e-Commerce Delivery: An Insider’s Guide for Online Businesses
Table of contents
You can’t get to your destination without first a journey, just as your products can’t get to your customers without proper delivery.
e-Commerce delivery ensures that your customers get to enjoy your goods earlier and cheaper, while still maintaining the safety and general quality of the goods in question. Efficiency is key in e-commerce shipping, and learning more about it can boost your online business.
- What is e-commerce delivery?
- How does e-commerce delivery work?
- Considerations for e-commerce delivery
- e-Commerce shipping costs
- e-Commerce shipping rates
- Strategies for e-commerce delivery
- Some last words
What is e-commerce delivery?
e-Commerce delivery refers to the transport of products ordered from your online store to your customers’ physical address.
Shipping of goods to customers is an important part of the e-commerce logistics process. It involves numerous places, people and working parts. Their concerted effort to safely bring your goods to your customers plays a major role in the online shopping experience that you provide.
In a recent survey on how delivery affects consumers’ perception of and satisfaction with online shops, 60% of respondents chose to buy from a competitor’s e-commerce site that had more expedient shipping options, and 74% of customers actually value free shipping very highly.
Your e-commerce delivery strategy can therefore help differentiate yourself from other digital merchants offering similar or even the same products. Such differentiation could then translate into more revenue and better customer loyalty.
How does e-commerce delivery work?
Consumers are most familiar with last-mile delivery, where goods purchased online are brought to their doorsteps by a carrier. However, e-commerce delivery involves much more than that.
Below shows three stages of e-commerce delivery. Each of them plays an indispensable role in delivering the right goods to purchasers.
1. Order processing
Order processing refers to a set of activities needed to process and complete customers’ orders.
As an e-commerce best practice, every purchase should be identified by a unique order ID.
The order management team would then confirm the order in the backend of the e-commerce site, and pass the information to the packaging and fulfillment staff. In the case where there isn’t an inventory management software in place, inventory needs to be updated manually.
2. Order fulfillment
After completing the initial steps of order processing, the next action item on the list is order fulfillment.
It includes picking the purchased goods from the warehouse, packing to prevent damage during transit, and passing the parcels off to a carrier to handle last-mile delivery, that is, bringing the goods to customers.
3. Return processing
After the goods are successfully delivered, there are chances that the purchasers aren’t satisfied with what they got, or the wrong products are shipped, and e-commerce fraud is a possibility too.
In each of these circumstances, customers may return the goods to you, and that’s when return processing comes into the picture.
For this last step of e-commerce delivery, you’ll need to provide a means and address for customers to send back the goods.
Resaleable goods may be returned to stock, whereas used or damaged ones can be discarded. Refunds and exchanges may also be needed depending on your store’s return policies.
Considerations for e-commerce delivery
When it comes to delivery of products, every e-commerce store must take into account a variety of considerations, such as the choice of packaging materials, shipping carrier, and the list goes on.
Below is a list of three aspects to bear in mind when planning for the e-commerce delivery process. Carefully weighing all these considerations can help you minimize costs, increase profit margins and create a better overall experience for customers.
1. Packaging materials
Packaging materials prevent damage to your goods during e-commerce transit, but they also add to the size and weight of your parcel, leading to potentially higher shipment costs.
To achieve the objective of goods protection at minimal weight and hence affordable rates, light-weighted packaging materials like bubble wrap, air pillows or foam wrap are great choices.
For more aesthetically pleasing e-commerce packaging, carton boxes, poly bags and bubble envelopes provide more room for branding and creativity.
2. Shipping carrier
While larger e-tailers may have their own fleet, many online sellers engage the services of third-party carriers to handle last-mile delivery.
In other words, a courier brings your products to your customers. Whether your goods arrive fast or slow, intact or broken — all depend on the quality of services of the carrier. The choice of shipping carrier is therefore important, and below are some aspects to help you find a good one.
- Costs: What are the shipping rates?
- Speed: How long does it take to deliver a parcel to the destination?
- Tracking: Does the shipping carrier offer any form of tracking? If yes, is it in real-time?
- Geography: Which areas does the carrier cover? Does it offer international shipping?
- Customer support: Does the carrier provide customer support (e.g. when a parcel is lost and can’t be found)? How effectively do they help clients tackle logistics issues?
3. Shipment tracking
Unlike buying from a brick-and-mortar store where customers can bring their goods home right away, online shopping entails a delivery process.
Some purchasers aren’t so trusting of digital merchants, and so after paying at your online store, they’d want some form of proof or evidence that their goods are actually being shipped to them.
Others are in urgent need of their goods, whereas some are simply eager to receive what they’ve bought. Either way, shipment tracking is good to have, if not essential in the e-commerce delivery process.
In the event that you do e-commerce delivery with your own fleet, a shipment tracking feature is something that you’d want to develop. It’s to give customers the peace of mind that their goods are safely on the way to them.
If you work with a third-party shipping carrier, such as SF Express, DHL or FedEx, then you can rely on their real-time tracking function, with which customers can find the latest information related to their parcels using a unique tracking number.
e-Commerce shipping costs
Speaking of e-commerce shipping costs, many people may think that all they need to pay for is the courier who facilitates last-mile delivery of goods to customers.
However, there are in fact several other cost items that a business must shoulder with regard to e-commerce delivery. Below is a list of them.
1. Carrier cost
The first item on the list, called the carrier cost, probably springs to mind when we speak of e-commerce shipping costs. As its name suggests, it’s what the carrier charges to transport your goods from wherever you drop it off to their final destination.
Depending on which carrier you work with, as well the type, size, weight and destination of the parcel, shipping rates could range from US$2 to to US$30 or even more.
Below is an example of shipping rates taken from the website of SF Express, a leading carrier in Southeast Asia:
2. Packaging costs
Just imagine: How would your customers feel if they opened up your product with much anticipation, only to discover that your goods are all damaged and unusable?
Your products need to remain safe and secure during the e-commerce transit process, and that’s where packaging costs come in.
Packaging costs include expenses incurred in relation to the boxes, tape, and other materials used to safeguard your products during their journey.
In some cases, a box may not be enough, and you may want to use infills such as bubble wrap, kraft paper and air pillows for extra stability.
In the example below, shredded paper is used to provide additional support and avoid collision of the product with the walls of the box during transit. In fact, it also serves an aesthetic purpose, making the product look attractive.
3. Fulfillment and other overhead costs
Fulfillment costs cover the actual labor needed to pack, secure and ship your package with care.
In some cases, the labor will be done by actual people who handle packages in e-commerce warehouses, though advancements in technology allow intelligent robots to do the same work as well.
Either way, you do need to pay for the wages of a warehouse laborer or the maintenance costs of a machine that moves your package closer to your customers.
Everything from printer ink to hiring employees, warehouse management software to the lease for the space, comes with a cost that you must take into account.
e-Commerce shipping rates
Naturally, the costs incurred in the e-commerce delivery process must be paid for, and there are certain ways that you can charge your customers.
Below are three shipping rate options commonly used among online businesses.
1. Flat rates
This type of rate is sometimes great, but sometimes not so much.
Sometimes the flat rate would completely cover the costs of shipping, or the actual costs account for only a small percentage of what customers pay to you.
In other cases, the costs may exceed your flat rate, forcing you to bear additional fees.
2. Free shipping
Free shipping for e-commerce comes in two main forms.
One way is to deliver to customers for free for whatever they purchase from your e-commerce site. This route, however, may lead to considerable losses as you’re paying for shipping fees without regard to your sales revenue.
The better alternative is to offer free shipping for orders that meet a certain dollar amount. For example, Casetify offers free shipping worldwide on orders of US$35 or more, and IKEA Hong Kong delivers locally for free for purchases over HK$7,000 (approximately US$907).
3. Real-time rates
Of course, you could always adopt real-time rates, where your customers pay for the exact amount it costs to deliver your goods to their desired addresses.
Unlike flat rates or free shipping, you rarely need to shell out more money for real-time rates as they are pulled directly from your preferred carrier based on the parameters and location set by the customers.
Connecting your e-commerce store to your carrier’s website to get accurate quotations can even be a walk in the park with the help of shipping APIs (application programming interfaces) that allow two programs or databases to communicate and exchange data.
Shopify Advanced, for example, enables you to connect your online store to DHL Express so you can create shipping labels that your customers can see, modify and pay for as they check out.
Strategies for e-commerce delivery
As mentioned, there’s a wide variety of shipping rates and delivery methods that you can use for your e-commerce store, but each has its own strengths and limitations.
To help you decide which one is best for your online business, below are some tips and best practices for e-commerce delivery that will help you convert more customers, boost your revenue and create better shopping experiences.
1. Offer same or two-day delivery
People today live in a fast-paced world, and efficiency is a virtue highly valued by new-age consumers.
Recent trends even show that customers’ expectations for speedy delivery have elevated with the rise of Amazon Prime, which guarantees free, same-day shipping on a broad selection of items to its members.
In a recent study by McKinsey & Company, 90% of online shoppers say they expect their products to arrive in 2 to 3 days. Roughly half of them would buy from another store if delivery takes too long.
Evidently, fast shipping might be a “desirable” attribute in the past, but it’s key and essential to meeting customer expectations today. Offering same or two-day delivery could help your business stand out as one that is truly reliable and efficient, and it’s a target that you should pursue.
2. Offer free delivery
At first sight, free shipping seems to benefit customers more than digital merchants. However, introducing free shipping into your e-commerce store can be done in such a way that still produces considerable gains.
To illustrate this, it’s not uncommon for purchasers to think that “I only need to buy $X more worth of products to get delivery for free!” That “$X” could give a revenue boost to your online store, and sometimes it could actually cover the costs of shipping — so your profit margins aren’t reduced by a dime.
If that’s not convincing enough, consider the recent research statistics published by Baymard Institute, which revealed that “extra costs” account for nearly 50% of abandoned shopping carts.
By taking shipping fees out of the checkout page, you could be recovering tons of sales revenue that would otherwise slip through your fingers.
3. Provide in-store pick-up options
Last but not least, digital merchants that also have an offline presence can consider providing in-store pick-up options for online buyers. It’s essentially an online-to-offline (O2O) strategy intended to create a seamless purchase experience.
The benefits of adopting an O2O strategy are multifold. For starters, it reduces the number of packages you need to ship and handle at the warehouse, hence achieving significant cost savings.
Allowing customers to get their goods at a physical store also cuts down on the waiting time. This way, they can enjoy the convenience of online shopping without the hassle and anxiety of waiting for the parcels, creating a win-win situation for both you and the customers.
4. Use shipping software
Designed to streamline workflow for e-commerce fulfillment and delivery, shipping software can be used to manage shipping orders, connect to third-party carriers, generate shipping labels and update tracking information.
It helps you automate much of the shipping process, hence reducing labor costs and improving the e-commerce customer experience as they’ll be posted on exactly how the delivery process is going.
Some last words
In a consumer-facing business, caring for your customers’ experience also means caring for the journey your products take from your store to their final destination. At Choco Up, we work with online businesses, and we certainly care about our clients’ business success.
As a global technology and financial services platform, Choco Up provides e-commerce funding (known as revenue-based financing) and business growth solutions for digital merchants. Our e-commerce funding can be used to fuel your business’s growth, such as scaling up marketing, paying for inventory, expanding to other locations, and many more.
We’ve worked with businesses like yours, and so we understand the pain points and needs of running an online business. Learn more about our e-commerce funding here, or claim your preliminary funding offer for free today!
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