There are few things more satisfying than opening your front door and finding a package with the items you purchased online just a day or two ago. But creating this sort of positive customer experience requires a great deal of work behind the scenes by retailers.
To reduce shopping cart abandonment and avoid unhappy customers, retailers must continuously revisit their shipping strategy and streamline fulfillment and delivery processes, all while keeping prices low. It's a fine balancing act, but one that becomes more achievable once you identify the right shipping partners.
"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."
"Today's e-commerce sites have a lot of competition, and shipping costs are often factored into consumers' buying decisions," added Christina Crawford, CEO of hair and skin care brand Bubble Pop Beauty. "So, it is essential for these stores to create a pricing structure that is competitive with big online retailers."
Whether you're just starting your business and don't know where to begin with shipping, or you simply want to make your shipping operations more efficient, here's a primer on what retail businesses need to know about the process. [Tackle the biggest challenges for small e-commerce retailers with ease.]
Choosing your vendors
When you start your business, you may have a small enough sales volume that you can just rely on FedEx or UPS to handle all your shipping needs. As you grow, however, you'll likely want to consider multistep, multi-vendor shipping options to get your deliveries out faster.
"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 as an alternative to private carriers, especially if they regularly ship bulky products. Business owners should take surcharges into account for services like weekend or rural delivery, and use this information to determine the most economical options for meeting customer delivery expectations, he said.
Drop shippers and other third-party logistics (3PL) providers can also reduce shipping costs. Drop shipping – a process in which a retailer sends customer orders to a manufacturer or wholesaler that then ships the product out 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.
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 suggests looking for suppliers and drop shippers in the areas closest to your customer base, to minimize the distance between the origin and the destination.
And never underestimate the value of negotiation, added Crawford.
"Don't accept standard shipping costs issued by the carrier," she said. "Go through the negotiation process. Compare pricing among other carriers and pick the option that best works for [you]."
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, it's important to label each individual box in case the load is broken up before it reaches its destination, Lathrop said. Crawford said that it's also helpful to consider preassembly of products and kitting so that orders can be shipped promptly.
Depending on the package weight, Poore noted that your fastest, least expensive delivery method might be to have a private carrier take it part of the way, and have USPS make the final delivery.
Shipping technologies and analytics
Thanks to technology, businesses can carefully monitor every step of the delivery process and update their customers on a shipment at any given time. This not only benefits the customer, but ensures that you're not held liable for any errors that occur after your product leaves your business.
Traditionally, if a customer reported an incorrect or damaged product showing up, you had to take their word for it. Now, businesses can use video surveillance, real-time scanning and tracking, and other analytics tools across their entire supply chains.
Another crucial ability is providing tracking details for customers, as they want to know exactly where their purchases are, said Jarrett Streebin, CEO of shipping solutions provider EasyPost. He advised focusing on getting orders packed and shipped within 24 hours whenever possible, and sending out 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 the business. An ongoing program of data collection and analysis is an invaluable part of that effort, he said.
Ultimately, your customers' expectations should be at the core of every shipping decision and deal you make, Caporaso said. A carrier that saves you money in the short term but provides poor service will cost you customers, and therefore money, in the long term.
Additional reporting by Nicole Fallon. Some source interviews were conducted for a previous version of this article.