How eCommerce Shipping Work- a Step-by-Step Guide

1) What is eCommerce Shipping?

For anyone engaging in the eCommerce industry, shipping is a must-know terminology. Shipping stands for all the services that go into transporting your products purchased by customers to their delivery destination. 

But there is more to shipping than meets the eye. If you are a budding eCommerce entrepreneur, you have more reasons to learn how eCommerce shipping works and what factors to look for when devising your shipping strategy.

2) How does eCommerce Shipping Work?

Think of shipping as an assortment of activities and personnel. There are four leading players: the shipper or the eCommerce brand, the carrier who delivers the order, the warehouses or fulfilment centres that store and dispatch inventory, and the 3PLs/4PLs who manage inbound and outbound logistics.

While shipping aims to get your products safely delivered to your customers, the process doesn’t begin with selecting your courier partners. It starts much earlier. 

3) So, how do you start with your eCommerce shipping?

It starts with your website. First, set up a marketing team to announce shipping policies and promotions to potential customers. Second, build a team of web designers to create the best UI to display the correct shipping options and enhance user experience. 

Next, assign a fulfilment team that will handle the processing, packing, and shipping of your orders and streamlines the process for you. Equally important is the customer service team that will manage customer queries about shipping and order locations.

Once you have assembled your team, your shipping strategy comes into motion. It is important to note that eCommerce shipping is a competitive area. Providing the best shipping experience goes a long way to satisfying your customers and keeping your business profitable.

4) Processes Involved in eCommerce Shipping

4.1) Shipment Processing 

The first step in shipment processing is receiving and processing customer orders. As soon as an order is received, inventory comes into play. Therefore, it is essential to work closely with your manufacturer/supplier or a third-party logistics company (3PL) to keep track of inventory.

Once inventory is checked, the next step is to verify order data that includes customer details like shipping and delivery address, contact information, delivery dates, and payment.

These steps can be automated using order management software to speed up and simplify shipment processing.

4.2) Calculating Shipping Costs

Calculating shipping costs is a tug of war between providing affordable deliveries to customers and maintaining your profit balance. With one miscalculation, your eCommerce brand can incur a loss.

So, how do you calculate shipping costs for an affordable eCommerce shipping experience?

Five variables for calculating shipping costs:

a) Package Dimension

Carriers use DIM divisors and the outcome DIM Divisors are the set metrics provided by carriers to measure the dimensional size of the package in cubic inches. This divisor is used after multiplying the package’s dimensions i.e., height, width, and length.

b) Package Weight

It refers to the natural weight of your package. It is important to get quotes for actual weight if your parcel weighs less than the DIM weight.

c) Delivery Destination

Often, carriers charge based on shipping zones which involve the distance your package travels between the point of origin and destination. 

d) Insurance

If you ship valuable products, it is recommended to get insurance. Though it may add more to your shipping cost, you will be reimbursed in cases of theft, damage, or loss.

e) Delivery Time

Delivery time works in combination with the shipping zone. Depending on your chosen delivery mode and the time allotted, shipping rates will vary. For example, expedited shipping or a two-day shipping time coupled with long-distance will add cost to your shipping. 

Apart from this, unforeseen challenges such as delays in transit and shipment splits may add more cost to your shipping. 

4.3) Shipping Methods

Choosing a suitable shipping method is crucial to reducing cart abandonment and increasing conversions for your brand. After the massively successful two-day shipping of the Amazon Prime program, customers always look forward to hassle-free, fast shipping to determine the value of eCommerce brands. 

So, what are the different eCommerce shipping methods you can consider?

a) Same-Day Delivery

This works best in cases of perishable/time-sensitive products and brands with multiple warehouses in a region. Also, serving local customers or those near the warehouses becomes easy and affordable with same-day delivery. 

A survey by Jungleworks has found that 61% of customers are willing to pay extra to get same-day delivery. You can also add a surcharge to earn profit while delighting your customers with speedy delivery.

b) Two-Day Shipping

Popularised by Amazon Prime, it is the most demanded shipping method today. Two-day shipping relies primarily on air and ground transportation for shipping longer and shorter distances. 

While it is a lucrative option, businesses may incur high costs with two-day shipping if not correctly implemented. In this case, using urban fulfilment centres with ground transportation and limiting the option to particular regions can make it more affordable. 

c) Expedited Shipping

This refers to faster shipping options than ground transport. Offering expedited shipping works wonders in reducing shipping cart abandonment rates, swelling customer satisfaction, and growing loyalty toward the brand.

For domestic deliveries, expedited shipping includes overnight or two-day delivery. Cost is another factor that gears up with expedited shipping. So, setting up a minimum spend threshold over your average order value and distributing inventory to multiple fulfilment centres will help curb the cost of shipping.

d) Overnight Shipping

Overnight shipping guarantees that delivery is made on the next business after the order is placed. Usually, roping in a 3PL provider with multiple warehouses across your country will help offset the cost of overnight shipping.

e) Eco-friendly shipping 

A new trend marking its presence in the shipping sector is eco-friendly shipping with biodegradable or eco-friendly packaging, offsetting carbon emissions and recyclable materials. 

Eco-friendly shipping requires a strategy beyond traditional shipping expectations like compostable mailers, nudging ground shipping, and regulating fast shipping that significantly contributes to carbon emissions.

4.4) Shipping Rates

Shipping rate typically refers to the price you charge customers besides the cost of the product they purchase. Figuring out your shipping rates will go a long way to maintaining profit margins while providing affordable shipping options to customers. 

In case you’re wondering how eCommerce shipping can work for you when there are so many different shipping rates to consider, don’t worry! 

Just keep an eye out for the following standard costs: carrier costs (the amount charged for transport), packaging cost (cost of materials used in packaging), fulfilment cost (labour cost for picking and packing), overhead cost (fixed costs of running your business) and you can determine the price you quote to your customers.

Here are the three most popular shipping rates:

a) Free Shipping 

Massively popular today, free shipping does not charge customers any additional shipping price. It is the simplest way to grow your customer base and conversion rates. But, free shipping can drastically impact your bottom line.

Therefore, it is advisable to carefully set a free shipping order threshold that gives you enough room to pay your carriers without incurring a loss. 

b) Flat Rate 

Flat rate is determined by the size of the package (box or envelope), not by the DIM weight. Carriers also have flat shipping rates for the same zonal delivery. Moreover, it is also important to abide by weight standards to avoid extra charges. 

c) Real-Time Carrier Charges

Here, you provide the real-time shipping rates directly from your carrier to customers at checkout. Though it is not a good option for promotion, real-time carrier charges establish transparency by charging your customers the exact amount the carriers will charge you.

This option is most viable for lightweight orders and customers near the warehouses where inventory is stored. You can also add a surcharge for packaging and fulfilment costs while giving some discount to counterbalance the price.

4.5) Picking and Packing

Packaging is a crucial element of your eCommerce shipping, especially when packaging gives customers a reason to return to your brand. While many aspects of eCommerce businesses converge with each other, it is packaging and presentation that can set you apart from other brands.

Different packing inserts, various shapes and types of boxes, personalised messages, fully custom packaging, corrugated boxes, mailer boxes, brand schemes, colours, and printing are great ways to give your customers the ultimate and greatly anticipated unboxing experience.

4.6) Insurance and Customs Declaration: 

Your eCommerce shipping is incomplete without insurance and tracking. Depending on the value of your products, insurance will secure your package and reimburse costs in case of damage or theft. Tracking software alerts you of delays or losses. 

Custom declarations with tariffs, taxes and duties are regular for international shipping. You can always check out your country’s postal service for details about customs.

Moreover, adding this information to your shipping policy page will help inform your customer of any additional customs fees they might have to pay when the package reaches their doorstep. 

4.7) Fulfilment centre

A must-know term to understand how eCommerce shipping is a fulfilment centre. A 3PL provider primarily operates a fulfilment centre. Unlike a warehouse where the merchants store only inventory, a fulfilment centre works as a warehouse that handles the entire shipping process. 

5) Factors to Consider in your eCommerce Shipping Strategy

There is no one-size-fits-all shipping strategy. While considering the above elements, you also have to decide on shipping customisations that fit your business goals and brand image. Below are some factors to consider to create a shipping strategy personal to your brand: 

5.1) Selecting Shipping API

Shipping APIs are a must-have nowadays for accessible businesses. It allows you to integrate shipping functionality with your eCommerce store directly.

A good Shipping API should ideally have a simple interface for an automated checkout process. Additionally, it should integrate with all your carriers and have address validation and real-time parcel tracking functions.

5.2) Making Your Shipping Strategy

Sometimes things work best in combos. For example, if you have a retail location, free in-store delivery, and same-day shipping will give your customers the best shopping experience.

Similarly, for B2B businesses, LTL freight and standard shipping work best. Having a mix-match of options will help you create the finest shipping plan.

5.3) Is Free Shipping necessary?

Free Shipping is sometimes regarded as the Holy Grail in eCommerce shipping. However, it is important to ask yourself- do you need free shipping? 

First, evaluate your market scenario, competition, and monthly shipping expenditure. If you lack any verticals, don’t opt for free shipping. Similarly, if free shipping does not drive up your sales, don’t provide it or limit the regions you want to provide free shipping. 

5.4) International Shipping

Cross-border eCommerce is gaining popularity and if you wish to target an international customer base, here are a couple of things you should consider:

•  Is your product suitable for international shipping?
• Is there enough demand for your product?
• Which carriers will ship your product overseas?
• Do you know all the tariff codes, customs decorations, duties, and taxes to ship internationally?

5.5) Returns

In eCommerce shipping, returns are unavoidable. Customers evaluate brands based on the return experience you provide. So it is imperative to have a proper return strategy handling reverse logistics.

You have to decide on factors like returning products to the warehouses or fulfilment centres, outsourcing returns to a 3PL, or using a returns managing software. 

6) Conclusion

A myriad of tasks, processes, and people make up the eCommerce shipping industry. Having a solid foundation of how eCommerce shipping works will give you the flare to kickstart a profitable eCommerce business.

Your eCommerce shipping journey, therefore, begins with a solid strategy that carefully considers the three major shipping factors: shipment processing and fulfilment, shipping methods, and shipping rate.