The Ultimate Guide to Shipping & Logistics in E-Commerce

Sep 02, 2022
  • Approximately 41% of customers abandoned their carts because shipping charges were more than expected, and 26% did so because shipping took too long.

  • 32% of shoppers put the environmental friendliness of shipping options ahead of both price and timeliness.

  • Multi-carrier shipping strategies, providing estimated delivery dates (EDD) and notifying customers in case of delays are among the best shipping practices.

Offering a positive customer experience is something businesses work extremely hard to achieve. However, shipping often feels like you are entrusting your business to an unknown third party. Shipping is when a consumer first gets their hands on your product, but it can also add up to a significant cost for your company, depending on how you go about it. 

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If you are unfamiliar with the shipping and fulfillment industry, you might feel overwhelmed by the sheer number of options available. With this in mind, we have compiled a comprehensive guide to shipping and logistics in e-commerce that will allow you to narrow down your options and make the best decision for your company.

The Role of Shipping & Logistics in E-Commerce

Making sure that the right things are delivered to the right location at the right time is the foundation of e-commerce logistics. It is a crucial aspect of any company, especially for an e-commerce venture whose success depends on getting products to customers as swiftly and easily as possible. 

When a consumer purchases on a website, they anticipate an easy and rapid delivery process. Statistics have revealed that shipping has a significant impact on cart abandonment. About 41% of customers abandoned their carts because shipping charges were more than expected, and 26% did so because shipping took too long. Other customer behavior and expectations include the following:

  • 78% of buyersdon't mind spending more on their items to get free shipping.

  • 82% of customers would rather have their goods delivered to their homes, whereas 9% would rather buy online and pick them up at a store, 7.5% would rather pick up their items at a collection point, and 1.5% would rather pick up their orders at a locker.

  • However, customers are open to various last-mile options in place of standard shipping: 85% would be ready to pick up their products from a nearby pharmacy or grocery shop if it saved them money on shipping.

  • Customers' opinions of retailers are negatively impacted by poor shipping experiences, according to 86% of respondents; this is true even when the carrier is at fault, according to 70% of respondents.

  • Of those who have had a bad delivery experience, 59% said they would complain to the retailer, 36% would shop elsewhere the next time, 29% would write a negative review, and 6% would share their negative thoughts on social media.

The Most Important Parts of E-Commerce Shipping

Now that we have established that shipping is crucial to the success of an online shop, let's take a look at the most vital components of shipping for e-commerce.

Order Placement

Inventory Management is the process of managing your inventory including the creation and storage of your products in preparation for shipping. This can be facilitated by softwares and inventory management systems that track when customers add things to their shopping carts and alter inventory projections based on the possibility of a sale.

Checkout Systems and Payment Processes involve how your customers will check out and pay for your stuff, including order forms and billing methods. Once a customer places an order, you'll employ an order management system to convey order details from your e-commerce store to your fulfillment center, including product information, shipping information, recipient information, and more.

Order Fulfillment

Order fulfillment is the process of picking and packaging a customer's order for delivery. This process, which is the most important component of both logistics and e-commerce, guarantees that customers receive their products on time and in good shape. In a small firm, everything could take place on a kitchen table or even in a storage unit. Larger companies and businesses have intricate networks of fulfillment centers dispersed throughout key geographic regions.

Types of E-Commerce Shipping Methods

Below are the different types of shipping methods that e-commerce businesses can consider:

Free In-Store Pickups

While this strategy is the most effective for physical stores, even e-commerce-only businesses can benefit from forming strategic alliances with larger, more established companies. Rather than waiting for things to be transported to their homes, customers are instead offered the option of picking them up at a local store, which can be faster or cheaper.

Same-Day Delivery

With same-day shipping, products are sent and delivered to buyers on the same day. Sellers rely on micro fulfillment centers or local businesses, delivery hubs, and automated dispatch and routing systems to make that lightning-fast delivery window a reality. Delivery can be costly and inefficient in some locations, but it's well worth it if you can figure it out.

Expedited Shipping

Expedited shipping is extremely rapid freight transport. For instance, to get their goods to end consumers more quickly, trucks carrying expedited packages make few or no stops. It makes it possible to get packages delivered the next day or even the day. As the name suggests, it is always quicker than the regular shipping option, which can take a few additional days.

Free Delivery

Many customers have become accustomed to Amazon Prime's free shipping and now expect it from all online retailers. Moreover, this strategy is simple to explain to consumers, meets their expectations, and improves conversion rates for those customers who make it to the checkout page. While customers appreciate the no-cost shipping, you still incur costs. Having said that, you will still need to pay the carrier, so be sure your margins are large enough to cover the related expenses.

Live Rates

In many cases, you can save money on shipping by obtaining real-time quotes from carriers like UPS, FedEx, or DHL. This method is not ideal for use as a marketing tool due to the wide range of possible prices. By charging exactly what the carrier would charge you, however, you guarantee the most cost-effective shipping method.

It is not uncommon for businesses to employ a combination of different fulfillment strategies to keep up with customer demands. Hybrid shipping services use a combination of several methods to complete orders for their clients. For instance, an e-commerce company that sells watches may employ drop shipping for accessories and a combination of in-house fulfillment and third-party (3PL) outsourcing for their core product.

Calculating Shipping Costs

E-commerce shipping expenses are rather simple to calculate. Once you have the dimensions, weight, and final destination for your packages, you can calculate the exact shipping costs. Form factor all major carriers, including UPS, USPS, and others, use the dimensional weight to determine the price. In other words, the surface area of a package matters when calculating its delivery cost. Dimensional weight is found by multiplying the length, breadth, and height of a package and then dividing that total by a standard digit.

The Weight of the Package: For this one, you will need a scale. Carrier shipping rates will be based on this scale if it is greater than your dimensional weight.

Origin Address: Where are you shipping out the parcels from? Your shipping costs may be expensive or minimal depending on where you are located and where your package is going.

Destination Address: In this case, the calculated rate depends on the destination of the shipment.

E-Commerce Packaging and Marketing Options

Consider packaging as a promotional opportunity as well. If you want to give your customers a joyful (and social media-friendly) unwrapping experience, you might want to invest in packaging that matches your branding. You could perhaps lean toward a more environmentally friendly strategy. Besides, 32% of shoppers put the environmental friendliness of shipping options ahead of both price and timeliness.

Customized Packaging

Custom packaging is a great way to differentiate your business from the competition and provide customers with a more exciting and memorable unboxing experience. you can utilize branded stickers when you wrap your products in pretty tissue paper or have packaging materials printed with your logo.

Eco-Friendly Packaging

About 65% of merchants support recyclable packaging over plastic. Earlier this year, McDonald's announced globally that all of its packaging would be made from sustainable, recycled, or certified resources by 2025. Many e-commerce companies are banding together to reduce their environmental impact by switching to paper or plant-based materials for their packaging or even completely avoiding plastic. We can reduce our packaging waste by making custom, smaller boxes and switching to mailers. You can match your brand with the values of your customers, cut expenses, and stand out from the competition by using eco-friendly packaging.

Tracking E-Commerce Shipments

By using package tracking numbers, you and your customers can keep tabs on the whereabouts of your shipments at all times. Whether you're sending something domestically or internationally, you can get free tracking from start to finish with USPS, FedEx, or UPS. You can accomplish it with the resources you already have or spend money on a platform for shipping tracking that automatically alerts you to problems and contacts your clients on your behalf.

Returns Policy

The process of giving something back is not what anyone enjoys. However, returns are often an unavoidable cost of doing business. Maybe something does not fit right or looks different from the product pictures. But you cannot afford to lose that customer. To retain customers, a reliable returns policy is essential. You can consider providing:

  • Automatic shipping labels that can be affixed to the original package and delivered to UPS or FedEx destinations

  • Physical store return options

  • Arrange for returns to be picked up at home

Read more about returns management here!

E-Commerce Shipping Best Practices

Still unsure where to get started? Here are some e-commerce shipping and logistics best practices that might be useful for your business:

Consider a Multi-Carrier Strategy

It is common practice for busy shippers to settle on a single carrier strategy and then bargain for the best possible rate. Eliminating the need to look up prices or get an instant quote, speeds up the decision-making process. Shipping with numerous companies saves time and effort compared to utilizing just one.

Notify Customers of Shipments

Did you know that customers check delivery updates up to 4 times per order and open 80% of these emails?

There is no denying that customers like being kept up to date on the delivery's progress. Create greater trust and deliver a better customer experience by informing customers of the product's whereabouts at every stage of the process through the use of notifications.

Clearly Show the Shipping Fees

Customers frequently back out of online purchases due to the high delivery fees they did not expect. Don't add it as an unexpected charge toward the end of the checkout process. Instead, make shipping rates and alternatives clear when the user views their cart or shortly after they provide their delivery address.

Provide Estimated Delivery Dates

Estimated delivery dates (EDDs) are more important than you think. If you promise 2-day shipping but it ends up taking five days because of other circumstances, you need to be upfront about it. The COVID-19 epidemic, for instance, had a significant influence on e-commerce shipping dates, and businesses made these delays known to customers via emails, announcements on the homepage of their website, and at the time of checkout. After all, accurate delivery date predictions will not only differentiate your brand from the competitors but also help to improve customer checkout conversions.

Be Responsible for Shipping Issues

Contact your customers as soon as possible if there are problems with the supply chain or the expected delivery date. Do you know how it feels to be waiting for a delayed flight, but no one will give you an update on what's going on or when it will be resolved? You certainly don't want to give that impression to your customers. Even if you have to issue a refund, you may have been able to keep the relationship and make the customer a returning customer.

Bottom Line

To ensure the long-term viability and profitability of your organization, it is essential to comprehend all the factors and modify your shipping strategy as your business grows. Make sure you are providing your consumers with the best service and experience at the best price by re-evaluating your strategy periodically.

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