While setting up an ecommerce store is relatively easy, the crunch comes when it is time to ship the product to the customer. The stakes of shipping rise further in today’s age of instance gratification, where customers buy the product at the click of a mouse or a few hand taps, and then expect the product to reach them the same or next day. Shipping can make or break an ecommerce firm.
Key Challenges
eCommerce shipping is not as simple at putting the product in a cover, and calling up the courier guy to take it away. The process is complex, requiring resolution of many considerations, brought forth by customer expectations. Customer expectations manifest in many ways:
- Instant Gratification: In the past, mail order companies could get away with vague “four to six weeks” promises for shipping. Today’s hyper-competitive ecommerce marketplace, filled with customers who seek instant gratification, places a premium on speed and promptness. Offerings from industry majors, such as Amazon’s same-day delivery service, and Google Express has established benchmarks which ecommerce customers now consider as norm, and smaller etailers have no option but to keep pace. Many customers would be dissatisfied if the delivery exceeds two or three days, and in any case, they expect an accurate shipping estimate. A survey by Micros Online Delivery Report estimates about 31% of customers prefer a fixed date for delivery, and 24% of them prefer next day delivery. 8% of customers want same day delivery.
- Flexibility: Today’s customers expect flexible shipping options, with the option to choose their delivery channel, delivery time, and other parameters. As high as one in every two online customer abandon purchase owing to inadequate delivery options.
- Transparency: Shipment tracking, which makes explicit shipment status, is more-or-less the norm now. Many customers actively track their shipments right from the time they complete the purchase. Of late, customers expect increased transparency into the entire process, and a proactive approach from the etailer in notifying them of the key movements related to their package, through SMS, email, or some other mode. Etailers have no option but to integrate their forward supply chain and make it transparent over customer facing apps.
- Efficiency: The hyper competitive business environment leaves no room for errors. Product shipping is a core business activity where the etailer itself has little control, and the actual tasks are carried out by third party stakeholders. Yet the implications of delayed delivery, delivery to wrong address, damages in transit, and other risks fall solely on the etailer. The etailer needs to be always on tenterhooks, and monitor each shipment to ensure accuracy.
- Returns: Customers also expect hassle free return policies, which involves reverse shipment. Creating reliable access points across several geographically dispersed points, and ensuring that each return shipment is processed accurately is complex and quite “stressful” for the enterprise.
- Legal and Regulatory Challenges: The Internet has demolished geographical barriers, and technically nothing prevents etailers from selling across the globe. Etailers, however, still face considerable legal and shipping hurdles before they can sell over a large geographical area, more so when their shipment crosses state or international borders.
Many people actually buy based on shipping options, cost, and other shipping considerations, rather than product price. Deploying the necessary infrastructure, and setting systems in place to resolve the key challenges requires considerable effort and investment, but the investment would be worth its while.
Tweetable Quote: “Launching ecommerce venture is the easy part. The crunch comes when shipping the product to the customer.”
Selecting Partners
The most obvious option for etailers to fulfil the shipment obligation is tie-up with logistics providers.
The various options available for etailers include:
- Logistics providers, such as FedEx, UPS, Aramex, DHL, and others, capable of handling shipments across the globe, and offer easy tracking option as well.
- U.S. Postal Service (USPS), UK Post, or other national postal services, as appropriate. The postal service is especially suited to ship bulky products.
- Drop shippers who offer reduced costs compared to traditional logistics and courier companies by combining inventory volume from a group of small merchants and undertaking bulk processing.
Pricing
Most etailers charge shipping costs from their customers.
Customers are for the most part ready to pay, but expect accurate and fair pricing. They also expect etailers to be explicit and reveal the shipping charges upfront. Charging a low cost for a product, and then including a high shipping charge is often seen with disapproval as “bait and switch” tactic, even when high shipping costs may be legitimate.
Flat Rate:
Getting accurate pricing for specific locations is demanding for most etailers. The possibility of surcharges for weekend or rural delivery makes it even more complex. Many etailers simply give up and offer flat, uniform, shipping rates.
Free Shipping:
Online customers would be delighted with free shipping, if they get it. In fact, 75% of online shoppers prefer shopping with etailers who offer free shipping. Etailers may expect a sizable following and sales if they do offer free shipping, but it may not be feasible to sustain the offer beyond a point, owing to the considerable resources and expenditure it attracts, taking away all or a sizable portion of the margins.
Returns
Returns are an inescapable process of ecommerce business, more so since customers do not have the opportunity to touch and feel the product. Offering free returns shipping is a double-edged sword. On the one hand, it may encourage ‘frivolous’ returns, while on the other, it gives customers greater confidence to go ahead and buy, with the knowledge that they can always return with minimal hassles if the product fails to meet expectations. Considering that free return shipping communicates the etailer standing behind the product, in most cases, it pays to offer this facility and trust the product.
Packaging
Having set up the shipping infrastructure, and resolved the pricing policy, the core task is to actually ship the product when the customer places an order.
The variables that influence packing include:
- The volume of sales, especially the average number of daily, weekly, seasonal and annual shipments. Whether to opt for custom made boxes, the type of packing infrastructure to deploy, all depends on volumes.
- Handling costs, influenced by packing materials such as boxes, labels, tape, and more. The obvious objective is to offer the best quality at the lowest price, and e-tailers would have to apply their mind to make trade offers and settle on an optimal quality-cost point.
- Shipping speed: The drop-off/pick time for the logistics partner, and the number of such pick-ups or drops per day, depends on the time-sensitivity of the order. Aggregating packages and scheduling a single drop may save cost, but may delay delivery.
- Packaging speed: The time taken to pack the product
The following conventions help:
- Put thought into the package size. The ideal package uses the minimum possible space. Pack for safety and density, and put items in an appropriate box for the product. Moreover, FedEx and UPS now have a dimensional pricing model, with pricing costs determined by both the package weight and size, for ground shipments.
- When shipping multiple items on a shrink-wrapped pallet, make sure to label each individual box in case the load is broken up before it reaches its final destination.
- Do not skimp on packaging material or protective layers to cut costs. Damaged and broken products can be more costly than using the proper shipping packaging. Moreover, the packaging and shipping offers the first impression to the customer.
- Depending on stock availability, it may make sense to pre-pack commonly sold or fast moving items, before heavy seasonal rush, to lessen and also even the load.
Best Practices
Etailers would do well to follow these time-tested best practices related to shipping:
- Make sure the shipping policy is clear-cut and easy to understand, transparent, and easily available to access in the website.
- The best policy is equitable, and not loaded against the shopper or any particular segment of customers. A good and equitable shipping policy can itself attract customers, and likewise ecommerce business. A bad policy can likewise do harm and drive customers away.
- Do not promise more than what can be delivered. Dishonored promises do more harm than good, and are sure to have a lingering bad impression on the etailer. The key is to manage customer expectations well. Establish firm, achievable shipping deadlines, and stick to them.
- Big data throws up tremendous insights, and big data related to shipping can be used to help improve the process. Use transparency offered by tracking to glean knowledge of what happens all along the supply chain. Identify shortcomings or weak points, and work towards improving it. For instance, big data could unearth delays at one particular point, making it expedient to work around an alternative route or change the partner causing the delay.
Finally, as elsewhere, nothing in the ecommerce world is set in stone. It makes sense to evaluate and review the shipping strategy periodically, in any case no later than once in six months, to ensure peak efficiency, and deliver the best possible value to customers at the lowest possible cost to the business.
