Ecommerce Shipping – A Step by Step Guide for 2019

Global ecommerce sales are currently topping $3.5 trillion and cumulative data anticipates a 276% increase in global retail over the most recently tracked period. If you’re just starting out your ecommerce business, the first thing to learn is that global sales require global presence. This, of course, does not entail setting up multiple brick-and-mortar stores or international warehousing, but it does require a strategic and well-thought-out approach to shipping.

Why should you care about ecommerce shipping? As per BigCommerce’s 2017 survey, shipping price and speed are two of the top three most influential factors driving customer purchases. Moreover, 45% of customers have abandoned a shopping cart because of unsatisfactory delivery options, 38% say that negative delivery experience is a deal-breaker, while 66% of shoppers claim they’ve decided not to make a purchase because of higher shipping costs.

The stats speak for themselves. If you’re not dropshipping or you’re still too small to transition to 3PL (third-party logistics) fulfillment services you’ll have to store, manage and ship the products to your customers by yourself. Regardless of the type of products you sell, if you’re just starting out, order fulfillment can be a very scary undertaking with a shipload *wink wink* of variables to consider.

So, where should you begin?

Determining an Ecommerce Shipping Strategy: Understanding Shipping Variables and Setting Goals

ecommerce shipping strategy

It’s important to keep in mind that there’s no such thing as a one-size-fits-all ecommerce shipping strategy. Your shipping strategy will continually develop and change according to your requirements. As your business grows, so will your needs and capabilities; the number of countries where you can offer free shipping or one or two-day delivery will expand, your packaging materials and your unboxing experience will (hopefully) improve, your budget, your products, your margins — basically every aspect of your fulfillment process will change. You will, of course, adapt as your business grows, but before orders start piling on it’s of utmost importance that you understand all the shipping variables and set your goals accordingly.

👉Shipping variables include but are not limited to:

    • Potential legal barriers depending on the type of products you sell – Are you working with pharmaceuticals or other products that may potentially have restrictions under some jurisdictions? Think carefully about the type of products you sell and whether they might cause any hold-ups at customs or any legal concerns with the countries you plan on exporting to. Also, make sure you double-check if there are any embargos or additional tariffs between the country of origin and the destination country as this may greatly affect your business.
    • Variables that affect your shipping costs – These primarily include the packaging size and weight of your parcel, the distance between the origin and the destination country, costs for insurance, tracking, customs & duties and any additional costs for warehousing, packaging materials, labels and so on.

💡As soon as you get your grip on all of the shipping variables, next you want to narrow down your focus and establish your primary shipping goals. What are your trying to achieve, precisely?

Let’s look at some of your potential objectives:

    • Increase conversions – Conversion rate is calculated by dividing the number of visitors on your sites with the number of shoppers who take the desired action. Increasing conversions depends on various factors such as the layout of your site, the quality of the products you sell, your website copy, marketing techniques and so on. Free shipping, for example, is one of the few things that has been proven to successfully boost conversion rates and should be the first thing you consider if this is your primary goal.
    • Scaling your business to new markets – Expanding your business to uncharted existing markets requires adequate shipping strategies. Implementing in-store pickups or same-day local delivery can help you gain a foothold and dominate the competition in your local market, while fast and inexpensive international shipping will certainly help scale your business regardless of how broad or narrow your niche is.
    • Increasing Average Order Value – The AOV is one of the most vital KPIs (Key Performance Indicators) of any ecommerce business. To calculate your average order value, divide your revenue with the number of orders. A proven strategy to increase your AOV is to offer free shipping on all orders exceeding a certain dollar amount. By offering promotions on bulk purchases and by utilizing up-selling funnels you can simultaneously increase your AOV and lower your shipping costs as shipping carriers will be happy to give you volume discounts.
    • Minimizing shipping costs – Having a lucid and strategic approach to your order fulfillment can have a vast impact on the growth of your business. By optimizing operational efficiency and decreasing shipping costs you can either increase your profit margins or offer the products at lower prices in order to attract and retain more customers. There are many variables that affect the cost of your shipping, but you should mainly concern yourself with the ones under your control: (i) improve the efficiency of the whole order fulfillment process, (ii) optimize your packaging, (iii) find the right carrier and negotiate rates, and (iv) double-check for any hidden fees and take advantage of free perks offered by your shipping carriers.

Shipping Policy: Methods of Shipping and Pricing Strategies

Once you understand all of the shipping variables and determine the primary goal of your shipping strategy, it’s time to nail down your shipping policy. Simply put, your shipping policy should be designed in accordance with your shipping goals and it should answer two basic questions: (i) what is the price of shipping, and (ii) what is the method of delivery?

👉 Regarding the price you charge your customers for shipping, you can either:

    1. Offer free shipping — You can take two approaches to this and offer free shipping either conditionally or unconditionally. If you chose the former, you can structure your free shipping offer in several different ways: (i) set a minimum order amount, (ii) offer free shipping as a promotion, (iii) offer free shipping only on select items, and (iv) let your customers choose between fast or free economy shipping. If you choose the latter, however, you’ll soon find out that free shipping isn’t really free and that you’ll have to find a way to discreetly pass the cost of shipping to the customer. If you want to learn how to offer free shipping in detail, read our In-depth guide on how to offer free shipping.
    2. Charge real-time carrier rates — Even though customers almost always prefer free shipping, there are some real benefits from displaying real-time carrier rates at the checkpoint. For one, customers get to know the full cost of shipping upfront, with no unexpected fees or additional costs. For two, this method allows you to charge the customers the exact amount it costs you to ship them their order. Some ecommerce platforms allow you to pull all of the data directly from the carriers and calculate the shipping price automatically.
    3. Charge a flat rate — This method really works best if your product line consists mainly of products with similar sizes and weights. If you’re selling a wide variety of products, charging a flat rate isn’t really an option for you since it’s really easy to undercharge or, even worse, overcharge your customers for shipping.

👉 Regarding the method of delivery, you can:

    1. Offer overnight shipping or same-day / two-day delivery – Thanks to Amazon Prime, during the past few years same-day and two-day delivery have become the industry norm. So much so that younger customers (aged between 18 and 26) actually expect to receive their package within two days and most of the time they’re willing to escalate the issue to customer support if they don’t. Furthermore, 61% of shoppers say they’re okay with paying more for these shipping speeds. Offering expedited shipping is great for building client loyalty, reducing shopping cart abandonment and meeting customer expectations. If you’re not using a third-party fulfillment service, however, successfully executing overnight or same-day delivery requires adequate preparation, technology, resources, and flawlessly optimized operations.
    2. Offer international shipping – Expanding to new markets is a great scaling strategy but it does have its limits. For smaller ecommerce businesses international shipping can be quite challenging; different countries have different requirements and restrictions for incoming shipments as well as different tariffs, tax policies and regulations. To execute this successfully you’ll need a good international carrier. Bigger companies such as UPS, FedEx, and DHL are a great option since they have years of experience in international shipping and are able to offer door-to-door delivery, tracking, insurance and take care of customs and duties.
    3. Offer in-store pick up – There’s a significant gap between the number of customers that want in-store pick up and the number of ecommerce businesses that offer it. In-store pick up is one of the most overlooked shipping options on the market and regardless of your specific approach to shipping you should definitely try and capitalize on this.

Calculating Shipping Costs

ecommerce shipping costs

You’d be amazed how many businesses go in the red just because they don’t bother to think one step ahead and do the math on all of the potential expenses they could incur as a part of order fulfillment. The good news is, you don’t have to be one of them; calculating the total cost of product is simple, and it should look something like this:

Cost of product$15
Packaging$3
Shipping costs$10.30
Customs/Duties (if you cover them)$0.00
Payment processor fees$3
When you add all of this up the total cost of product comes down to $31.3. To calculate the price you should sell your product for, add your profit margin to the total cost of product. If we suppose you go with a relatively conservative margin of 30%, your product should sell for ~$41.

To get to this number, however, you must first calculate your ecommerce shipping costs. Shipping carriers determine their shipping rates based on the following factors: package size and weight, country of origin, the destination country, costs for customs & duties, any additional costs for insurance and tracking plus any volume or business account discounts you might have with the said carrier.

Calculating the shipping costs for your products is fairly straightforward and almost all of the largest and most popular shipping couriers provide shipping cost calculators. Use the ones we’ve listed below to compare prices and weigh your options.

Shipping Insurance and Tracking

Nothing infuriates customers more than having to wait for a package to arrive without having any idea where it is and how much longer will it take it to appear. Moreover, just imagine yourself having nothing to reply to that enraged customer enquiring about his lost package with full-on caps lock emails and you’ll immediately concede that saving a few bucks on tracking just isn’t worth it.

Tracking and insurance offer great value for money; for a few additional bucks, you can give your customers a great deal of security and peace of mind. If you’re selling high-ticket items, including both tracking and insurance to your shipment should be your default modus operandi.

💡Some shipping couriers offer complimentary insurance coverage up to $100 or in some cases even up to $200 dollars.

Customs & Duties

If you intend to sell your products across international borders, you’ll need to include all the relevant customs and duties documentation with your package. The exact forms you’ll have to fill may slightly vary depending on your location but, in general, they’re always required and they serve to tell the customs officers at the country of import what’s in the package, what’s the reason for export and what’s the total commercial value of the package.

To find out exactly which forms you’ll need to attach to your package just contact your country’s postal service and they’ll help you out with everything. Furthermore, make sure you inform your customers that you aren’t able to control any of the additional fees for taxes, tariffs and customs they may incur (make this very clear in your shipping policy page) and that this is determined by each country individually.

💡If you’re from the US, UK, Canada or Australia, you can find more info regarding customs and duties information in the links below:

Ecommerce Packaging

ecommerce packaging

First impressions matter and you don’t get a second chance to make one. There’s hardly a living soul in this world that hasn’t heard this rather cheesy proverb and still, only a few genuinely realize just how true and powerful it is.

When you encounter something new, your brain forms an impression of it in just a fraction of a second. Within a minute, your brain’s primal, emotional centers will process beyond ten thousand visual, tactile and oral sensations which will immediately produce “an intuitive” assessment – a gut feeling – as to whether the thing you’re seeing is a potential threat or a valuable asset. Your brain will basically decide whether it likes or hates what you’re seeing within seconds of seeing it, and you don’t have any say in it.

Now, let’s apply this to ecommerce shipping. What’s the first thing that your customer sees when they get the package? That’s right — it’s not the product itself, it’s the packaging. The packaging is the first impression you make, and first impressions can make or break your business.

Like it or not, the unboxing experience is the new shelf presence and, from the customer’s satisfaction and shopping experience, the design and quality of the packaging are just as important as the product itself.

Ecommerce Shipping: Custom Packaging Options

Before you can decide on the exact design of your packaging, you need to take into account all of the variables that may affect you: what’s your product, what’s its shape, size and weight of it, and is it fragile or durable?

💡Depending on your situation, you can choose between three types of shipping containers for your product: mailing envelopes, shipping boxes or a combination of both.

Mailing envelopes are best used for shipping smaller and sturdier items. Envelopes generally occupy much less space, they reduce packing labor and they’re far less expensive than counterpart shipping containers. You can choose between three types of mailing envelopes: (i) plastic envelopes – least eco-friendly of the bunch but serve their purpose nonetheless, (ii) paper envelopes – very affordable and have a much lower minimum order quantity (MOQ) when you use custom printing compared to plastic ones and (iii) paperboard envelopes – these are designed to stay flat during shipment and they print up beautifully.

Mailing boxes, on the other hand, come in all shapes and sizes so they’re suitable for almost any type of product you can sell. The most commonly used mailing box type is the ordinary brown corrugated box. The upside is that they’re lightweight, durable, and come in all shapes and sizes while the downside is that they come only in two colors (brown or white) and if you want to add colors and graphics to them it’s going to cost you a fortune. The minimum order quantity on custom printed mailing boxes starts at 1,000 units and the lead time ranges between two to three weeks.

That being said, depending on the type of product you sell, custom printing your mailing boxes – even though it’s pricey – may still be great for business since it allows you to showcase your brand's values and elevates your brand’s image to another level. Moreover, 40% of shoppers say they’d be somewhat more or much more likely to buy from the same e-com shop again if the product came in a premium, thoughtfully-designed package.

The print, however, is not the only grantor to a great unboxing experience; branded tapes, handwritten thank-you cards, custom cushioning, sticker seals — every little piece of attention matters. If your product allows it, you can go wild and use fine perfumes to add a whole ‘nother dimension to the unboxing experience.

Ecommerce Shipping: Labeling

Once you decide on your ecommerce shipping strategy, pick a courier, calculate all the shipping costs and nail down your presentation, it’s time to label the packages and send them on their way!

You can start off by applying the labels and writing the ship-to and return addresses by hand. It may be tedious and time-consuming but, in all honesty, you’ll feel all warm and fuzzy each and every time you slap that label on the package and set it aside for shipping.

Once your business picks up, however, this won’t be sustainable so you’ll have to automate this process and start printing your postage. There are a number of shipping label printing services you can use to help you streamline this process and scale your business successfully:

  • Stamps.com: 17.99/month + postage
  • Shippo: $0.05 per label + postage or $10/month (up to 60 labels)
  • Shipstation: $9-$159 + postage
  • ShippingEasy: Free-$99/month + postage (Free for up to 50 packages per month)

You’re set to succeed!

With your goals clearly defined and with the right strategy in place, the time is ripe to take action and implement everything you learned in this guide. Shipping is one of the more challenging aspects of any ecommerce business, but once you nail it down and optimize your operations accordingly — your business will go through the roof!

Stefan Stankovic

Stefan is a part-time crypto writer and full-time podcast addict. He holds a master's degree in Commercial Law with a graduate thesis in cryptocurrency regulation. He spends his free time lawyering around the block and lifting heavy objects off the ground. With his mind.