Many merchants struggle with the challenge of shipping goods in the fastest and cheapest manner. There are several variables that determine the best shipping provider for each order. These include the number of items, the weight of the products, their prices, customer-requested transit times, and domestic versus international.
Excessive shipping costs are a primary reason why shopping carts are abandoned. And free shipping could be the most successful promotion in the history of retail. It’s important, in other words, that retailers pick an affordable and efficient shipping provider, to avoid wasting money and effort.
Selecting the right shipping provider is more of an art that gets refined over time. But it can be made more predictable by considering the following six factors.
1. Target Market
If a retailer’s target market is both domestic and international consumers, then the retailer should research providers that work with local shipping companies in different countries, such as Japan Post in Japan and Royal Mail in the U.K. Additionally, retailers will have to review customs duties and support for different payment mechanisms (such as cash on delivery) when shipping internationally. It is better to do thorough research of the different local shipping providers in a specific country if large volume of orders is expected from that country. Otherwise, if the international order volume is small then the retailer can work with a well-respected international shipping provider like DHL.
An assessment of the target market also requires an understanding of the customer’s location. If many customers live in rural areas, then it is important to determine the best shipping provider(s) for those regions before finalizing the shipping strategy.
2. Product Mix
If most of the products that a retailer ships are less than a certain weight, such as 2 pounds, then the retailer could pick a provider (such as U.S. Postal Service) that offers flat shipping rate for items under that weight. On the other hand, if most of the products are large and heavy, then selecting a freight or cargo provider might be a better option.
The other thing to consider is the average size of the order. If the individual products weigh less than 2 pounds, but the average order consists of two items, then a flat rate, 2-pound shipping box will not work.
Another aspect is to ensure that the provider can ship different types of products — i.e., fragile products, dangerous products (chemicals, flammable), and expensive products — and also offers insurance for damage or accidents.
3. Transit Times
Transit times need to match customer expectations. For sites like Ebay where products are commonly shipped internationally, it is normal for a buyer to wait 7 days or more to receive the products. But some retailers on Ebay still offer same-day and next-day shipping, to get orders from shoppers who want the item quickly.
Also, if the retailer is selling perishable products like flowers or food, supporting faster transit times is mandatory. If the retailer sells commodity products, not offering faster transit times may lose business to other retailers that do. In some cases, a shipping provider may not be able to support the desired transit times, especially for certain locations.
4. Integration with Ecommerce Platform
Ecommerce platforms sometimes come bundled with real-time shipping calculators that integrate with the leading shipping providers, such as FedEx, USPS, UPS, and DHL. These calculators can determine the total shipping costs for a specific order, in real time, based on the rules defined by the retailer’s business and the weight of the products, the order destination, and shipping method.
If the ecommerce platform does not offer a built-in shipping calculator, then a retailer needs to evaluate how it can integrate with a third-party service, as it is typically too cumbersome to manage online orders with manual shipping calculations. ShipStation, as an example, works with the leading shipping providers and also integrates with leading ecommerce platforms like Shopify and Magento.
5. Returns Processing
Returns are an essential function of an online retail business. A shipping provider should pick up the returned merchandise from the customer’s location. The provider should also be able to ship the returned merchandise directly to the drop shipper’s location or to the retailer’s warehouse. Many retailers have encountered challenges with shipping providers that cannot pick up from a customer’s location, or do a poor job of checking if the returned product is packed properly for shipment.
Merchants should also evaluate if the provider can disassemble a product for instances when a customer might have assembled a piece of equipment or furniture. This avoids placing the burden on customers to disassemble items before returning them.
6. Grow with the Business
A shipping provider should be able to accommodate additional volume as the merchant’s business grows. It should also extend volume discounts for increased shipments from the merchant.
Additionally, and more importantly, a provider’s service level should not reduce as the business grows. No merchant wants unhappy customers due to shipment problems. The sloppiness of the provider will impact the merchant; customers do not consider shipments and orders as separate businesses.