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A Small Business Guide to E-Commerce Shipping

Jad Kaado

Finding the right shipping partner is critical for e-commerce businesses that want to maximize their profits.

    • Selecting the right shipping partner is a critical decision for e-commerce businesses.
    • There are several options for shipping partners, including the U.S. Postal Service, FedEx, UPS and drop shippers.
    • Consider cost, shipping schedules and packaging when choosing a shipping service for your business.
    • This article is for e-commerce businesses that are trying to select the right shipping partner.

    Many consumers have become accustomed to free shipping for online purchases, often with one- or two-day turnarounds. While this goal may be easily attainable for large companies, it  may seem insurmountable for some small business owners. Yet, by fulfilling these expectations, smaller businesses can create a phenomenal customer experience that converts shoppers into loyal, lifelong customers.

    Achieving these results requires a lot of behind-the-scenes work by retailers, which must constantly refine their shipping strategy and streamline their fulfillment and delivery processes. To make it even more challenging, this must all be accomplished without increasing prices to unacceptable levels. Once you identify the right shipping partners, however, the process becomes far more manageable.

    "When it comes to customer loyalty, shipping speeds and costs are more important than ever," said Tom Caporaso, CEO of Clarus Commerce, a provider of e-commerce and subscription commerce solutions. "Most shoppers still choose 'free' over 'fast,' but with a growing number of retail outlets – Amazon, eBay and others – now combining those options, retailers of all sizes have to find ways to cater to every customer's interests."

    Whether you have just started your business and aren't sure where to begin with the shipping process or you're an established company interested in creating a more efficient methodology, here are some tips for tackling the biggest challenges small e-commerce retailers face.

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    How to choose the right shipping vendor

    Most businesses begin by using the best-known shipping vendors. Big names like UPS and FedEx feel safe and established, and your volume may be small enough to justify the expense. However, as your business grows, you may need to choose a multistep and multivendor shipping arrangement to ensure faster deliveries at a reasonable price.

    "While using just one carrier may seem like a simple solution, it may not be the most cost-effective one," said Amine Khechfe, co-founder of shipping solutions company Endicia. "Small businesses should take the time to identify the right shipping mix for their business needs."

    Khechfe recommended that e-commerce businesses consider the U.S. Postal Service (USPS) as an alternative to private carriers, especially if they regularly ship bulky products. Business owners should also consider surcharges for services such as weekend or rural delivery and use this information to determine the most economical options for meeting customer delivery expectations, he said.

    Here are some of the factors to consider when choosing a shipping partner for your e-commerce business:

    1. Dropshipping

    Using dropshippers and other third-party logistics providers (3PLs) can also reduce shipping costs. Dropshipping – a process in which a retailer sends customer orders to a manufacturer or wholesaler that then ships the products from its warehouse – is a particularly attractive option for businesses that want to boost their shipping volume without increasing the space needed to store their inventory. Similarly, 3PLs can leverage the combined inventory volume of a group of smaller merchants to offer better shipping alternatives, said Jose Li, founder and CEO of shipping insights and analytics firm 71lbs

    2. Networking

    Building smart, strategic relationships and using technology can help small businesses find the right balance of price and convenience, said Frank Poore, founder and CEO of online merchandising and fulfillment platform CommerceHub.

    "The little guys have to act like the big guys," he said. "They have to do things systematically to minimize costs and transit times."

    Poore suggested looking for suppliers and drop-shippers in the areas closest to your customer base to minimize the distance between the origin and the destination.

    3. Packaging

    FedEx and UPS follow a dimensional pricing model, meaning shipping costs are determined by package weight and size for ground shipments. Kevin Lathrop, CEO of shipping company Unishippers Global Logistics, said many businesses made a lot of adaptations to optimize their packaging for this reason.

    "You want to use the minimum amount of space you can," Lathrop said. "Package for safety and density, and put [your items] in an appropriate box for the load."

    If you're shipping multiple items on a shrink-wrapped pallet, label each box in case the load is broken up before it reaches its destination, Lathrop said.

    Depending on the package weight, your fastest, least-expensive delivery method might be to have a private carrier take it part of the way, with the USPS making the final delivery, Poore said.

    4. Shipping technologies and analytics

    Technology has made it much easier to manage the shipping process. Businesses of all sizes can monitor shipments at every stage of the journey, allowing customers to receive accurate and timely updates. But that ability isn't only valuable for the customer; it also ensures that the business isn't held liable for delays, errors or damage that occurs once a product has shipped.

    In the past, if a customer reported an incorrect or damaged product, you had to take their word for it. Now, however, businesses can use video surveillance, real-time scanning and tracking, and other analytics tools across their entire supply chains.

    It's essential to provide tracking details for customers, because they want to know exactly where their purchases are, said Jarrett Streebin, CEO of shipping solutions provider EasyPost. He advised focusing on packing and shipping orders within 24 hours whenever possible and sending tracking numbers immediately.

    Caporaso said retailers should evaluate their shipping strategy every six months to ensure that it's operating at peak efficiency and delivering the best possible value to customers at the lowest possible cost to your business. An ongoing program of data collection and analysis is an invaluable part of that effort, he said.

    Ultimately, customers' expectations should be at the center of every shipping decision you make, Caporaso said. A carrier that saves you money in the short term but alienates your customer with poor service will eventually cost you customers, and money, in the long term.

    5. Cost

    To run a profitable e-commerce business, it is critical to watch your bottom line, and shipping is a major expense. Even though free shipping will be more appealing to your customers, many shoppers are willing to pay a reasonable price for shipping if it is fast.

    Make sure to choose a shipping schedule that will not increase your overhead but will still satisfy your customers' needs. Compile a list of the shipping options and their prices. Then, compare this information to your profit margins, and choose an option that will help you hit your financial goals.

    6. Shipping schedule

    Consistency is one of the keys to customer retention. People support your business because of the quality and reliability of your products and services, and ensuring their satisfaction requires a lot of preparation behind the scenes. The frequently with which you ship items is a part of that preparation, as it keeps your operations flowing smoothly.

    Determine how much inventory you need to ship and how frequently you need to do so. If you are working with a third-party shipper, ask about the shipping schedules to ensure they will meet your needs.

    Your business might be seasonal, which may change the preparation and frequency of your shipments. Regardless, be on top of all of the factors that will affect your shipping schedules.

    7. Shipping volume

    As a small business, you do not want to take on more inventory than you can handle. To avoid issues that will disrupt your business operations and incur unnecessary costs, keep your shipping volume in mind.

    There are two ways to think about shipping volume: the size of your product and the number of products you receive or send out in a shipment. Make sure you have enough space for your inventory.

    Consider using a third-party option, like drop shipping. Perhaps your business can hold a limited number of smaller items, so you could use a drop-shipping service for your larger products to help you save space.

    8. Guarantee

    Few things provide more peace of mind to your customers than a guaranteed receive-by date. Hitting these marks shows consistency and care for your customers' business.

    Mistakes and challenges are bound to happen, which is why having a guarantee on your shipping can assure your customers that they will be taken care of if problems do occur. Ensure good customer service – for example, by reaching out to the customer directly and providing some form of compensation.

    In addition to guaranteeing the time of arrival, make sure your product is labeled properly and packaged securely so no damage occurs during shipping.

    If you are looking to work with a third-party vendor, find out the vendor's rate of incidents, and make sure you understand the insurance policies. Customers usually remember how you handle a shipping mistake more than the mistake itself.

    9. Support

    Offering informational and technical support for shipping is helpful for handling any issues that occur during the shipping process.

    Clients sometimes have questions about their orders, so it's helpful to connect them with a representative who is knowledgeable about your shipping process. Providing customers with answers and solutions – whether through phone, email or social media - will encourage them to come back even if problems occur.

    Key takeaway: Some factors to consider when choosing a shipping partner for your e-commerce business are cost, shipping schedules, packaging and guarantees.

    Business shipping solutions

    Small businesses can choose from a variety of shipping services. Here are some popular options:

    United States Postal Service

    The USPS offers a few choices that make it worth utilizing as a shipping solution. Some of the benefits the USPS offers small businesses include multitiered click-and-pay services for both domestic and international shipping, volume discounts, postage calculation tools and lightweight business services.

    FedEx

    FedEx, which has one of the largest government contracts, provides an e-commerce center to help you develop your online business, as well as grants, administrative task support, and an informational blog and podcast.

    UPS

    UPS offers several services designed specifically for small businesses. There are a variety of flexible shipping solutions that can help you track and manage your shipping expenses. UPS offers overnight, international and ground shipping, as well as returns and billing options.

    Additionally, the company's eFulfillment service can help you store and ship products that are sold on more than 20 platforms.

    Drop-shipping

    Another option is drop-shipping. Although drop-shipping does not cover much of the logistics a business or warehouse would require, it is a viable option for streamlining your shipping process.

    Before choosing drop-shipping, make sure to research the industry, determine how much drop-shipping would cut into your profit margins and avoid overbuying.

    Third-party logistics

    If your business is heavily reliant on warehouse space, consider using 3PLs rather than operating a fulfillment center. 3PLs offer complex services that are not associated with drop-shipping, such as product assembly and packaging, order fulfillment and warehousing. Talk to the companies directly, and negotiate where possible.

    Key takeaway: Shipping options available to small businesses include the USPS, FedEx, UPS, drop-shipping and third-party logistics providers.

    Tips for reducing shipping costs

    Here are a few ways to minimize your shipping expenses:

    • Use fewer boxes. See if you can consolidate orders with the same vendor in one package rather than using multiple boxes. In addition, keep costs low by choosing appropriately sized boxes.

    • Reuse boxes and packing material. If you receive boxes and packaging materials, see if you can reuse them.

    • Be a savvy shopper. Search for discounts, sales or bulk offers when shopping for materials such as packing peanuts, bubble wrap, packing paper and foam.

    • Assess your inventory. What are the sizes of your products? If they are about the same size, you can buy boxes in bulk. If you prefer using a shipping company instead, use standard-rate boxes to ensure you are spending the same amount on each shipment.

    • Negotiate prices. Negotiating a good deal requires you to understand what discounts are available from several companies, presenting that data to your potential vendor, and building a relationship with the management team and salespeople. When you review contracts, pay attention to any hidden charges.

    Key takeaway: To save money on shipping, consider buying in bulk, reusing shipping materials and making the most of the space in each box. 

    Additional reporting by Marisa Sanfilippo.

    Image Credit: ijeab / Getty Images