Once you realize how important shipping is to your e-commerce store, it can get overwhelming fast. This article will cover the shipping basics that every online merchant should know to develop an effective shipping strategy.
E-commerce shipping solutions can be broken down into two subtopics; quoting and fulfillment.
Quoting is the presentation of shipping rates during the checkout process. You collect money for shipping when your customer places an order.
Fulfillment is the act of preparing the order to be shipped. Printing the shipping label is a crucial event in the fulfillment process. You pay for shipping when you fulfill an order.
The ability to provide shipping quotes is built-in to every e-commerce platform. However, there is a wide range of capabilities.
Free shipping, or charging a flat rate are the most basic ways to provide quotes during the online shopping experience. Some ecommerce platforms are limited to these options or variants of them, such as charging a different flat rate based on the order amount.
More capable platforms will allow you to connect your shipping accounts so you can use your negotiated rates. Rates are retrieved from your shipping company real-time and displayed to your customer.
The most advanced e-commerce platforms, such as Magento, Shopify, and WooCommerce, will allow you to install apps from third-party developers. Apps from third-party developers are usually the most capable solutions. Even though these e-commerce platforms are well thought out, it is difficult for them to meet all the needs of online merchants. Third-party developers step in when there is a market for an improved version of a feature - in this case, shipping quotes.
The process you use to fulfill orders will depend on your e-commerce platform, the shipping company you use, and your preferences. Printing a shipping label directly from the order details page is possible in some cases. Printing postage and labels for the US Postal Service is the most common example.
Many ecommerce platforms will allow you to connect an online shipping system, like ShipStation. These systems will retrieve your orders for processing. Once a shipping label is printed, the system will give your online store the tracking number and update the order status. The features of online shipping systems are far superior to what is built-in to ecommerce platforms.
Your shipping company may not be integrated into your e-commerce platform or an online shipping system. This is likely if the company isn't a national postal service, FedEx or UPS. In these cases, you'll need to login to the company's online portal to create shipping labels.
There are many types of shipping, but only a few are a good fit for an e-commerce. Shipping rates should be available 24 hours a day, 7 days a week so your customers can always complete an order. The shipping methods that meet this criteria are:
Many factors determine which shipping methods are viable options for your online store. Size and weight is the most common factor. Product characteristics can also dictate your choices. For example, the US Postal Service prohibits alcohol, weapons ammunition, corrosive chemicals, dry ice, and hazardous material. Yet it's possible to ship all of these with the parcel and LTL freight carriers.
Consider the composition of your orders when deciding which shipping methods you should offer your customers. It's easy to select a preferred method when only one item from your catalog is in the shopping cart. It's more difficult when the cart can contain more than one item at a time. Even a small product catalog can yield a (seemingly) infinite combination of possibilities.
Some online merchants can get by offering only one shipping method. If you sell bumper stickers to consumers (B2C) who never order more than a few at a time, the postal service is all you need. If you sell only large appliances, then LTL freight is your only option. If you sell bumper sticker stock to businesses (B2B) that make bumper stickers, then you may need to offer all three types of shipping.
If you offer all three types of shipping, you can ship orders ranging in weight from less than an ounce to more that 10,000 pounds.
Postal carriers deliver more shipments for e-commerce businesses than any other type of shipping company. Postal service is usually the cheapest of the three options. Postal carriers can deliver packages to PO, APO, DPO and FPO boxes, which isn’t possible with the others. Nearly all e-commerce platforms have built-in support for postal services.
|Shipment Characteristic||Maximum Value|
|Weight per package||70 pounds|
|Packages per shipment||1|
|Weight per shipment||70 pounds|
|Package dimensions - Priority Mail||108 inches in length plus girth|
|Package dimensions - Parcel Select Ground||130 inches in length plus girth|
|Package length||27 inches for machinable packages|
FedEx, Purolator and UPS are examples of shipping companies that provide parcel services. Parcel carriers have better tracking, offer money back service guarantees, and have better customer service. Parcel carriers are more reliable, but they are more expensive than postal carriers. Most e-commerce platforms have built-in support for the larger parcel carriers.
If you're evaluating parcel carriers, be sure to read our blog post, FedEx vs. UPS: Which One's Best For E-commerce?
|Shipment Characteristic||Maximum Value|
|Weight per package||150 pounds|
|Packages per shipment||10|
|Weight per shipment||1,500 pounds|
|Package dimensions||165 inches in length plus girth|
|Package length||108 inches|
LTL stands for Less-Than-Truckload. Use LTL freight for shipments too heavy or large for the parcel carriers. It can also be the cheapest option for shipments weighing as little as 150 pounds.
There are many LTL freight carriers, The top 25 LTL carriers account for more than 90% of the transportation segment’s revenue. The largest five LTL carriers are:
Each LTL carrier has its own limits for weight and size. The table below will give you some general guidelines. Most freight shipments are palletized so you won’t see metrics about packages in the table. Dozens of boxes can be placed on a pallet.
Want to learn more about LTL Freight? Check out this resource: LTL Freight Primer - How to make it work for your online store.
|Shipment Characteristic||Maximum Value|
|Weight per shipment||10,000 pounds|
|Shipment length||24 feet|
What you can offer your customers during their shopping experience depends on your e-commerce platform. Some platforms will limit your choices to only what they provide. Others will have a marketplace for third-party apps that may offer dozens of innovative solutions.
If you're evaluating an e-commerce platform, spend some time in its marketplace or app store. You should also perform some online searches using Google or Bing. Be careful not to mistake an app or plugin intended for fulfillment for one that returns shipping quotes during the online shopping experience.
Magento, Shopify, and WooCommerce are popular e-commerce platforms that have third-party apps that can display shipping rates in the cart or during the checkout process. Many of these third-party apps will be superior to what you will find in any e-commerce platform.
The strategies below aren't specific to any platform. You may find that some of them aren’t possible with the e-commerce solution you're using.
News flash! Everyone pays for shipping. It's merely a matter of how it's done. Proponents of this strategy believe that it has the lowest cart abandonment rate.
Merchants who use this strategy inflate their prices to cover the cost of shipping. The challenge is that most shipping costs are variable, while the amount added to the product price is static.
To avoid unpleasant surprises, keep an eye on what you collect for shipping and what you pay for it. The relationship will be constantly changing since shipping costs are variable. To make sure your shipping costs aren’t eating away at your profits, you’ll find that frequent adjustments are needed.
Offering a flat shipping rate is another popular option. It shares many of the same challenges as free shipping. Shipping costs are variable, while the flat rate is static. Your profitability will be in a constant state of flux because the actual shipping cost will be different for every order. If you charge enough to make sure you never lose money on an order, your conversion rate will suffer. Charge too little and you won't make any money!
A variation of the flat rate strategy is to charge different rates based on geography, weight or price. This is a table-driven strategy. You might be able to accomplish this using the functionality built into your e-commerce platform. Apps from third-party developers may be another option for some platforms.
A table-driven strategy will get you closer to aligning what you collect with what you spend. While it's an improvement over a single flat rate, the inherent weakness remains the same. What you collect for shipping will never align accurately with what you are paying for shipping.
If your e-commerce platform supports it, you can charge real-time shipping rates. This is the most effective strategy for aligning the amount you collect to what you pay. Your customers will also have the ability to choose and pay for the service they want. The choices they see will be based on the negotiated discounts you have with the carrier, plus any markup you choose to add.
The real-time rating engines built into e-commerce platforms are pretty basic. Some e-commerce platforms, like Magento, Shopify, and WooCommerce, will allow you to install apps from third-party developers. The apps from third-party developers are usually superior since they address weaknesses in the e-commerce platform. Some third-party apps are capable of penny level accuracy.
The type of packaging you use can have a significant impact on your costs. The size of the package often determines what you are charged. To understand this you need to be familiar with what the postal and parcel carriers call billable weight.
The billable weight of a package is the greater of its actual or dimensional weight. The dimensional weight is calculated by multiplying the package's length, width, and height, and dividing the result by the carrier's volumetric divisor. In 2019, the volumetric divisor for FedEx and UPS is 139. The volumetric divisor for the USPS is 166.
What is your billable weight If you ship a five pound package through UPS using a box measuring 12 x 12 x 12 inches?
12 x 12 x 12 / 139 = 12.4 pounds.
Round up the fractional weight to the next whole number. The dimensional weight of the package in our example is 13 pounds.
Do you remember the original question? The actual weight of this shipment is five pounds. The dimensional weight of the package is 13 pounds. Since the dimensional weight exceeds the actual weight, the billable weight of the package is 13 pounds. This is why you should always use the smallest box possible to minimize the amount you pay for shipping.
Standardizing on specific box sizes is a good practice. Start by having a standard small, medium, and large box. Add or remove boxes as you gain experience and see what works best. When you have standard box sizes you will find that the shipping process will be more efficient and cost-effective.
A few third-party apps allow you to identify your standard box sizes and will use them to identify the packaging solution for your orders. They remove the complication of billable weight and will provide your carrier of choice the exact shipment characteristics so that you get the most accurate rate quote possible. The best of these apps will even give you instructions on which box to use for an order, and step-by-step illustrations for how to pack it.
Shipping can be daunting for online merchants and agencies who are unfamiliar with it. Use the form to the right to subscribe to our blog. You'll learn more about how to use shipping as a valuable component of your online store.
Eniture Technology is committed to helping online merchants grow their business by executing proven strategies for inbound marketing, creating custom solutions for unique challenges, and offering affordable off-the-shelf products that boost conversions and revenue. It is what we do. This is one of many educational articles that I hope helps you achieve your goals!
Paul Birkhead Eniture Technology