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Ecommerce Shipping Guide: Methods, Types, Pricing, and Expert Tips

The ultimate resource for eCommerce shipping: Detailed insights on ecommerce shipping processes, methods, types, and strategic pricing for successful online sales.

Team Hopstack
April 18, 2024

In this blog

When it comes to online shopping, ecommerce shipping plays a significant role in determining customer satisfaction and business success. In this guide, we’ll explore the essentials of ecommerce shipping, and how it holds the key to meeting and exceeding customer expectations for fast, affordable, and hassle-free delivery. 

From adopting the right ecommerce shipping methods and strategies to formulating a sustainable shipping strategy, we will cover everything you need to know to thrive in the competitive online marketplace. 

Introduction to Ecommerce Shipping

There’s a reason ecommerce shipping is one of the most crucial stages in the fulfillment process — it involves transporting the physical products and placing them safely in the hands of your customers. A streamlined ecommerce shipping strategy can considerably improve the customer purchasing experience without having to incur additional order fulfillment costs

Industry giants like Amazon and Walmart have already raised the bar for convenience and affordability in ecommerce, and the competition in shipping services is more intense than ever. ecommerce shipping methods encompass not just the delivery but also order processing, warehousing activities, label printing, and handling returns. While it might seem straightforward, the complexity of ecommerce shipping varies based on product type, delivery regions, and shipping options. 

With the right partnership, ecommerce shipping can be streamlined, cost-effective, and swift, playing a pivotal role in the overall online shopping experience.

Ecommerce Shipping Methods and Strategies

The shipping strategy and choice of method should align with the business's overall goals, target audience, and product nature. Whether it's increasing conversions, expanding market reach, or improving operational efficiency, the right ecommerce shipping method can be a game-changer in today’s competitive landscape.

Hyperlocal Shipping

Hyperlocal shipping is an approach where a business picks up physical goods or products from a local retailer and delivers them directly to the end consumer. Since it involves delivering products within a small, specific area, often enabling same-day or next-day delivery, hyperlocal shipping is ideal for businesses with a strong local presence. With hyperlocal shipping, businesses focus on fixed delivery zones and geographical areas to quickly and sustainably meet the immediate needs of the customer, thereby nurturing a strong local customer base.

Same-Day Delivery

Thanks to Amazon, most of the ecommerce world has become acclimatized to “same-day delivery.” It’s an ecommerce shipping model where a business delivers the product or item to the customer within 24 hours of them ordering it.

Offering same-day delivery is a powerful way to stand out in the ecommerce market. It requires a highly efficient logistics operation and is often limited to local or metropolitan areas. This ecommerce shipping method can significantly boost customer satisfaction and conversion rates, as many customers are willing to pay more for the convenience of receiving their products on the same day they order them. Same-day delivery also potentially lowers business inventory costs, allowing enterprises to capitalize on more business opportunities and increase margins.

Two-Day Delivery

Two-day delivery has become a standard expectation among many online shoppers. One or two-day delivery means the customer will receive their order within two days of placing the order, either online or offline. McKinsey & Company estimates more than 90 percent of consumers see 2- to 3-day delivery as the baseline, and 30 percent of customers expect same-day delivery.

Most online retailers have a cut-off order time in place to qualify for two-day delivery. This strategy is crucial for businesses looking to compete at a national or international level. While challenging to implement, it can greatly enhance customer satisfaction and increase the likelihood of repeat business. Speedy delivery also plays a crucial role in minimizing lost sales and cart abandonment incidents.

Each of these ecommerce shipping methods and strategies has its own set of benefits and challenges. Hyperlocal shipping is cost-effective and fast but limited in reach. Same-day delivery offers unparalleled speed and customer satisfaction but requires significant logistical resources. One-day/two-day delivery strikes a balance between speed and reach, appealing to a broad customer base but demanding efficient logistics and potentially higher costs.

Ecommerce Shipping Process

From the moment an order is placed to the final delivery and potential return, each step of the fulfillment process needs to be meticulously managed to maintain efficiency, accuracy, and customer satisfaction. This cohesive workflow is what makes the ecommerce shipping process a critical aspect of the online shopping experience.

Order Processing and Fulfillment: This is the initial and foundational step in the ecommerce shipping process. Once an order is placed, it must be accurately processed and prepared for shipment. This involves confirming the order details, checking inventory, and preparing the item for shipping. Efficient order processing is vital for timely deliveries and minimizing errors, which directly impacts customer satisfaction.

Shipping Label Generation: After the order is processed, the next step is generating a shipping label. Warehouse labels contain all the necessary information for shipping, including the destination address, return address, and tracking number. The accuracy of the information on the shipping label is critical as it ensures the package is sent to the correct location and can be tracked throughout its journey.

Pickup and Dispatch: Once the package is ready with its shipping label, it's picked up from the warehouse or fulfillment center. The dispatch process involves organizing and loading packages onto delivery vehicles based on their destination routes. This stage requires efficient coordination to ensure that packages are dispatched on time and routed correctly, which is essential for maintaining promised delivery times.

Last Mile Delivery: This is the final step in the delivery process, where the package reaches the customer's doorstep. Last-mile delivery is crucial as it directly impacts customer experience. Delays or issues at this stage are often the most noticeable to customers. Therefore, efficient last-mile delivery is essential for customer satisfaction and can significantly influence the perception of the ecommerce brand.

Returns: Reverse logistics is an often overlooked but equally important part of the ecommerce shipping process. A smooth and hassle-free return process is crucial for customer retention and trust. This involves managing the reverse logistics to receive the returned item, processing the return in the system, and if necessary, initiating a refund or exchange. A straightforward and customer-friendly returns policy can enhance customer loyalty and be a key differentiator in the competitive ecommerce market.

Ecommerce Shipping Process

Consumer Expectations from Ecommerce Shipping

Businesses must maintain transparency with customers, especially in terms of delivery timelines and costs. Communication plays a key role in managing expectations - updating customers about the status of their delivery and being upfront about shipping costs and return policies can significantly enhance the overall customer experience. Businesses need to align their shipping processes with these expectations to ensure a positive purchasing experience.

Fast Deliveries

Today's consumers often expect rapid delivery options such as one-day or two-day shipping. A survey by Dropoff revealed that 99 percent of U.S. consumers say fast delivery is important to them when making online purchases. To meet these expectations, businesses should streamline their fulfillment process, leverage efficient logistics partners, and optimize inventory management to reduce the time from order placement to dispatch. Additionally, offering a range of delivery options at checkout can cater to different customer preferences and demographics.

Free Shipping

Free shipping plays a significant role in influencing purchasing decisions. Jungle Scout’s Consumer Trends Report estimates 80 percent of consumers expect free shipping when ordering a certain dollar amount of products and 66 percent of consumers expect free shipping for all online orders.

This expectation adds a complex layer to a shipper’s cost structure, making it all the more important to establish the best shipping rates and efficient operational processes. Businesses often incorporate the cost of 'free' shipping into their product pricing or set minimum order thresholds to balance the financial impact while meeting customer expectations.

Seamless Returns

Efficient and customer-friendly return processes are vital in ecommerce — if done correctly, seamless returns can considerably improve customer lifetime with a retailer and increase retention revenue. According to a survey by Doddle, 84 percent of respondents revealed a positive returns experience encourages them to shop with a retailer again. 

The returns process involves reverse logistics, where the ease of scheduling a return pickup and the agility in processing refunds or exchanges are crucial. Businesses should establish a clear, easy-to-understand returns policy and invest in a streamlined returns management system to enhance customer confidence and loyalty.

Ecommerce Shipping Costs and Rates

ecommerce shipping costs are a complex but crucial aspect of running an online business. Understanding and effectively managing these costs is essential to maintain profitability while meeting consumer expectations. Here's a breakdown of the various components that contribute to ecommerce shipping costs:

  • Ecommerce Shipping Carrier Costs: This is the primary expense and refers to the amount charged by the ecommerce shipping carrier to transport the package from its origin to the destination. Major carriers like UPS, FedEx, and DHL have different pricing structures, which usually depend on the package's weight, dimensions, destination, and speed of delivery.
  • Ecommerce Packaging and Labeling Costs: These include expenses related to materials like boxes, poly mailers, tapes, and ecommerce shipping labels needed to securely package the products. The goal is to ensure items are delivered in pristine condition, which can sometimes require specialized ecommerce packaging materials, adding to the cost.
  • Insurance: Shipping insurance provides protection against lost or damaged items during transit. While this adds to the overall cost, it's a safeguard for both the business and the customer, especially for high-value items.
  • Labor Costs: This encompasses the labor involved in the entire shipping process, including picking, packing, and shipping the orders. Integrating an ecommerce warehouse management system (WMS) can optimize labor management and significantly influence productivity and overall shipping costs.

Calculating ecommerce shipping costs involves understanding various factors that influence the final price. Here’s a quick guide to ecommerce shipping cost calculation:

To calculate ecommerce shipping rates, consider these factors along with the pricing structure of your chosen best shipping carrier. Businesses often use different strategies like flat rate shipping, real-time carrier rates, or free shipping (with costs absorbed in product pricing or through minimum order thresholds) to manage these costs effectively.

For instance, flat rate shipping is where a fixed rate is charged across all orders or for specific categories, based on an average cost. Real-time ecommerce shipping carrier rates provide exact shipping costs at checkout, pulled directly from carriers based on the customer’s location and preferences.

UPS offers five flat ecommerce packaging rates and four shipping speeds for flat rate shipping (Source: UPS) 

Cheapest Ways To Ship

If you’re a small to medium-sized business, finding cost-effective shipping methods is crucial for maintaining profitability in e-commerce. Here are some strategies:

  • Compare Carrier Rates: Utilize multi-carrier rate shopping tools to compare rates and services. Each carrier has strengths in specific areas, and comparing them can yield the most economical options.
  • Use Packaging Provided by Carriers: Many carriers offer free packaging, which can be a cost-effective choice, especially for standard-sized items.
  • Leverage Flat Rate Shipping: For items that are heavy but small, flat rate shipping can be economical. It simplifies cost calculations and can often be cheaper than paying for postage based on weight and distance.
  • Prepaid Shipping: Buying shipping labels in bulk can lead to significant discounts.
  • Hybrid Services: Services like FedEx SmartPost or UPS SurePost use a combination of courier services and USPS for the final delivery, which can reduce costs.
  • Negotiate Rates: If you have a high shipping volume, negotiate rates with carriers to lower costs.
  • Consider Regional Carriers: Regional carriers may offer competitive rates for local deliveries.
  • Third-Party Insurance: Opting for third-party insurance can be cheaper than carrier insurance, especially for high-value items.

Each business must find a balance between competitive pricing for customers and maintaining a sustainable cost structure for themselves. Using tools like shipping calculators provided by ecommerce shipping carriers and considering pre-negotiated rates available on platforms like Shopify can help in making informed decisions about shipping strategies.

Shipping in Ecommerce Returns

Effective ecommerce returns management through efficient return pickups and speedy reverse logistics significantly improves customer loyalty and retention. Having effective returns processes and policies in place along with best ecommerce tools can improve sales without increasing the total number of returns.

  • Creating Shipping Return Pickups with the Carrier: This process involves coordinating with the ecommerce shipping carrier to arrange for the return of the product. It's crucial to have a streamlined system in place for creating return pickups, which may include generating return labels, scheduling pickup times, and providing clear instructions to the customer. Efficient handling at this stage can enhance the customer experience, as it provides visibility to the consumer and increases trust in the return process.
  • Speed of Reverse Logistics: The promptness of reverse logistics is vital in the returns process. Fast and efficient reverse logistics ensure that returned products are quickly restocked, reducing the time they are out of the sales cycle. This efficiency is not just beneficial for inventory management but also positively impacts customer satisfaction, as quicker processing often leads to faster refunds or exchanges. According to Locad, approximately 62% of customers expect a refund or exchange within 30 days.
  • Return Costs in the Overall Fulfillment Cost Structure: Returns can be a significant cost factor in ecommerce. According to a study by Statista, in 2022, the cost of retail returns in the United States reached a staggering 817 billion U.S. dollars. This cost includes transportation, processing, and restocking of returned items. Efficiently managing returns is crucial as high return costs can erode profit margins. Businesses need to strike a balance between offering a flexible returns policy to customers and controlling these associated costs.

Multi-carrier Shipping in Ecommerce

Adopting a multi-carrier strategy is becoming increasingly crucial for businesses looking to optimize their shipping operations and enhance their overall service offering. Multi-carrier shipping is a strategic approach in ecommerce that involves leveraging multiple shipping carriers to optimize costs, delivery times, and geographical coverage.

Finding the Best Rates and Delivery Times: Using multiple ecommerce shipping carriers allows businesses to compare and choose the most cost-effective and efficient shipping options for different scenarios. For example, one carrier may offer better rates for heavy shipments, while another might be more competitive for international deliveries. This flexibility enables businesses to tailor their shipping strategy based on specific needs, such as delivery speed, package size, or destination.

Expanding Geographical Coverage: Different ecommerce shipping carriers have varying strengths in terms of geographical reach. By diversifying their carrier options, ecommerce businesses can extend their reach to a broader customer base, including international markets. This is particularly advantageous for businesses looking to grow their global footprint, as they can select carriers with strong regional networks in target markets.

Attaining Cost Efficiencies: Multi-carrier strategies can lead to significant cost savings. By not being tied to a single carrier's pricing structure, businesses can select the most cost-effective option for each shipment. This approach also opens the door to negotiating better rates based on volume across different ecommerce shipping carriers.

Mitigating Risks: Relying on a single ecommerce shipping carrier can be risky, as any disruptions in their service can severely impact the business's ability to fulfill orders. For instance, the UPS recently ratified a new labor agreement with the International Brotherhood of Teamsters union, averting a strike that could have shaken the U.S. economy. Using multiple carriers mitigates this risk by providing alternative options in case of disruptions, ensuring continuity in order fulfillment, and maintaining customer satisfaction.

Comprehensive Shipping Module for Effective Ecommerce Fulfillment

Hopstack offers a comprehensive solution for ecommerce fulfillment that goes beyond just shipping. As an integral part of the overall warehouse management and fulfillment ecosystem, Hopstack is designed to streamline and optimize every step of the ecommerce process.

  • Multi-Carrier Rate Shopping: Hopstack's integration with major carriers like UPS, DHL, and others allows for real-time rate shopping, ensuring that you always get the best shipping rates and delivery times without compromising on delivery quality.
  • Shipping and Dispatch Module: The shipping and dispatch module is at the core of Hopstack’s offering, allowing you to completely control your outbound dispatches. It streamlines the shipping process, improving productivity, and providing full visibility from pickup to delivery. With Hopstack, you can expect a 35% reduction in average shipping cost per order and a 70% improvement in outbound visibility.
  • Shipment Tracking: With Hopstack, tracking the complete delivery lifecycle has never been easier. From dispatch to delivery and even order returns, the platform enables you to identify chokepoints and areas of improvement, thereby boosting shipping productivity.
  • Shipping Analytics and Performance KPIs: Continuously track and evaluate the performance of your ecommerce shipping carriers. Hopstack allows you to accurately monitor key metrics like pickup performance, on-time delivery rate, transit time, shipping cost per order, and order tracking accuracy.
  • Automatic Generation and Printing of ecommerce Shipping Labels: This feature minimizes human intervention and reduces order packing time by 48%. Automatically source and print ecommerce shipping labels manifests, and other necessary documents to streamline the packing process.

With Hopstack, you can centrally manage your small-parcel and truck-load shipments, seamlessly integrating with a range of transport management software and EDI documents. The platform’s out-of-the-box integration capabilities make it a versatile and powerful tool for ecommerce businesses aiming to optimize their warehouse and order fulfillment processes.

Hopstack is not just a shipping software; it's a comprehensive omnichannel fulfillment solution designed to lower fulfillment costs, increase efficiency, and improve the overall customer experience. To explore how Hopstack can transform your ecommerce fulfillment strategies and solutions, schedule a demo and experience the difference firsthand.Ecommerce Shipping Guide: Methods, Types, Pricing, and Expert Tips

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