Definitive Guide to Ecommerce Shipping and Fulfillment

Have you ever received a package in the mail that you have wanted for so long? That moment of anticipation almost drooling out of your lips as you can feel the good times you are about to have.

That anticipation is at the heart of the ecommerce success over the past decade. It is the reason why the retail sector of the economy brought in over $4.5 trillion worth of sales in 2013, and why online retailing is now 10% of all sales.

However, the question most entrepreneurs have is how they can create a replicable system to deliver their products to clients quickly, and create the anticipation their clients expect.

Five stages of shipping and fulfillment

Before we get too far into the details of how to ship online products, let’s review the basics of how the process works for small businesses getting started with ecommerce.

The overview listed below uses real life examples of the process that Matthew Carroll discusses in an answer on Quora to take you from a novice doing it out of your own apartment to a seasoned veteran with strategic partners shipping products to your customers.

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Instead of just repeating what he said, we provide below some real life examples of how this process would look in the first two phases. Not to say that it is easy for big business to ship goods…but it is a whole lot easier for big business than mom and pop shops to fulfill orders online.

That is why this will focus on how entrepreneurs start the process.

Bootstrap ecommerce: Not to get too philosophical here, but the quote about a journey of a thousand miles begins with a single step sums up the approach to shipping for new ecommerce store owners.

Most entrepreneurs start with limited funds trying to determine the best approach to shipping their product online. Their ingenuity helps propel them to come up with creative solutions to shipping their products around the country.

Take Renee Raville, and her Simple Life, Simple Health Etsy Store. She sells a number of scrubs, oils, and other natural health products online.

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Renee did not have a manual or explanations of the best process to ship her goods. Instead, she used trial and error to determine how to ship products.

Her big secret was UPS. The “guys’ there helped me through the process and gave me suggestions.”

Her big takeaway from talking to UPS was that “for stuff not fragile, ship in bubble wrap envelopes. Scrubs and oils should be shipped in boxes with bubbles to ensure they do not leak.”

Surviving the launch: After you have survived the launch period and done it all yourself, you will want to start talking to third party logistics companies to streamline the process.

Take online retailer ShoeDazzle, which celebrity Kim Kardashian helped start. I know this might be hard to take for some people, but dare I say it…Kim does not personally ship out every pair of shoes that is purchased on her site. Spoiler Alert!

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In the UK, third party logistics (3PL) company Clipper Logistics handles the shipping for the company. Companies like Clipper will work with your business to help you ship products across multiple sales channels. Having an outside partner helps expand your brand faster.

If you are tired of boxes upon boxes stacked up in your living room…or your wife says it has to go now…then you will want to consider a 3PL company to simplify the process for you.

Instead of sending out each order individually as they come in, you send out regular shipments a few times a month to your logistics company. Then the logistics company sends out the shipments to your clients.

Software like Lettuce App can help you integrate this process with your checkouts on Shopify.

What do you need to do to prepare to ship?

You have your products that your customers will want delivered. Now, you have to wrap and package them for shipping. The materials you use to package your product should protect the product and your brand’s reputation. What does that mean?

Packaging serves two purposes. It helps to protect the products on their way to your customer. It can also be used as marketing. And, the packaging makes a statement about your brand, which is your company’s image. Here’s how.

Protect the goodies: Packaging should make sure the product is secure, so it will not break or otherwise damaged en route. The fragility of your product dictates the type of package padding you use. Air pillows and crumpled wrapping paper are just two of many padding options available.

Here are a few different supply companies you can use to ensure that your product is secure.

UlineThe company has over 29,000 shipping products for budding ecommerce stores looking to ship a wide range of products. Added bonus: Uline brags how they answer 90% of calls within 1 second after the first ring. I actually called them to find out if they do that, and they answered in 1 second. Awesome!

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Fast Pack Another great resource for finding packaging supplies. Between Fast Pack and Uline, you run the gamut of products available for securing your packages.

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USPS Another option for budding entrepreneurs is the US Post Office. Some, but not all boxes are included free with shipping. Bonuses all around!

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The un-pack experience

We discussed at the beginning the type of drooling, eye-popping anticipation that makes ecommerce function. Here are some companies that just know how to make you antsy with anticipation.

Shipping as promotional marketing: We start with the master of ecommerce; Amazon. They turned shipping into an art form, because Jeff Bezos understood that the branding for their products does not end with the sale. That is why every Amazon Fire that they sell has the box emblazoned with the brand.

It is as if the box single-handedly perpetuates the age-old tradition of keeping up with the Smiths.

However, they are not alone. All of the great ecommerce sites today know that the brand they create online must continue in the shipping. Take one of my favorites, Dollar Shave Club.

The entire brand for Dollar Shave Club was built upon the hilarious video founder Michael Dubin created. The video went viral on YouTube, and the popularity of the brand grew from there.

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However, the fun did not stop with the video. The packaging was so good that many fans like Domenic Mahoney went through and did explanation videos on YouTube talking about how cool the membership card was along with the quality razor and blades.

You know your packaging is good when clients pay you, and then create free video testimonials of your products without you asking.

Here are a few ideas you can use to turn your next shipment into branding gold:

  • Create a decal for a high-end product and use it on all shipments.
  • Include a flyer in the package for upcoming sales.
  • Put a bonus product in your package to show you care.
  • Send a membership card for clients. The membership gets them special deals and discounts.

Evaluating shipping services

You are now ready to ship your products. Whom should you use? That will depend on a number of different factors.

For example, ManPack.Com mostly uses USPS to ship their manly products to men across the country. However, as they say on their website FAQ, “It depends on the size/weight of the package.”

It is your job to determine which shipping service offers the greatest value to your customers and yourself.

Evaluate the features, benefits, and costs of several shipping services. Use your typical product packages with each service to get specific pricing. Pricing will vary based on several factors:

Place of pick up: Where are your products picked up: At a substation, or your place of business? Determining this will decide how much the fulfillment house has to pay on transit costs.

Delivery location: Do you ship overseas? What about rural areas? ManPack.com only ships to consumers in the United States, because they offer free shipping to quarterly customers and those who spend over $50 on goods.

Package dimensions and weight: We already discussed the importance of packaging above for protecting your product. Package dimensions and weight are also the biggest factor in the cost of your product.

Take the recent decision by UPS and FedEx to now charge companies not only by weight, but also by the dimension of the product. This affects lightweight products like paper products (TP, paper towels, etc.) and clothes (socks, underwear, T-shirts, etc.). A lightweight box for shipping a pair of socks can get excessive.

 

Tracking: Finally, make sure that you are able to track your packages without additional fees. Some fulfillment and shipping services charge for this service.

The three most popular national-international shipping services are

 

Shipping rates: What you charge your customer

Understanding shipping costs is essential, because research shows customers purchase more online when shipping is included in the price, or “free.Know your break-even point to be sure you are charging enough for the product when shipping is included.

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If you’re not familiar with break-even point, check out this explanation from Entrepreneur.com.

If the cost of shipping to your customer is not included in the purchase price, you want to be sure the shipping options you extend to your customer will provide value as an extension of your brand.

If not, your customer will hesitate to purchase from you and will find a similar product for a lower shipped price. Sendly is another app for Shopify, by SecureShip, with an emphasis on calculating shipping costs, so there are no surprises for you or your customer.

Also, do not just use one service for shipping. Know the pricing for multiple services in case prices change like the dimensions change that UPS and FedEx made earlier this year.

Setting up Business Accounts: Before you can ship anything to anyone, you’ll need to establish an account with the shipping services you have chosen.

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This is for the sake of safety – the shipper knowing you are not likely to send a bomb (unless you sell bombs, which brings up a host of other legal issues) via their service, expediency – you’ll be able to ship when you need to without delays, and efficiency — you and your customer will be able to track your shipments.

Be sure to establish the shipping service account in the name and address of your business, not in your personal name.

Follow are the links to set up an account for your business in the United States.

Integrating shipping with Shopify: The beauty of using Shopify is that you have multiple apps to serve an assortment of functions, one or more with benefits for you and your customers.

Here are a few good Shopify plugins to get started.

  • AfterShipThis software tracks deliveries for USPS, FedEx, UPS, and 200 other carriers. It has automated updates available on shipping.
  • Shippo – This software allows you to actually create the shipping directly from Shopify for USPS. You can also do this when you have a FedEx, UPS, or DHL account.
  • ShipwireWe mentioned Shipwire in this article, because they are one of the largest fulfillment houses in the world. Connect your Shipwire account directly to Shopify for automated servicing.
  • ShipStationA great option for those interested in an integrated system. ShipStation can create batch labels of up to 500 at a time for FedEx, USPS, UPS, DHL, and Canada Post. Additionally, they can aggregate orders from over 40 different marketplaces like Ebay and Etsy. Finally, ShipStation also works with Amazon FBA to help them fulfill your products.  
  • Lettuce AppWe mentioned this app earlier, but it is worth mentioning again. Lettuce App integrates your fulfillment with your checkout process.

Shipping costs: Now we come to that depressing part of the conversation where we talk about the cost of shipping products to clients. It is definitely a sensitive subject for most retailers.

It is not humanly possible to go through all of the different cost structures for shipping. That could be an entire manual that would probably change the moment we finished it. Therefore, we are going to focus on how to compare the shipping for your needs.

The first thing you need to know is that shipping costs are generally determined by the dimensions and weight of the package.

This means if you have a box that weighs 2 pounds, but you use a huge, gigantic box that takes up as much space as a product that weighs 20 pounds you will have to pay a comparable weight price.

Traditionally, all of the carriers have used weight as a determinant of how much to charge. That is why if you have items less than 2 pounds you will want to use the United States Post Office instead of UPS or FedEx. They charge less for lighter objects.

However, with heavier objects you will want to choose between UPS and FedEx. To help you with this, we used the calculators at UPS and FedEx to provide you with an understanding of cost.

This was done based on a standard payment with the companies. Both carrier have discounted rates for account holders.

In this scenario, we have a 4 lb package that is being shipped in a small box. Below are the prices for both 1-day, 2-day shipping.

FedEx Standard Overnight® (arrives 3 PM) – $53.50
UPS Next Day Air Saver ® (arrives 3 PM) – $82.62
 
FedEx 2 Day® – $20.50
UPS 2nd Day Air® – $40.93
 

If you want shipments that go out in 3 or 4 days, you can use UPS Ground and FedEx Express Saver®. However, keep in mind that you can only do UPS Ground shipping if you ship with your own box.

UPS Ground (4 days) –    $15.53
FedEx Express Saver® – $10.50
 

Based on standard rates, FedEx has a significant edge in pricing right now. However, check with UPS to find out what discounts they have for corporate clients. Amazon uses them for a reason besides for their reliability, and part of that is because of the cost savings.

The pros and cons of working with a fulfillment house

Maybe you do not want to spend your days mulling over the price of shipping on FedEx and UPS anymore. Perhaps you do not have time to do so. This is a perfect time to look into using a fulfillment house to help you with your shipping needs.

However, making the jump from DIY to fulfillment shipping is a huge jump. Therefore, let’s look at the pros and cons of doing so for your business.

Pros

Cheaper shipping – One of the great lessons from the industrial age is that mass production will almost always be cheaper. That is especially true when talking about using a third party logistics company to do your shipping and fulfillment.

The company has the advantage of shipping a larger number of goods every month, which reduces their bill. Ask your fulfillment house what type of deals they can pass on to you.

Automated process – Rovio, the creator of the popular Angry Birds game, decided a few years to go big into merchandising the Angry Birds we have come to know and love.

To do so, they set up a Shopify website to sell products online, and then outsourced the process to fulfillment house ShipWire. Now, all Angry Birds merchandise comes from the Shipwire factories in Los Angeles and London.

Cons

Extra costs – One of the biggest challenges of online retailing is that there are more returns than with items purchased at a store. The ease of use is a double-edged sword.

In fact, many retailers that already outsource a lot of their fulfillment to third parties find that the costs of doing business are 25% higher due to free shipping and free return policies that customers expect from e-commerce stores.

Less control of experience – While any good fulfillment house should have a good dashboard for you to track orders, you still lose control when you outsource the process to a third party.

Make sure that you have a long conversation with your logistics company ahead of time, so they can ship your products to your customers’ level of expectation.

Final thoughts

Phew! We did it! Shipment sent. What next?

  1. After the delivery remember to ask for reviews. If we’ve learned anything from the e-commerce giant Amazon, it’s that positive reviews of products sell more products to those sitting on the fence.
  2. Depending on your brand and the markup of the product sold, send a note thanking your customer, either via email, postal mail, or courier.
  3. For high-end products, thank your customer with a smaller product, gift certificate, or sample.

Following up with your customers will let them know you care about their experience with your brand.

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Customers will appreciate you valuing them almost as much as they value the packaging when they unwrapped your shipment.

In the end, keep in mind the best practices for ensuring your customer gets a timely delivery of your goods. Your job after reading this article is asking what you can do to improve your shipping and fulfillment for your clients. How can you make something mundane like shipping an invaluable service?