keep your packaging as small as possible. This will not only help you save on your shipping costs and what your customer paid for shipping, but will also keep packaging costs from eating away your profit margin.
Depending on your business and product line, you may want to consider carrying a variety of package sizes and packaging materials.
Using a Fulfillment Warehouse
A fulfillment warehouse can help automate and handle the shipping for you. When you choose to work with a fulfillment warehouse, you will store your inventory at one of their warehouses. Depending on their level of integration with your shopping cart, when an order comes in your fulfillment partner will automatically be forwarded the order to pick, pack, and ship the purchase order on your behalf.
There are a number of advantages to using a fulfillment warehouse including:
- Cheaper shipping rates. Because fulfillment warehouses ship such large quantities for multiple vendors, they receive cheaper shipping rates. They’re also integrated (usually) with all of the major shipping logistics companies, giving you easier access to the widest range of shipping options.
- Shorter shipping times. Strategically choosing your fulfillment partner and the warehouse to store your inventory means you can store your inventory closer to the bulk of your customers.
About the Author:
Thea Earl is a Product Marketer at Shopify, focused on making logistics simple, efficient, and approachable for entrepreneurs.
QuickBox is the only supply chain management center that is fully integrated in nutritional supplements and skin-care products aligned with world-class fulfillment services. Dedicated to high volumes of internet direct-to-consumer brands, we provide FAST, FRIENDLY, and ACCURATE fulfillment seven days a week. Combine that with our 24/7 world-class client services to help maximize your business’ profits and provide the ultimate wow factor to your customers.If you would like to learn more about how you can get started in the private label health and beauty business feel free to contact Quick Box Fulfillment here.
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