Shipping and Fulfillment 101

Today, eCommerce merchants are competing in a market saturated with creative and innovative ideas. Moving people through the conversion funnel is no easy task. Now more than ever, customers have high expectations and are more demanding of strong online shopping experiences. In order to provide these strong “customer experiences”, the online shopping experience must be spectacular from start to finish. That means from the moment the shopper lands on your site until the very moment they open the box revealing their new product.

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What many online merchants struggle with creating a strong finish when it comes to customer experiences. It happens much too often, a customer goes through every stage of your conversion funnel, then abandon cart because they aren’t satisfied with the shipping options! According to eConsultancy, 50% of abandoned purchases are due to inadequate delivery options. You need to realize that the journey doesn’t end at the “Add to Cart” button. To help, I’ll explore with you the topic of Shipping and Fulfillment, so that shoppers on your site actually convert into paying customers and hopefully gets encouraged to come back!

CHOOSE THE RIGHT SHIPPING RATE STRATEGY

Choosing the right shipping rate strategy can be challenging. You want to offer a fast and cheap option to retain your customers, but you also don’t want to hurt your margins too much! After all, you are running a business to make money. Let’s look at some of the most common shipping rate strategies:

Free Shipping

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This is obviously the most preferred shipping option to customers and it is what makes people buy your products! In fact, more than a third of online shoppers say they wouldn’t make purchases without free shipping. Not only are shoppers more likely to make a purchase, but they’re also likely to buy more items on top of that. However, free shipping isn’t for everyone because like most things in life, “free shipping” isn’t actually free. Somebody has to pay for it, so you will need to either absorb those costs yourself or increase the product prices to cover it. For some companies, this may not be the best option. In this case, you can use a form of free shipping such as “Free Shipping over X Amount” to at least ensure higher purchase orders.

BEST SUITED FOR: Ultimately, the feasibility of this option will depend on your margins and what kind of products you are selling. The best situations in which you can absorb the costs of shipping yourself or increase prices is when your products are luxury or unique items. These type of products typically have higher margins and are less price sensitive. For example, adding $5 to a $200, one-of-a-kind item might not be a noticeable difference. However, if you are selling a pack of pens that is sold at many other retailers for $10, increasing your price to $15 will just drive shoppers away to your competitors. In this case, you might want to entertain a different idea. Note that when you increase prices to cover the shipping costs, the shopper is ultimately paying for shipping. Therefore this strategy has a lot to do with the perception.

Related: Should You Offer Free Shipping?

Flat Rate Shipping

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You can offer flat shipping rates to your customers in various ways. For example, you can offer standard flat rates for every package or it can vary along ranges of weight, purchase order amounts, or delivery regions. Technically, this can also be called “Price Based Shipping” or “Weight Based Shipping”. Although flat rate shipping isn’t as ideal as free shipping, I’d say that it’s the next best thing. Why? Because it is an upfront cost that the customer will be aware of. For example, if you make it clear on the site that all shipping across Canada is $5, it will alleviate the problem of shopping cart abandonment due to surprise costs. More than two thirds of shoppers say that they need to see delivery timescales and charges to help them make a decision on whether or not they should make a purchase.

BEST SUITED FOR: If you cannot afford to offer free shipping on your site, flat rate shipping is something to aim for. This method of shipping is a little more difficult to determine since you need to figure out your average shipping costs. From there, determine a price that isn’t too expensive but enough to offer a decent shipping option. For example, $2 shipping is great but if the items aren’t going to come until 6-8 weeks, customers will be discouraged from buying. The appropriate price will also depend on the price of your products. For example, if you are selling t-shirts for $15, a shipping price of $10 might be excessive. However, $10 shipping on a $200 item is a lot more reasonable. As every business is different, it will take some testing to figure out the most optimal rate to charge.

Real Time Shipping

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Real time shipping is the most simplest in terms of how the shipping is being paid, since customers get live quotes calculated based on what is in their carts. It also shows customers that you aren’t inflating any of your prices like you would in other strategies, which could build trust with some shoppers. However, this strategy comes with a few major drawbacks. The biggest problem that comes with real time shipping is shopping cart abandonment. Having to calculate shipping costs at the checkout lengthens the conversion funnel and we all know longer conversion funnels mean lower conversion rates. In this particular case, the abandonment comes from price shock. Shoppers calculate a total cost that they expect to pay at checkout, however when they later realize that they need to pay for shipping it becomes discouraging. According to the eConsultancy report, 74.5% of shoppers say that high delivery charges would make them abandon their purchase and 70.8% of shoppers say hidden charges will also deter them from completing a purchase. Then when should you use real time shipping?

BEST SUITED FOR: Despite the issues discussed above, real time shipping can be appropriate in some circumstances. The best case scenario for this strategy would be if you are selling something expensive but small and light. For example, a luxury piece of jewellery. These products are ideal for real time shipping because the shipping rates will be inexpensive and will appear to be very minimal compared to the actual cost of the product. On the other hand, real time shipping might be your only option if you are selling very large and heavy items such as furniture. This shipping strategy can also be appropriate if you are competing in a highly price sensitive market and you want your product prices to be as low as possible. Do keep in mind though, that the abandonment issues discussed above will still apply in this situation.

Drop Shipping

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The fourth shipping strategy you can employ is drop shipping. This technique is very different from the other ones mentioned since you are not actually shipping your products. You, as the retailer, do not keep products in stock but rather transfer your customers information to the manufacturer or wholesaler, who then directly ships the products to your customers. It is easy to do, but of course there are some drawbacks to be aware of. The number one issue I would advise you to keep wary of is that your reputation will rely on the performance of your supplier. Like I said in the beginning of this post, customer experience is everything. You want the process to be as smooth as possible for your customers, this means ensuring the product you sell are actually in stock and are of the quality you describe it to be. There is a lot of coordinating to do with your suppliers, but if you can get it right, it can allow you to scale your business really quick.

BEST SUITED FOR: Drop shipping is unique in that it allows entrepreneurs to get started in eCommerce with minimal funds. You don’t need to invest in inventory and you don’t need to stress as much on order fulfillment. If you are interested in learning more about drop shipping, you can read about it here.

Again, every business is different so test which strategy works for you and don’t be afraid to go out of the box a little bit. Combining strategies may be your solution.

Related: The Pros and Cons of Drop Shipping

FULFILLMENT

You’ve decided on a shipping strategy for your online store and your customers have finally checked out. Now what do you do with that package and your customer? Remember, just because they’ve paid, it doesn’t mean it’s the end for their experience. So, now let’s look at what you can do to do keep up that high momentum.

Maintain Communication

Stay in touch with your customers, don’t forget about them and don’t let them forget about you. Be sure to send them an order confirmation, then if you’d like you can send them a thank you email a few days later or follow up with them by asking how they’re experience went. Be ready to answer any questions they may have and provide excellent customer service.

Brand your Package

Rather than sending your products hidden a boring and ugly brown box just filled with plastic wrap, try to make your packaging pretty. This doesn’t mean you need to send your products in a glittery pink box, but put some effort into making it look nice. For example, nicely wrap your product in tissue, have a branded box or ribbon, include business cards or a thank you note. These are the little things that are going to bring you to the front of your customers minds.

Exchanges and Returns

Have a clear and easy exchange and return process. If possible, allow for free returns. Make the return form easy to fill out and include it with the package so that your customers aren’t left scrambling your site on how to return their item.

You can learn more about creating seamless shipping experiences to your customers here and get a thorough guide on shipping in Shopify here.

Choosing a Strategy that Works for You


For many merchants deciding on the right shipping and fulfillment strategy is crucial to improving conversion and remaining competitive. Consider your entire shipping and fulfillment process to determine which strategy is best suited for your online business. Now that you have a complete list of all that you need to know about Shipping and Fulfillment, which strategy will you use?

Related: How to Create a Seamless Experience When Shipping to a Customer