Everything you need to know about shipping
When it comes to the world of eCommerce, shipping is a tough nut to crack.
You might have started out doing everything by yourself - consolidating your orders, packing your items, and zipping out to the post office once a day.
But as your business grows and the number of orders you receive a day skyrockets, there comes a point when the DIY solution is no longer feasible. You know that you can’t put it off any longer; the time has come for you to bite the bullet and come up with a proper shipping strategy.
Okay, deep breaths. It’s not as daunting as you think.
Yes, you’ll be getting a total stranger to handle what can arguably be considered the most important part of the customer journey.
The good news? There are tons of world-class shipping services which are professional, reliable, and highly effective. Or totally different options, like drop shipping.
You just need to decide which is the right option for you (and your bank account)!
Types of shipping
First things first - I’ll run you through the different types of shipping that you should be familiar with.
If you’ve chanced upon any articles that teach you how to get an eCommerce store up and running within a week, chances are they’ll have recommended drop shipping.
Drop shipping lets you hold zero inventory
In a nutshell, eCommerce stores who use the drop shipping method completely outsource the packing and shipping processes. These stores don’t own any inventory; when their customers purchase a product, they simply forward the order to their distributor, who will ship the product directly to the customer.
Image from Oberlo.com.
Sound like a dream come true? Drop shipping really levels the playing field in the sense that it allows anybody to start a business. With drop shipping, you don’t need to have a large amount of capital to sink into inventory or storage costs.
Drop shipping saves you the hassle of dealing with fulfillment.
But don’t get me wrong - I’m not saying that drop shipping is the be all end all, and I’m definitely not saying that this shipping option doesn’t come without its limitations, including:
Drop shipping is expensive
First, let’s talk about price. If you want to drop ship your products, you’ll have to pay higher wholesale prices to your distributor, which will eat into your profit margin.
Think about it: if your distributor handles product fulfilment to individual customers, but charges the same as suppliers who ship in bulk to eCommerce stores, how are they still in business? They’d have run out of money a long time ago.
What does this mean for eCommerce store owners who want to use drop shipping?
You’ll either have to suck it up and live with a low profit margin, or you’ll have to differentiate your brand so that you can get away with charging higher prices.
If you’re keen on the latter option, here’s another roadblock to consider:
It’ll be difficult for you to distinguish your brand given that you’re simply reselling items.
To get around this, you can look for a supplier who does white labeling - meaning, they’ll dropship products, but will put your business’s address on the label rather than their own, and some may even allow custom packaging and the ability to add handwritten notes.
If you want to find out more about drop shipping white labeled products, check out this case study.
Drop shipping is a logistical nightmare
Apart from the higher costs associated with drop shipping, here’s another issue to consider. Assuming that you have multiple drop shipping suppliers on board, the logistics of drop shipping can get quite challenging.
Let’s say your customer makes an order on your eCommerce store, and this order consists of three items: item 1 from Supplier A, item 2 from Supplier B, and item 3 from Supplier 3.
Given that your suppliers will be shipping from different locations, and that they have different shipping times, your customer will end up getting their items separately. He or she might also get the first item within two days, and then have to wait up to a week for the other two items.
If you’re thinking, damn, that doesn’t sound like good customer service, you’re absolutely right.
And guess who will have to reply to snarky emails from irritated customers? That’s right - you do.
Running in the same vein, you’re essentially putting your brand on the line for your suppliers, and hoping your suppliers will deliver (both literally and figuratively).
If any one of your suppliers doesn’t pull through, your eCommerce store’s reputation will be affected, and you’ll have to go into service recovery mode.
Getting started with drop shipping
To find a supplier that drop ships, you have several options.
What many eCommerce store owners do is to go straight to AliExpress - whilst it officially positions itself as an online retailer, the bulk of the sellers on the platform do deal with resellers and offer drop shipping options as well.
Because drop shipping with AliExpress is such a popular option, there are various tools and services that can help you to streamline your workflow when drop shipping with AliExpress merchants.
For example, there are apps available that can help you sync and import products from AliExpress to your Shopify or WooCommerce storefront, and also notify you of inventory or price changes from your supplier’s side.
For more information on drop shipping with AliExpress, read this guide!
Alternatively, you can also look for suppliers via drop shipping marketplaces such as Doba or SaleHoo. If that fails as well, you can always fall back on Googling (although this might be pretty hit-or-miss), or contacting the manufacturer of the products you want to resell and asking them whether they work with drop shippers.
If you’re shipping only domestically, it’s time to consider going international.
Experts have predicted that global eCommerce sales will hit $27 trillion by 2020, with Asia-Pacific being the region that will see the fastest rise in retail eCommerce sales.
Image from eMarketer.com.
Plus, with shoppers worldwide becoming increasingly savvy, the friction associated with purchasing items online from another country is at a minimum. A Pitney Bowes Study, for example, showed that more than 40% of shoppers have made an online purchase from another country.
Pro Tip: if you want to gauge the demand of your products from overseas shoppers, check your Google Analytics to see if people from other countries are visiting your website.
Which carrier should you use to ship internationally?
If you want to start shipping internationally, the first thing you’ll have to do is choose your shipping carrier.
The cheapest option is to use a postal carrier such as USPS (or a freight expediter or consolidator); this means that your package will be delivered to the postal authority in the destination country, with the postal authority performing the final delivery.
Do take note that the cheaper options offered by USPS only provide tracking up until the package reaches the destination country and/or city - in these cases, you have no way of telling whether your package ever reaches your customer.
To get around this, purchase insurance for these packages. This way, you’ll be able to recover your Cost of Goods Sold in the event that the package is lost and your customer files a credit card chargeback or requests a refund.
Your other option is to go with private carriers such as DHL, UPS, or FedEx.
Whilst these may be more expensive, they provide detailed tracking and guarantee that your package will be delivered safely into the hands of your customer.
For an in-depth analysis of how these three services stack up against each other, check out this article.
Payment options for international customers
Depending on which country you’re looking to focus on, you might need to expand your payment options.
Do your due diligence and check which forms of payment are the most popular in your country of choice - in the UK, for example, offline credit, eWallets and real time bank transfers are pretty common. In China, consumers typically use Alipay and Union Pay.
International returns will obviously be more expensive to handle than domestic returns, so if you’re currently offering the shipping and processing costs on returns, think about whether you need to amend your return policy for different countries.
At the same time, take into consideration the buying behavior of consumers in different countries - shoppers from the UK return approximately 15% of online purchases, for example, but Germany has return rates 3 to 4 times higher.
The last thing you’ll need to know with regards to returns is that certain regions have legislation in place to govern how returns are handled.
How does this work?
If a shopper within an EU country wishes to cancel their order, they will be required to send their item back to the seller within 14 calendar days (from the day they received said item).
The eCommerce store will then have to provide a refund within 14 days of the order being cancelled, and this refund has to include any shipping fees that the consumer might have paid.In addition to this, if you’re selling to consumers in the EU, you’re required to fully disclose the cost of a product, as well as communicate to consumers their right of return.
If they fail to “properly inform” consumers about their return policy, according to EU regulations, consumers will be afforded one full year in which they decide to cancel their order.
International rules and regulations
Obviously you’ll run into some sort of difficulty if you’re selling contentious items such as weapons, but there are also tons of rules and regulations which you need to abide by even if you’re selling something as innocuous as food.
For example, if you’re selling food items to consumers in the EU, you’re required to list all possible allergens that your product contains on your packaging.
Specific countries will also have their own rules on the inclusion of manufacture and expiry dates on the packaging, as well as guidelines revolving around how food is prepared and handled.
Avoiding fraud with international orders
There’s no question about it - by opening yourself up to international orders, you’ll also be more susceptible to fraud (que cheesy fraud stock photography).
According to a LexisNexis study titled “The True Cost of Fraud”, international eCommerce fraud happens 2.5 times more than domestic eCommerce fraud.
Here’s a quick crash course on the most common types of eCommerce fraud today:
The first and most common type of eCommerce fraud occurs when fraudsters order items online using someone else’s identity (and credit card or debit card information).
These fraudsters typically acquire personal information using phishing or pharming techniques; more sophisticated hackers sometimes also muscle in on transactions between customers and their banks, allowing them to gain access to customers’ log in data.
Other than third-party fraud, eCommerce stores also encounter fraud from their own customers.
This happens when customers make purchases and pay for them, but claim that their credit card details were stolen, and that they never placed such orders. The fraudulent customers end up being reimbursed, but they still keep the goods you sent them.
With the amount of eCommerce fraud that is happening daily, you’ll want to take the necessary precautions to minimize your losses.
Firstly, offer your customers the option to create an account tied to their social media profile so you’re able to verify your customer’s identity.
While there’s still a chance fraudsters may create multiple fake social media accounts to beat the system, you can counter this by using social login verification services, which will analyze the social profile of your customer and provide a score based on his or her authenticity.
This will help you to determine whether a person’s account is authentic, machine generated or fraudulent, and react accordingly if necessary.
Secondly, watch out for inconsistencies where customers’ billing address, shipping address, and IP address are concerned.
I’m not saying that purchases with different billing and shipping addresses are definitely fraudulent - it could simply be someone buying a gift for a friend. However, your alarm bells should be sounding if an order is:
- of an uncharacteristically large value,
- has different billing and shipping addresses,
- is tagged to an IP address that’s different from the location that the credit card is registered to.
In the above scenario, you’ll definitely want to do some investigating!
Last but not least, cover your bases by requiring signatures for high-value purchases and make sure you’re able to track all the shipments your shipping courier makes.
You’ll want access to proper documentation in the event those pesky fraudsters try to take you to task over “missing” packages.
It’s no secret that free shipping will help you attract customers and increase sales.
According to E-tailing Group, 73% of online shoppers deem free shipping as a "critical" factor that influences their purchase decision.
A study by Wharton shows that shoppers spend 30% more per order when free shipping is included.
Last but not least, data from Forrester shows that 44% of shoppers will completely abandon their cart due to high shipping costs.
To further drive home the point, I’ll throw in a case study as well...
Check out how this anti-aging skin care company used the incentive of free shipping to increase their orders by 90%. The free shipping also bumped up the brand’s Average Order Value (AOV) by 7.32%!
Does this mean that all eCommerce companies should, without a doubt, offer free shipping?
My answer to that would be a conditional yes - so it’s a yes, but only if your increase in sales and AOV more than justifies your lower profit margins.
You won’t be able to figure this out without running some experiments and doing some A/B testing - here’s a guide which will give you all the details you need.
On top of that, feel free to get creative with your free shipping offers.
For example, on top of offering free shipping with a minimum purchase value, you can also use a limited-time offer (free shipping if you checkout within 10 minutes!) to incentivize your customers to buy.
When combined with a countdown timer on your eCommerce store, you’ll get your customers to complete their purchase in no time. (Pun totally intended.)
Also, instead of having your customer take free shipping for granted, make sure you remind them of exactly how much they’re saving. Have your checkout page show the amount your customer would typically be paying for shipping, so the free shipping perk is presented to them in a concrete, quantitative form.
Last but not least, try to strike a good balance with the minimum purchase your customer has to make before the free shipping kicks in. Too low and it won’t make sense for your company; too high and it won’t have a significant impact on your revenue.
According to eCommerce consultant John Lawson, a good rule of thumb is to make your minimum order value 10-15% higher than your average order value. This will give your customers that push they need to make their order a little larger, but isn’t unrealistic to the point where they’d rather forego the free shipping.
Now that you know all about your different shipping options, let’s move on to talk about order fulfillment.
If you’re not working with a supplier who drop ships, then you’ll either have to engage an order fulfillment center, or do fulfillment in-house. Both come with their own advantages and disadvantages.
Working with an order fulfillment center
The key benefit to working with an order fulfillment center is the flexibility it allows you.
Here’s what I mean:
If you rent your own space to store your inventory, you’ll be paying for long-term warehouse leases. These are substantial sunk costs that we’re talking about - and regardless of whether your inventory levels drop during non-peak seasons, you’ll still be committed to the same cost.
On the other hand, you can pay month-to-month for the specific amount of space you occupy, if you work with a fulfillment center. This will save you money, especially if you’re in a highly seasonal industry.
Image from Snapmail.Net.
In addition to this, outsourcing your fulfilling to a third party means you won’t have to hire packing staff and you can keep your employee costs to a minimum.
Because you won’t need to worry about the logistics side of your business, you’ll also be able to focus on more strategic, high-level decisions.
Pro Tip: Not sure which fulfillment center or service is the best fit for your company? This guide evaluates the various options available.
Fulfilling orders in-house
Whilst working with a fulfilment center comes with it’s advantages, it isn’t suited to all companies.
Obviously, if you just launched your eCommerce store and you haven’t gotten much traction with it yet, it’ll be more cost-effective to handle fulfillment in-house.
Image from Elkfox.com.
Apart from this, fulfilling in-house also gives you maximum control over the entire process. You’ll be able to monitor the picking and packing process and make sure your customer gets a great delivery experience.
This is particularly important to companies who ship fragile items...
Unfortunately, if you’re a small account, the fulfillment centre you’re working with might not play nice with your packaging. (I know - pretty crappy, but true.)
If the items are damaged in the process of shipping, you will be responsible for customer service and replacement. Welcome to being a business owner! You take full responsibility for everyone else’s mistakes. :)
Also note that, regardless of whether you’re shipping fragile items, it’s a lot easier to investigate a lost or damaged order if you do fulfillment in-house.
Handling high shipping costs
Shipping can get expensive. How do you avoid high shipping costs that put off your customers?
You have three options:
(1) Try to get a better deal with your existing fulfilment center, (2) switch to cheaper shipping services, or (3) better educate your customers on shipping costs.
Let’s start with the first option:
Reducing shipping costs with an existing fulfillment center
If you haven’t already done so, try to tailor your packaging so you can lower your shipping fees charged by your fulfilment center. I’ll be talking more about this in the next section on packaging!
Other than that, try speaking with a sales rep to see if you can get any discounts based on your shipping volume. This is more likely to be effective when you have a track record (so, for example, if you’ve been using UPS to ship your items for a year and you have a good working relationship with them).
Your shipping carrier will want to do everything they can (within reason, of course!) to keep you from switching to a competitor, so try negotiating with a sales rep to see if you can get any additional perks.
If you’re not making any headway with your negotiations, your second option is to consider taking your business elsewhere.
Reducing shipping costs by using a different shipping carrier
I talked about how USPS is pretty much the lowest cost option for eCommerce sellers; they have several types of mail services which cater to different industries.
With USPS’s Priority Mail, for example, you get a flat rate pricing (for shipments up to 70 lbs) for any one state. USPS will pick up your package from your home or office and deliver it to your recipient within 1-3 working days. No surcharges apply for residential, rural, and Saturday delivery.
If you’re selling media items, you can also opt for Media Mail, which is a USPS mail class restricted to the delivery of books, film, and recorded media.
This is by far the cheapest way to ship heavy items (again, up to 70 lbs), but make sure the items you’re shipping fit into USPS’s specific requirements, or they might send your package back to you with a fine.
Another possibility is to use a third party service which will provide you with shipping discounts.
Image from ScottSigler.com.
ShipStation, for example, is a platform that helps eCommerce stores ship their orders. This company partners with several eCommerce shopping carts and postal services to offer discounts, with USPS being one of the partners.
If you’re a ShipStation customer, you’ll be able to enjoy substantially lower shipping rates, which include:
- Up to 49% off Priority Mail, and up to 56% off Priority Mail Express
- Up to 22% off First Class Package Service
- Up to 18% off First Class Package International Service
- Up to 18% off Priority Mail International, and up to 20% off Priority Mail Express International
- Up to 40% off USPS Package Insurance Rates
Not too shabby, eh?
The former is a hybrid between UPS and USPS, while the latter is a hybrid between FedEx and USPS.
How does it work? It’s pretty simple:
Image from KyleSwitchPlates.com.
With UPS SurePost, for example, UPS picks up the package from you and drops it off at a USPS sorting facility located near your customer. USPS does the final delivery, and this allows the SurePost facility to reach every address in the US, including P.O. boxes, military APO, FPO and DPO destinations.
The same process applies for FedEx SmartPost; the only difference is that FedEx is the one that picks up your package at the start of the delivery.
With hybrid services, the tradeoff is that delivery times will be longer. If you have customers who are especially price-sensitive, but aren’t too concerned with delivery times, this might be a good fit for your business.
Educate your customers on shipping costs
If you’ve tried all of the above and you still can’t manage to reduce your costs, then you might want to tweak your checkout page to better educate your customers on shipping costs.
Essentially, you’re providing them with greater clarity and transparency as to why these costs are incurred.
For instance, here’s how skincare eCommerce store Simple Sugars does it:
At Simple Sugars’ checkout page, the customer inputs an address and the calculator displays real-time shipping quotes based on this address. The calculator shows their customers that the company isn’t artificially inflating shipping fees, which makes them less resistant to paying for shipping.
Your packaging has a direct and significant impact on what you’re paying for your shipping.
In this section, apart from giving you some tips on how to tailor your packaging to get the best shipping rates, I’ll also be discussing the differences between utility-focused packaging and experience-focused packaging.
When it comes to utility-focused packaging, less is more. Think plain envelopes, easy-fold mailers, and cardboard boxes.
Image from Shopify.com.
Utility-focused packaging serves one function: To ensure your item gets safely transported to its destination.
Because utility-focused packaging is highly affordable, startups and small businesses who can’t afford to spend much on packaging might be tempted to go with this option.
But bear this in mind:
If you’re hoping to build a brand, your packaging should display your company’s name and/or logo at the very least.
Image from StickerMule.com.
How do you do this in a simple, low cost way?
You can still use standard-issue cardboard boxes and other low-cost materials, but jazz those bad boys up with custom designed labels.
If you’re going with a label design that’s not too fancy, you might be able to print them in-house with a label printer. If not, simply outsource this to a third party.
Pro Tip: Purchase your packaging in bulk from Uline - they offer a wide range of boxes and shipping supplies at highly affordable prices.
If your company isn’t completely tight on cash, and you do have some budget to play around with, it’s worth investing in packaging. Take a look:
Image from StickerMule.com.
Good packaging brings about a whole host of benefits such as making your brand seem more upscale and reinforcing that your product is worth the cost. Pretty sweet, right?
Plus, packaging can also help with word of mouth. More specifically, 40% of online shoppers say branded or gift-like packaging makes them more likely to recommend a product to friends.
Now let’s take a look at how some eCommerce companies use their packaging to create a great customer experience, starting with lingerie brand I’M IN.
Each purchase made on I'M IN comes beautifully wrapped with a handwritten card. The team behind I’M IN goes so far as to personalize their messages based on the occasion, which endears them to their customers even more.
Another company that utilizes a similar packaging strategy is subscription menswear service Trunk Club.
Every time Trunk Club sends its subscribers an item of clothing, it includes notes handwritten by the company’s personal stylists. The notes explain why the stylist has selected each particular product for their customer; this is another example of personalization done right!
Pro Tip: You can use a service like Handwrytten to send handwritten notes to all your customers without having to write them yourself! (Or to your best customers, as a way to increase customer lifetime value.)
Other than incorporating handwritten notes into your packaging, you can also slip in some free samples for your customers.
Image from EdenBotanicals.com.
“I hate free samples” - said no one ever. This is a great way for you to delight your customer, and at the same time, sneak in some cross-selling.
If you want to really impress your customers, come up with packaging that reflects your brand name and identity. For instance, this herbal tea brand Teapee packages its teabags in these extraordinarily creative miniature tepees.
This doesn’t just reinforce the brand’s name, it also pays homage to the Native American origins of the herbal teas. How wicked is that?
Last but not least, you can also use decorative tissue or other inserts to add to the aesthetic appeal of your packaging, like how this company does.
It’s a small touch, but having a consistent color scheme (using the same color on the font and on your tissue wrapping, for example), provides a very pleasant effect.
At the same time, you can also include your social media handles in your packaging and encourage customers to use your branded hashtag and tag you if they post photos of your product. Hurray for user generated content!
Reducing product damage and shipping costs through packaging
Before we move on from the topic of packaging, here are some tips on how you can reduce product damage and shipping costs through packaging.
According to an online study, approximately one in every 10 packages are damaged during the shipping process.
Your goal is to beat the industry average - so you can shoot for, say, having only one in 20 packages being damaged.
How do you do this?
Apart from ensuring that you use a sturdy, high quality package, you can also speak to your shipping carrier and negotiate a Service-Level Agreement (SLA) that makes sense for you.
You’ll want to come to an agreement (and this should be in black and white!) about what constitutes an acceptable level of damaged packaging.
Another good tip: Get your carrier to evaluate your packaging and provide feedback on any improvements you might be able to make that will help minimize the risk of damages.
Next, when it comes to shipping costs, the key is to pack your item so that there’s minimum space wastage.
If you’re shipping your item in a box, choose the right size; if it’s possible to switch to using a poly mailer bag, do that instead.
In addition, for multiple orders of bulky items, you might find that it’s more worthwhile to split up the shipment into several boxes or packages. Although the combined weight will remain the same, the smaller size of each package will help you save cost with dimensional weight pricing.
Congrats, you’ve made it all the way to the last section of this article, which deals with inventory management!
What has inventory management got to do with shipping? Plenty.
Image from MartechSystems.net.
Without a good inventory management system in place, you might find it difficult to keep track of your orders, which will delay shipping.
When you’re just getting started, you might find that it’s possible to get by with doing your tracking manually, like on an Excel sheet or via Shopify’s built-in inventory management.
However, as your business starts to grow, you’ll want to invest in an inventory management software that has all the tools you need to manage your inventory more effectively.
For example, many inventory management softwares come with automated demand forecasting. This will help you predict the demand for your products for the upcoming year, and generate metrics for your reorder point (aka when you should be re-ordering), order quantity, and more.
Nailing your reordering is very important; if you don’t reorder in time, you’ll run the risk of going out of stock. This means you won’t have any products on hand to ship to customers who are ready and willing to make a purchase - you’ll lose the revenue from that sale, and possibly the entire Customer Lifetime Value (CLV) of your shopper.
Plus, a good inventory management software will help you control and track inventory across multiple warehouses and allows you to adjust stocks levels for new products, returns, damages, shrinkage, and promotions and have your “stock on hand” value sync automatically once an order is fulfilled.
To learn more about the inventory management software available in the market, check out this comparison site.
Some parting words
Give yourself a pat on the back - you’ve finished reading this 5,000 word article, and you’re now an expert on all there is to know about shipping.
If there’s one last piece of advice that I’d like to give you, it’s that you’ll never be able to achieve the “holy trinity” of shipping by finding a shipping carrier that offers shipping which is fast, cheap, and trackable.
If it’s fast and trackable, it won’t be cheap.
If it’s fast and cheap, it won’t be trackable.
If it’s cheap and trackable, it won’t be fast.
And that’s okay - because there are other things that you can do to make up for this (such as offer superior packaging that will delight your customers, as previously mentioned in the article)!
Of course, as your company grows, and you have more resources to play around with, you’ll probably be able to spend more on shipping.
But for now, simply decide on the one most important factor (Is it price? Speed? Or reliability?), and once you’ve done so, firmly stick to your guns.
If you enjoyed this post and give a ship, take a moment to share it! ;)
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