Successfully getting your product to your customers is perhaps the most vital element of a successful e-commerce business. It might seem rather obvious or simple, but there are a lot of moving parts when it comes to delivering a product and it can be intimidating if you’re new to the e-commerce world.
If done wrong, you end up losing money on packaging and shipping, so it’s important to learn how to be cost and time efficient and aware of which systems will work best for your business.
Whether you’re going it alone or using an order fulfillment service, it’s important to have an understanding of product preparation and shipping operation needs.
Elements of an e-commerce order process
There are five basic elements of the start-to-satisfied fulfillment process. First, let’s talk about what the order fulfillment process looks like. Note that this process might look different depending on the type of order fulfillment solution system you choose to use.
1. Receiving products
You may choose to have your products shipped directly to you in-house or choose to outsource (dropship), which is using a third party to handle storage and shipping. We will go further into those details later on in the article, however, some questions think about:
- Who will produce the product?
- How and where will they ship them to you?
- What if the products are damaged?
- Are you able to preview and test a product before moving forward with production?
This space, whether in your garage or in a warehouse, can set the tone for the supply chain of your business. Ensure you have the space to protect and organize your product.
2. Inventory storage and management
An inventory management system is crucial in keeping your products and orders organized. For example, without an inventory system, a customer may order a product that is out of stock or discontinued, which then leads to dissatisfaction, which hurts your business.
What your inventory storage system looks like is dependent on the scale of your operation. If you own a small business that deals with a small number of products, you may be able to store them in a spare room and track via Google sheets.
Larger-scale businesses or those with physically large products might need an alternative location like a warehouse. This will require communication with the warehouse regarding your orders.
- Will you be able to access your products 24/7?
- Can you physically pack your product and carry it to the post office?
- Are they able to store and ship for you?
- Is there software that manages this communication process between your website orders and the warehouse?
Tracking your inventory levels secures that your customers will get what they order. Good management software also cuts down on time, making preparing orders a more efficient process.
3. Order processing
Crucial for getting your customer the correct order at an appropriate speed, order processing involves:
- Retrieving the order
- Packing it for shipping
- Printing a shipping label
- Getting it to your shipping provider
As mentioned above, having an organized space and an efficient warehouse management strategy will help this process run smoothly.
Fast, reliable, and affordable shipping is an increasingly important factor for consumers. Free shipping incentives are becoming standard. How will you handle this? Can you afford free shipping on first orders? There are many different factors for you to consider when deciding on a shipping provider and how to meet shipping costs.
- Will you include the shipping into the price of the product or will it be an additional fee?
- Will you cover shipping for returns?
- Are the additional costs of two-day or expedited shipping worth it?
- How does weight play a role in pricing?
5. Returns processing
It’s important to know how to take care of returns and process returned products. This element of order fulfillment will also depend greatly on the type of fulfillment system you choose.
- How much will returns packaging cost?
- What if the return is damaged? Will you be able to salvage the product?
- How to ensure product quality to avoid returns?
Types of order fulfillment
There are four types of order fulfillment and each one depends on where and how your product is stored and processed.
Your product will be stored, processed, and shipped in your own facility. This requires you to have an inventory management organization system and your own staff to package orders.
You can use an order fulfillment center like ShipBob or, for larger-scale operations, a third-party logistics company like XPO Logistics to house your product and organize packing and shipping. You collaborate with these companies to communicate orders made on your eCommerce website, and the order leaves from their facility.
Drop shipping is when a third party manufacturer produces, stores, and ships the product. The product is never in the business owner’s hands, and the business is only billed for the products they sell. Dropshippers are usually overseas.
A hybrid fulfillment system is a combination of any of these options. This may allow for increased flexibility in your digital business.
Doing it by yourself can be time intensive and costly, so there are multiple points of support for your fulfillment solution. Choosing one type over another may be determined by your product, cost, or maybe your order fulfillment is just too time-consuming.
Outsourcing your order fulfillment can come at a cost, but it may save you time and guarantee your customer orders are executed properly. Now, let’s talk about what your needs might be for each type of fulfillment system so you can decide what is best for your eCommerce company.
Factors to consider in a shipping system
Space to package orders and packing materials
Make sure you have designated space to prepare your orders. You’ll also need materials like bubble wrap to make sure your product remains undamaged through the shipping process.
Although many of the choices you make concerning packaging materials will likely be determined by cost, keep in mind the customer experience when they receive their package. Is the packaging attractive, and does it represent your brand? Are your packing materials eco-friendly and recyclable? These choices can impact what you choose to purchase to pack your products.
Establish what shipping carrier or fulfillment company you’ll use for sending your products. This choice is affected by a large number of factors that we’ll now go into more depth about.
It’s very common for a new eCommerce business to begin with an in-house system, and upgrade to a third-party fulfillment provider as their business scales up. Because of this, we’ll cover some primary shipping knowledge, so you can have confidence in getting the end customer their product.
You’ll be responsible for getting the package ready, but your shipping carrier will do the heavy lifting. When choosing a carrier, take the time to compare services and prices to find the best fit for your customers’ and product’s needs.
- One tool to use when deciding on a carrier is shipping rate comparison software. Sites like Ordoro and ShipStation make it easy to determine the cheapest option to ship orders. Many of these sites are equipped to integrate with your eCommerce platform, making it easy to organize your orders and shipping information. Not only do these tools save you costs on shipping, but many of them are free or charge small fees for their services.
- It’s also important to consider the ease of shipping label printing, and what different carriers require for the printing of labels. Most carriers have compatible software that makes it easy to print labels from your printer but ensure this is part of your research.
Weights and sizes
Often we think that weight is the biggest determiner of cost, but size plays a hefty role as well. It is important to use the smallest box possible for the order to get your product to its destination safely. A term to be familiar with that will help with weight and size costs is dimensional weight. The dim weight of a package means the rate is applied to the dimension of the box. This means if you are sending a large, but lightweight package, you end up paying for the size, rather than the weight. To see what costs come with size and weight, we will look at how two business owners decided on their shipping carriers and package types.
Tim has a paperweight company that makes artisan, hand-blown glass paperweights. Tim has selected FedEx as his shipping carrier, specifically for their FedEx One Rate services. This service charges for the size of the box alone, not the weight. Even though Tim’s paperweights are pretty heavy, they are compact and small, so he’ll end up paying less for their shipping than if the weight was factored in.
Bill sells blankets that he makes, specifically goose-feather down comforters. His packages usually end up being relatively large, but lightweight. After doing his research, Bill found that USPS has lower rates for packages under 3 pounds, where FedEx and UPS have higher rates for lightweight packages. Because of this, he’s chosen to use USPS as his carrier.
Commercial and residential addresses
Shipping carriers have different rates depending on the type of address the package is being sent to. Residential businesses typically have added surcharges or overall higher rates than commercial addresses do. If you are shipping primarily to residential addresses, USPS might be a fitting option for their lower residential rates, since that is their target market and the majority of their service. Or, you may sell your product to another business for their product. This is called business to business shipping, or b2b. Sending product to other commercial businesses can save money on shipping.
Delivery Zones are important to note, as they change the shipping price of the package. Essentially the more zones your package has to travel, or the farther it has to go, the more expensive the rate and the longer it will take to ship to its destination. Consider your market, and where the majority of your goods are shipped. Most carriers have resources to help factor delivery zones, like UPS and FedEx zone maps. Here is an example of how being aware of delivery zones can affect what services you offer:
Sharon has a small eCommerce business that makes and sells magnets for tourist cities in Florida, like Miami and Orlando. She herself operates out of Florida, so she knows she is close to her market. Because of this, she knows she can offer faster shipping to her customers, and that two-day shipping or ‘Priority Mail’ shipping won’t be as expensive, as it doesn’t have to travel very far.
Shipping methods are determined by the time it takes for the package to reach the end customer. Likely you’re familiar with ‘Overnight’ or ‘2-Day Air’ shipping, ground delivery or ‘Priority Mail’. These all refer to the different methods each shipping carrier has to classify packages and package speeds. If speedy shipping is a large concern for your customer, then you need to consider what method of shipping is best for you. Give yourself time to review the different shipping methods your shipping carrier offers, and what methods will be best suited to the budget of your business, as well as the needs of the customer.
Another consideration to make is the number of packages you’ll be shipping. Your shipping volume is the number of packages you ship out. If you have a consistent and large order volume going out weekly or monthly, you may be entitled to discounts from your shipping carrier. This is often a challenge for smaller businesses, as larger corporations can offer cheaper prices on their products, as they have decreased rates with their large volume. One way to increase your order volume is to have any inbound stock be shipped on your shipping account, which might increase your volume to a discountable rate. It is also very good to make a habit of checking rates across carriers, as shipping rates change regularly.
International and large orders
In time, your business may come to see many unusual requests or orders. It is important to be prepared to meet your customer’s needs, whatever they may be.
- Large orders may be uncommon, but you should definitely be prepared to shipping however much of your product your customer needs. When dealing with extremely large orders, there may be other methods of shipping that are more cost-efficient, like LTL (less-than-truckload) freight. You can use a freight broker like FreightPros to arrange the shipping of large orders for a much cheaper price.
- Online stores have an incredibly wide audience, so your customer base may become a bit wider than a single country. International shipping may be requested, even if you don’t offer it. To give your customers what they want, and to potentially begin expanding your market, look into the what carriers are compatible with your international shipping needs. As a national postal service, USPS offers International Priority, which is very compatible with the postal systems of many other countries.
Shipping system and eCommerce platform integration
Another large thing to consider is how your shipping system will work within your eCommerce website. Having efficient fulfillment software to connect your site to your eCommerce fulfillment company or your shipping provider will lead to a streamlined system, and make your job significantly easier. Many eCommerce platforms have the ability to print labels linked to specific orders, all from within your site. Most shipping carriers have fulfillment software, but make sure that as you’re choosing, your carrier has what you need.
Keep your customer experience in mind
Remember to maintain the customer’s experience when making all of these choices. What will be best for the customer, and what is likely to build your customer base and satisfy their needs?
- Consider their experience in receiving the package may affect the choices you make. What do the packing materials look and feel like? Is the packaging attractive? It is a popular trend to post pictures on social media of the packages customers receive or to film unboxing videos for other potential customers. Your packaging is a good opportunity for you to establish your brand and advertise your product. Include a free sticker or a coupon for their next order to build your customer base.
- Another option to consider is how you’ll allow customers to track their packages. One method of this is to provide the tracking number in an order confirmation, and the customer can track the package through the shipping carrier’s website. The other method is to integrate real-time package tracking into your own website. This can improve the customer experience and ease of tracking, and increase traffic on your site, hopefully influencing them to add more products to their shopping cart. You can integrate tracking through software like AfterShip to have created a complete customer experience.
There are a lot of choices to make, but hopefully, this guide will help you through the logistics and give you the tools you need to make time and cost-effective choices for your business. The bottom line is that order fulfillment is crucial, and is necessary for a consistent sales channel. If done well, you can cut down on a lot of costs, but if done poorly, can break the budget. There are many choices to make, but each one can lead to a satisfied customer with a great product. Whether you choose a self-fulfillment method or utilize an order fulfillment company, there are many resources to ensure your success.