Warehousing & Fulfillment

eCommerce Shipping: A Complete Guide

Warehousing & Fulfillment
December 8, 2021
13 min read

Learn why ecommerce shipping is the final and most important step in the buyer experience and how you can take yours to the next level.

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Most businesses, from the growing sector of digital native brands to multichannel and omnichannel merchants, have an ecommerce sales channel. In fact, ecommerce is even more important now than ever before, and the recent boom drove 35% of merchants to open an ecommerce storefront for the first time in 2020. 

The benefit of ecommerce is that sales are easy to scale. The entire process and customer experience is digital — that is until the final, and arguably most important step: actually getting the physical product into the customer’s hand. 

eCommerce shipping is very different from traditional retail fulfillment, and it is the last step before your customer actually interacts with your product. Any mis-step along the way (from slow delivery to damage in transit) can cause a negative customer experience.

On the other hand, a positive ecommerce shipping experience can drive consumer preference for your brand and drive up your reorder rates. In fact, our recent consumer survey revealed that 79% of shoppers are likely to make a second purchase from a brand after a positive delivery experience.

Ahead we’ll explore consumer expectations for ecommerce shipping, best practices, shipping price, and bottom line implications.

eCommerce Shipping Best Practices

When Amazon first introduced the idea of free 2-day shipping, it felt like a luxury and quickly  drew subscribers to Amazon Prime. Fast forward to today, and 1 to 2-day delivery is now a consumer expectation across the board, and a general best practice for ecommerce shipping for businesses of all sizes. In fact, consumer survey data shows that 37% of consumers expect small to mid-sized businesses to ship faster than their big box competitors.

When O2 Recovery Drink shifted their focus from retail sales to direct to consumer shipments, they realized that they had to deliver on a new promise to this new set of ecommerce customers. They relied on their flexible outsourced fulfillment partner to ensure the nationwide 2-day delivery their customers expected.

Besides delivery speed, other ecommerce shipping best practices include accurate last-mile carrier tracking, custom packaging, and room of choice or full-service white glove delivery for large or high-value products.

Calculating eCommerce Shipping Costs

eCommerce shipping rates are calculated based on two major factors:

  1. Dimensional Weight (DIM Weight): A volume calculation based on the package’s weight and size. Carriers use DIM Weight to determine shipping costs because it’s the most accurate way for them to determine how many packages they can fit in each truck.
  2. Shipping Zones: Determined by the package’s origin and destination zip codes. Shipping zones let the carriers know how long a product will have to travel in its final mile. The longer the package travels, the higher the shipping zone number.

Consequently, the two most effective way to reduce ecommerce shipping costs are:

  1. Optimize packout procedures: Find the smallest packaging that can safely fit your product to reduce DIM weight without risking damage. Depending on your product, that could even be an envelope or poly mailer.
  2. Reduce time in transit: The less time a package spends in transit, the lower the shipping cost will be. Storing your product as close to your end customers as possible will reduce costly long-zone shipments.

Not sure where to store your inventory to reduce time in transit? Get a free custom analysis with NetworkVu.

The Right Packaging

The unboxing experience has become an essential part of the online shopping experience. Consumers have come to expect a level of personalization and “wow” factor from direct to consumer (D2C) brands.

According to Forbes 60-80% of consumers reported that they would not return to a brand with poor packaging. The cost of losing a potential loyal customer may far outweigh the cost of investing in custom or high-end packaging.

Another factor to consider when choosing the right packaging for your products is waste. Our consumer survey revealed that recycled packaging is the top sustainability concern for 41% of eco-conscious consumers. Opting for recycled packaging (and letting customers know that it’s recycled with messaging printed on the package) lets your customers know that you share their values.

Pricing Strategies for eCommerce Shipping

The challenge for ecommerce sellers is to meet consumers’ delivery expectations without degrading their unit economics or inflating the cost of their product until they’re no longer price competitive. Ahead are five common pricing strategies for ecommerce shipping and the advantages and disadvantages of each strategy.

1. Charge a flat rate anywhere in the US at checkout:

Many ecommerce sellers will average their shipping costs across their previous orders to set an average cost per item. This is a risk-based pricing exercise designed to not alienate large existing or potential markets. For example, if you are based in the northeast, and California or Texas are large markets for your products, those customers would pay the same for shipping as as a customer right across town. 

Merchants decide to go with this strategy because they are experiencing high shopping cart abandonment rates in more lucrative markets. However, taking this route risks alienating those closer markets with shipping prices that are optimized for cross-country delivery. You also risk degrading your unit economics if demand spikes in more remote markets and causes you to over-index on long-zone shipments or overnight air. Typically, when customers see a flat rate shipping charge at checkout, they’ll go on the hunt for alternative options that offer free 2-day shipping.

2. Pass shipping costs on to customers in the form of higher prices:

Obviously free shipping is never free for the merchant. Many merchants will choose to offset their margins by increasing the cost of their product. This tactic is really only feasible for retailers with strong brand affinity and little to no competition.

3. Offer free shipping after a spend threshold:

This strategy is an interesting study in human behavior with a built-in reward mechanism. It can prompt some consumers to spend more and increase the average order value (AOV) or it can cause abandonment from new or return customers that want to buy your product but are not interested in a large purchase at that time. In the latter instance, the reward and dopamine response backfires and produces an undesirable outcome. While spend thresholds have the potential to increase AOV and improve your unit economics, it may be more prudent to focus first on converting those new customers who are just dipping the toes in the water of your brand and introduce spend thresholds later.

4. Absorb the cost of free shipping:

Using this strategy, you won’t raise the price of your product; you’ll fully absorb the cost of shipping yourself. This is the best option for most emerging brands and those in a highly competitive space. The only way to achieve this without damaging your unit economics is to lower your cost to serve by positioning your products closer to your end customers. This can be achieved by distributing your inventory across a nationwide warehouse network, targeting the areas of highest demand concentration. This enables nationwide 2-day ground coverage, eliminating the need for next-day air and costy long-zone shipments.

Learn how Ware2Go can help you offer free 2-day shipping

Eco-Friendly eCommerce Shipping

Today’s consumers are much more environmentally conscious and often make their purchasing decisions based on a brand’s sustainable business practices. In fact, a recent consumer survey by Ware2Go revealed that 88% of consumers consider sustainability either somewhat or very important to their purchasing decisions, and 66% of consumers said that sustainability has become more important to them as a result of the COVID-19 pandemic.

eCommerce shipping has a profound effect on the environment from carbon emitted by last mile delivery vehicles to packaging waste. Consumers have taken notice of the effects of their ecommerce shopping habits and are demanding more sustainable options. Respondents to Ware2Go’s consumer survey reported that eco-friendly ecommerce shipping was one of their biggest considerations when choosing a sustainable brand. 64% of consumers look for brands that use recycled packaging, and 41% look for brands that offer sustainable shipping options.

There are two steps merchants can take towards more eco-friendly ecommerce shipping prcatices:

  1. A distributed fulfillment network: Time in Transit (TNT) is the largest contributor to the carbon footprint of ecommerce shipments. The longer a package has to travel to its final destination, the more fuel is burned and the more carbon emitted. By distributing inventory to fulfillment centers closest to their customers, merchants can lower their TNT to 1 to 2 days and significantly reduce their carbon emissions. Distributed fulfillment also lowers the overall number of next-day air shipments
  2. Carbon Offset Shipping: Carbon offset programs range from planting trees to protecting old growth forests and forest management. These programs offset carbon emissions and protect valuable animal habitats. Consumers also have a favorable view of carbon offset shipping. In fact, Ware2Go’s recent consumer survey revealed that 45% of consumers are willing to pay more for a sustainable shipping option and that 66% consumers are more likely to purchase a product that offers carbon-offset shipping if the product and price point are the same.

Click here to learn more about Ware2Go’s Carbon Offset Shipping Network.

Ware2Go’s eCommerce Shipping Services

Ware2Go simplifies ecommerce warehousing, fulfillment, and ecommerce shipping with a fully-integrated technology platform that connects all sales channels to your fulfillment network. The platform automates processes like order management and delivery tracking and allows full visibility into inventory levels across platforms and warehouse locations.

The technology is supported by a distributed warehouse network to enable nationwide 2-day ground shipments, and all warehouses offer the same rigorous SLA’s, including same-day fulfillment and 99% on-time fulfillment rates. 

When YBell Fitness launched their BigCommerce store, they knew they needed an ecommerce shipping solution that would fully integrate with their current internal processes. Ware2Go created a custom integration that gives them a low-touch fulfillment solution. That way their team can focus on driving sales knowing that their customers’ expectations for delivery are being met.

ecommerce shipping

Advertising eCommerce Shipping Guarantees

Ultimately, 2-day shipping guarantees not only increase customer satisfaction but drive consumer demand. To realize all of the advantages of a fully optimized ecommerce shipping network it’s important to advertise shipping promises at the top of the sales funnel. Google Shopping’s Free and Fast annotations are an excellent way to advertise free 1 to 2-day shipping at the very beginning of the buyer’s journey, and Google’s data shows that these annotations increase conversion rates by up to 9%.

ecommerce shipping

You should also advertise your shipping guarantees on your homepage, in banner ads, and in paid social campaigns. If you haven’t yet established a nationwide 2-day footprint, begin growing top-line revenue in the markets where you do offer free 2-day shipping with geo-targeted ads.

How eCommerce Shipping Can Improve Your Bottom Line

Optimizing your ecommerce shipping network for free 1 to 2-day delivery can simultaneously grow top line and bottom line revenue. By strategically placing your inventory closest to your largest customer bases, you lower your overall cost to serve in your most profitable markets and increase the profitability of every shipment. 

eCommerce shipping can also drive customer satisfaction and retention, with 84% of consumers reporting that they would not return to a brand after a poor delivery experience. Studies show that acquiring new customers costs up to 25 times more than retaining existing customers, so by reducing your customer acquisition costs with 2-day delivery, you further improve your margins and ultimately your bottom line.

To learn more about how Ware2Go is helping ecommerce merchants improve drive sales and improve their bottom line, reach out to one of our ecommerce shipping experts.

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