Your complete guide to eCommerce shipping and fulfillment
Spending time implementing the perfect shipping and fulfillment solution for your online store is one of the best investments you can make for your eCommerce business.
But if you’re familiar with just how many little details go into that, you know how difficult it can be to create that plan.
We’ve put together a complete guide to make it easier for you to decide which shipping and fulfillment options are going to work best for you and your store.
Questions to ask yourself
When thinking about shipping, there are probably a few key areas that come to mind right away:
- How much do I charge for shipping?
- What is it going to cost me?
- How am I going to ship my products?
While those are all great questions to be asking before making your business public, there are actually some other things you need to think about as well:
- Where will you be holding your product?
- Who will your shipping carrier be?
- What about your packaging & shipping labels?
With so many things to consider before you launch (and grow!) your business, we made it easy by breaking it down for you step-by-step in this handy guide..
Click on the corresponding links below to jump to a specific section.
- Where will you be holding your product?
- Who is your shipping carrier going to be?
- What is your packaging going to look like?
- Where will you be getting your shipping labels?
This is the first question you should be asking yourself!
You'll need to have a space large enough to hold your inventory. When starting out, you could just use your garage - but you might outgrow it, so it's important to consider the future.
Planning ahead is important in eCommerce. Even if you don't have enough products or orders yet to justify moving your business outside of your house, you should be taking into consideration your next steps as you continue to grow.
That way, when it comes time for you to find a bigger space for your inventory, you're armed with the knowledge you need to make the right decision!
Otherwise, you'll probably need a warehouse.
Anyhow, there are a lot of considerations you need to take into account when looking at using a warehouse: “Is the space big enough for my inventory needs? Is the location near the majority of my customers? How much will this space cost me?”
Note: If you've already got your inventory space figured out, jump to shipping!
How much space you’ll need
When hunting for a warehouse, make sure it’s not too big for your needs: You’ll end up with unused space or fill it with too much inventory. Either way, your costs will be significantly higher.
Fitsmallbusiness suggests maximizing your internal space by creating an intricate (down to the inch) and detailed layout of your floor plan before you even put anything in the warehouse.
Whether you’re a small business just gaining traction, or an enterprise-level store, you don’t want to be cutting into your profits by paying extra (and unnecessary) costs.
Ensure you determine everything you need to store (packing supplies, inventory & extra stock, equipment, etc.), so you can map out your storage areas and determine how many storage racks you’ll need.
Pro Tip: Canada Post recommends using narrow shelving, which is especially useful for smaller items (and utilizing a small space effectively).
If you’ve got a few items that sell often, either pre-pack or keep them close to the packing area so that orders can be fulfilled more efficiently.
If you’re a small business, you probably have less capital to work with. This gives you fewer purchasing options when it comes to a warehouse and inventory - without hurting your equity, that is.
When considering how much inventory to carry, it’s suggested that you take a look at your historical orders, the current season (is there a major shopping holiday around the corner?), and your competition (have they released a similar product that may make your demand waver?).
Knowing your demand gives you an idea of how much inventory you should have in stock for the next few months or years, depending on your forecasting and ordering.
Regardless of the size of your business, or whether or not you’re selling products on a subscription basis, accuracy is key; carrying excess stock can cost you extra money to the tune of tens of thousands of dollars.
Where your warehouse should be located
If possible, choose a warehouse that’s near the majority of your customers; you’ll cut down on shipping costs, and customers will receive their orders more quickly.
Spoiler alert: 52% of participants chose next-day delivery as their most-preferred delivery option, and contrary to what we may have expected, same-day delivery was almost the lowest-chosen option at only 12%!
This gives you some leeway if your shipping warehouse is far away, but you should still try to locate your warehouse strategically to keep costs down.
Plus, isn’t it a great surprise coming home to your online order a day or two early?!
On that note...
While placing your warehouse near a central population is convenient, it’s more likely that your customer locations are sporadic. If that’s the case, consider choosing a warehouse that’s around convenient transportation routes.
That way, you can still impress your customers with fast delivery.
Cost of your fulfillment warehouse
Just like you don’t want to hold extra inventory because of excess fees, you don’t want to pay too much to rent a warehouse.
Costs are often displayed in a per-square-foot unit, and prices will differ based on location and warehouse size.
Here’s an idea of what rent might look like for you in different U.S. cities (in USD).
Want another example? Dream Office has 218 industrial properties across Canada and the United States. According to their 2017 Annual Report, their average rent costs for warehouses per square foot were $4.08 in the U.S. (FL, NC, TN) and $7.17 in Canada.
If you’re ready to get started with a warehouse, check out this guide to renting warehouses and industrial spaces.
Fulfilling your eCommerce orders
Order fulfillment is the process between a customer placing their order and receiving it. Warehouse employees use an invoice to put the order together and prepare it to be shipped.
If your business is small enough, you can save on costs by doing the picking and packing yourself. If you prefer to have a team of people do this for you, you’ll need to hire a few positions:
Order pickersThese team members use the customer’s invoice to gather their order, picking the items off the shelves. There are some different types of order picking you can choose, but it should be reflective of your business’ size in order to increase efficiency:
Single/basic order picking is common for companies with small order volumes. The order picker focuses on one order at a time, going through each aisle and taking the items off the shelves. This method ensures high accuracy, however is not efficient and will not work well for a company with large order volumes.
Multi-order/batch picking involves the same process as single order picking, except the focus is to pick for multiple orders at the same time to increase efficiency (often between 4-12 orders at a time). Items are then separated into their respective orders at the packing station. Batch picking saves you time (and subsequently lowers labor costs), plus, increases productivity.
Zone picking consists of sorting SKUs into different zones. Workers are assigned to their own zones, only picking the items from that zone. Orders are moved to the packing station via conveyor belts in an ‘assembly line’ fashion. This is an ideal option for businesses with large order volumes.
Order packers await the items and wrap the order up in the packaging that the company uses (jump to packaging section), preparing it to be shipped. It’s not uncommon to hire somebody who fills both this role and that of the order picker, but that only works for smaller businesses, or those with fewer orders.
Warehouse Managers are useful and can take a lot of work off your plate (at least in regards to warehousing duties). If you’re having trouble keeping up with the demands of your warehouse (and especially inventory management), it might be time to hire one!
A Warehouse Manager can help by keeping track of and organizing inventory, overseeing your other employees, communicating between channels, and delegating tasks. If you’re having a difficult time balancing all of your responsibilities, a Warehouse Manager can help.
If all of this just seems like way too big of a commitment (and cost) for the amount of orders you’re getting, then consider 3PL (third party logistics) warehousing - it may be a much more viable option for you.
The third party will often take care of the fulfillment for you, too, so it’s really a matter of sending them the orders to be packed and fulfilled; just make sure you’ve sent them enough inventory, and you’re set!
Outsourcing your warehouse and fulfillment process can free up a ton of time and save you the headache of figuring out all of the logistics surrounding it. Plus, a 2017 study found that 90% of domestic Fortune 500 companies reportedly rely on 3PL supply chain services.
Here are some examples of 3PL companies to consider:
ShipBob is a company who offers fulfillment services and same-day delivery to eCommerce businesses. They’re touted as one of the top companies for small businesses.
Red Stag Fulfillment
Red Stag Fulfillment has a money-back guarantee should anything go wrong while using their service. They offer 3PL warehousing, fulfillment, and fast shipping services.
Fulfillment By Amazon
Amazon has fulfillment centers and warehouses across the globe, making them a reputable option (with additional benefits such as free two-day shipping to Prime members) for businesses who are selling internationally.
FedEx Fulfillment offers solutions that include warehousing, packaging, fulfillment, and shipping, making them a great full-service option for small and medium-sized businesses. They also offer an enterprise solution.
These are only a small handful of the 3PL companies you’ll find to help with your eCommerce business. If this sounds like the right option for you, read more about how to find, choose, and use a 3PL warehouse in 2018.
Your shipping carrier may change based on where you’re shipping to. If you’re in North America, chances are you’ll be looking at a few key players when considering a shipping carrier: FedEx, UPS, Canada Post, and USPS.
If you’re looking at opening your store to international orders, you may have to explore even more options. If you are interested in shipping overseas, find out everything you need to know about international shipping.
While you’re at it, grab our FREE multi-currency app: it automatically converts your prices into your customer’s local or selected currency (and if you use it with Bold Cashier, they can check out in their local currency too, without any extra conversion fees!)
So, how do you choose a shipping carrier?
It’s best to weigh the pros, cons, and your products (literally) to figure out what sort of cost you’re looking at. Some carriers calculate the weight of your products by not only the item’s weight, but the shape and size of the parcel as well.
This is what’s called DIM weight pricing (dimensional weight pricing), where the length, width, and height of the parcel are multiplied to get a number which equals cubic inches. That number is then divided by a DIM divisor (chosen by the carrier) which gives you the total “weight” in pounds.
Here’s an example from stamps.com:
- Flat-rate shipping
- Price-based shipping
- Weight-based shipping
- Carrier-calculated rates
If you use a carrier’s flat-rate shipping boxes, you’ll pay one shipping rate (up to a certain weight) on your shipments, making it a strong contender for businesses who want to offer one shipping rate to all customers.
You can easily absorb this cost into your product prices to offset the cost of offering free shipping, which is something that can increase your average order value (AOV).
Keep in mind that flat rate shipping prices differ based on the package size, so this is a good option if your largest product can fit into one of the boxes - that way, your shipping price can be consistent.
USPS shipping rates: USPS offers flat-rate boxes at no cost, and you can ship products up to 70lbs; you’ll just pay the flat rate shipping price.
FedEx shipping rates: FedEx also offers a flat rate shipping service which they call One Rate, with prices starting at $7.65. You won’t have to weigh or measure the package if it’s under 50lbs.
Canada Post shipping rates: For Canadian entrepreneurs, Canada Post offers Canada-wide flat rate shipping up to 5kg (approximately 11lbs), ranging in price depending on the box size.
Weight-based shipping costs
On Shopify, you can offer shipping that’s based on the weight of your products. This is a great option if you have a varying range of product weights.
Keep in mind that some shipping carriers charge by dimensional weight, so optimize your packaging by only using a size that fits your product comfortably with protective packaging (such as packing peanuts) to avoid product damage during transit.
Price-based shipping costs
You can offer shipping that’s congruent with a customer’s cart total, rewarding customers who spend more by lowering their shipping price. For example, spending $20 will earn a customer $10 shipping, and spending $50 will reward them with free shipping.
The best way to use this is by offering free shipping to customers when they reach a certain threshold, because you can encourage customers to spend more if there is an added incentive of receiving free shipping. (We have an app that does that!)
On certain eCommerce platforms, you can calculate shipping rates automatically based on the product dimensions you’ve set up.
For example, if you’re a Shopify user, you can use USPS, Canada Post, UPS, and FedEx through your store. Based on the product weight, dimensions, and packaging you specify, the carrier will calculate a shipping rate and allow you to print shipping labels at a discount.
Regardless of what type of shipping you decide to go with, the shipping costs will be determined by you. You might consider using A/B testing to help maximize your sales, and see what price point meshes well with your customers.
BigCommerce suggests using your current AOV and adding 10% to that to reach the optimal free shipping threshold for your store.
When you offer free shipping, you’re either eating the entire cost of the shipping, or increasing your prices to make up for that shipping cost.
Don’t let this deter you, though; Walker Sands Communications has done studies which show that between 2014 and 2017, an average of 83% of consumers say free shipping would make them more likely to shop online.
If you think your shipping rates are going to be too expensive - after all, 60% of consumers reported abandoning their online cart due to high shipping costs - then you should adjust the shipping costs that consumers pay.
Just like with free shipping, you can increase your product prices slightly to cover some (or all) of the shipping fees so that they are aligned more competitively. Otherwise, you may need to dip into your profit margins a bit.
Packaging might not seem like an overly important aspect of shipping - I mean, you could easily just throw it in a free cardboard box and fill the box with tissue paper. However, what kind of message would this send about your brand?
According to a 2016 study on eCommerce packaging, 40% of shoppers (up from 29% the previous year) were more likely to repurchase from an e-tailer if the package they ordered online was ‘gift-like’ or ‘premium’.
It also found that 55% of consumers would be more likely to repurchase if their order came with a free surprise gift.
Not to mention, packaging has a strong effect on brand perception (60% say it makes the brand seem more upscale). According to a behavioral sciences journal article, the way a consumer perceives a brand’s image affects their trust in the brand and, in turn, trust affects their repurchase intent.
In essence, custom packaging positively affects consumers’ brand perception, which makes them more willing to purchase from you again in the future.
According to a report about how packaging can add value in eCommerce, the main focus of packing for many eCommerce stores is simply the price of the packaging - even though product unboxing is a perfect opportunity to solidify your brand in consumers’ minds with your logo, print inserts with interesting facts about your company, or anything else you want them to see.
HelloFresh has sent out information cards that address their impact on the environment (it’s positive!). They also include recipe cards with their shipments.
Dotcom Distribution’s 2015 study found that 4/10 respondents shared their new purchase on social media, which equals free advertising for you (and positive first impressions to consumers who may not have even heard of your brand).
Be sure to consider other aspects of your packaging, too: your box, the tissue paper, protective filler, and other details that will make an impression on your customers. Look at including branded stickers, a custom note, free gift, or even a sample product to make your customers’ - unboxing experience memorable and exciting!
It’s important to consider more than just aesthetics in your product packaging; using protective filler in your shipping container will protect your products from damage while being shipped to your customers.
Because first impressions are so important, if your customer receives an item that has been damaged or broken in transit due to inadequate packaging considerations, they’ll be disappointed and have a bad impression of your brand.
DHL Express suggests using bubble wrap, packing peanuts (styrofoam), or crumpled paper, and ensuring there is 5 centimeters between the outer and inner packaging (i.e. between the product and the shipping container).
Want to know more?
For a more in-depth look at using unique product packaging to not only entice customers to buy from you again, but also protect your product and save on shipping costs, check out our post about different types of product packaging.
Shipping labels provide information about the package to your carrier. This includes who sent the item, who it’s addressed to, the weight of the package, the type of shipping (i.e. standard or priority), and a tracking number.
According to Canada Post, 75% of Canadian customers rate tracking as important, and it can minimize customer’s anxiety and feelings of regret (‘buyer remorse’). This means that allowing your customers to track their package is in an integral piece of their experience with your brand.
If you use Shopify, you can purchase and print USPS and Canada Post labels right from the admin page, and you won’t need to worry about calculating the shipping rates because they’ll do it for you (plus, you can save up to 74% on your shipping rates!).
BigCommerce also offers this as an option; you can purchase and print shipping labels online, as well as print packing slips right from home.
Pick yourself up a label printer so you can print out shipping label stickers, rather than just a paper copy that needs to be stuck in a clear pouch or taped down.
Still unsure about committing to a shipping software? Luckily our friends at ShipStation have created a decision guide to help you find the best shipping software for your business.
UPS shipping labels
Planning on heading to one of their locations? Calculate your shipping time and cost beforehand.
FedEx Shipping Labels
Wow, that was a lot of information! Let’s break it down real quick
Renting or owning a warehouse, complete with employees to help you with fulfillment, is a great option for higher-volume stores with more orders. But if you're a small business owner or want to save on costs, then consider automating your fulfillment through a 3PL service.
There are multiple ways to ship products and determine shipping rates depending on the weight (and size) of your products. Don't forget about the impacts of offering free shipping to your customers, or how to determine & charge shipping rates.
Consider using unique, branded packaging to amp up your customers’ unboxing experience. This makes your company stand out and impresses customers, increasing their value perception, and making them more likely to repurchase. Don’t forget to protect your orders from damage that can occur during shipping, too!
You can print out shipping labels right through your eCommerce platform, calculating shipping rates at the same time. Or, you can go through a shipping carrier and easily determine shipping rates, print labels, and schedule it to be picked up all in one place.
Got any shipping or fulfillment tips? We’d love to hear them in the comments below!