February 18, 2025
Ramin Popal
Shipping is a crucial part of running an eCommerce store. Slow or unreliable shipping can frustrate customers and prevent them from returning to your store, and high shipping costs eat into your profit margin. Choosing the right supplier plays a key role in this process, so learning how to find a supplier for your product can ensure you work with reliable partners who offer efficient shipping options.
Luckily, with some research and preparation, you can get eCommerce shipping to run like a well-oiled machine and keep your customers and your accountant happy.
In this guide, we'll explain how eCommerce shipping works so that you can develop a solid strategy for your online store. We'll also share tips to help you reduce shipping costs and improve your operations.
eCommerce shipping involves transporting goods from an online retailer or warehouse to a customer’s location. It encompasses various steps, including:
Each of these steps impacts costs, delivery speed, and customer satisfaction.
The shipping process begins as soon as a customer places an order. Let’s break it down step by step:
A customer places an order in an online store. The store’s order management system (OMS) processes the request, verifies payment, and checks inventory. An order confirmation email is sent to the customer, providing estimated delivery time and tracking details (if available).
Why It Matters
The warehouse or fulfillment center receives the order. Items are picked from inventory, packed securely, and assigned a shipping label. Labels include shipping details, tracking numbers, and barcodes for carrier scanning.
Packaging Considerations:
Why It Matters
The merchant selects a shipping carrier based on factors like:
Why It Matters
Once labeled, packages are picked up by the carrier and transported to a regional distribution center. The package goes through a sorting hub before last-mile delivery (final transport to the customer). Customers receive tracking updates via email or SMS, so they can monitor their delivery status.
Last-Mile Delivery Considerations:
Why It Matters
Returns are an inevitable part of eCommerce. Having an efficient return policy can increase customer trust and repeat purchases.
Return Process Flow:
Ways to Reduce Return Costs:
Why It Matters
Shipping costs, especially in eCommerce, can be troubling to calculate. Package size and weight are among the most significant pricing factors in shipping. Most major carriers don’t just charge for actual weight; they also calculate dimensional weight (DIM weight) based on package size. If a package is large but lightweight, shipping costs may be calculated based on volume instead of weight.
This means a light item in a big box could cost as much to ship as a heavier item in a small box. For example, a 3-pound item in an oversized box might be billed 14 pounds due to dimensional weight pricing. This can drastically increase costs if businesses don’t optimize packaging. Use the right-sized packaging to reduce DIM weight fees and avoid excess volume.
Switch to poly mailers for non-fragile products, which are lighter and cheaper to ship. Use carrier-branded boxes (like USPS Priority Mail) that are not subject to DIM weight fees. Businesses can significantly lower shipping costs by reducing excess packaging without compromising protection.
Shipping rates increase based on how far the package has to travel. Carriers use shipping zones to determine pricing, which means a package sent locally costs less than one shipped across the country. For example, a package shipped within Zone 1 (same state or nearby region) is much cheaper than shipping to Zone 8 (cross-country delivery).
This applies domestically and internationally, where international shipping comes with additional taxes, tariffs, and customs fees. To reduce costs caused by shipping distance, multiple fulfillment centers should be used to store inventory closer to customers. Offer local pickup or regional shipping options to minimize long-distance shipping.
Work with third-party logistics (3PL) providers with warehouses across multiple regions, reducing shipping zones. By minimizing the distance a package travels, businesses can lower carrier fees and offer faster delivery times to customers.
Different shipping carriers charge different rates based on package weight, destination, and delivery speed. Businesses that rely on only one carrier may miss out on cheaper options. For example, USPS might be the most affordable option for lightweight packages, but FedEx or UPS could offer better rates for heavy shipments. Expedited shipping costs significantly more than standard shipping (like 2-day or overnight delivery).
To reduce carrier costs, use a multi-carrier strategy to compare shipping rates and choose the cheapest option for each order. Take advantage of flat-rate shipping, where a set price applies regardless of weight or distance. Negotiate bulk shipping discounts with carriers if shipping large volumes. Using multiple shipping partners and choosing the exemplary service for each package can save businesses thousands of dollars annually.
The way an eCommerce business fulfills orders directly impacts shipping expenses. Businesses that store and ship their inventory have different costs compared to those using third-party fulfillment or drop shipping. With in-house fulfillment, businesses manage their inventory and shipping, giving them complete control but requiring warehousing, packaging materials, and labor costs. This can be expensive, especially for small businesses handling logistics themselves.
Using a third-party logistics (3PL) provider can be a cost-effective alternative. These companies store inventory in multiple warehouses, allowing businesses to ship from the closest location to the customer and reducing shipping zones and costs. Dropshipping eliminates the need for warehousing, as suppliers ship products directly to customers. While this reduces inventory costs, it can lead to higher supplier shipping fees, depending on the product and location.
The best strategy for businesses looking to mitigate fulfillment-related costs is outsourcing fulfillment if self-warehousing expenses are too high. Work with suppliers who offer competitive shipping rates. Optimize warehouse locations to be closer to the majority of customers. For businesses using dropshipping, choosing reliable suppliers with fast, affordable shipping is crucial to maintaining profitability.
Returns are a significant cost factor in shipping, especially for businesses that offer free return shipping. Every returned order adds extra costs, such as return shipping fees paid by the company. Processing and restocking the item in the warehouse. Handling fraudulent returns, such as worn or used products being sent back.
Poor return management can drain profits, but a well-structured policy helps minimize costs and improve customer satisfaction. To reduce return-related expenses, set clear product descriptions and images to reduce unnecessary returns. Use AI-powered return management tools to automate return approvals. Charge restocking fees on non-defective returns to recover handling costs. By preventing unnecessary returns and optimizing their management, businesses can avoid excessive return costs while maintaining customer trust.
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Free shipping is a powerful incentive for customers, but offering it on all orders can be expensive. Instead, businesses should implement strategic free shipping methods to encourage larger purchases while controlling costs. Here’s how to offer free shipping without hurting profit margins:
Offer free shipping for orders above a particular value (e.g., "Free shipping on orders over $50"). This encourages customers to buy more to qualify, increasing average order value (AOV).
Instead of charging for shipping separately, slightly increase product prices to cover part of the shipping cost. This works best for high-margin products where shipping is a small percentage of the total price.
Apply free shipping only to lightweight or low-cost-to-ship items. This helps attract customers without significantly increasing expenses.
Offer free shipping to loyalty program members or repeat customers. This encourages brand loyalty while reducing costs for new customers.
When free shipping is offered strategically, it boosts conversions and increases order sizes, helping to offset shipping expenses.
One of the most common mistakes in eCommerce is sticking to one shipping carrier. Different carriers offer different pricing structures, and failing to compare rates can lead to unnecessary overcharges.
By choosing the right carrier for each shipment, businesses can lower costs without sacrificing delivery speed.
Managing your fulfillment can be expensive, requiring storage space, labor, and packaging materials. For many businesses, outsourcing fulfillment to a third-party logistics (3PL) provider or dropshipping supplier can cut costs significantly.
Outsourcing fulfillment allows businesses to focus on sales and growth while letting logistics experts handle shipping at lower rates.
Manual order processing slows down fulfillment and increases labor costs. Businesses can save time and money by automating shipping label printing and order processing.
By automating fulfillment, businesses can reduce labor costs, improve shipping speed, and increase overall efficiency.
Shipping carriers charge extra for oversized or heavy packages, so optimizing packaging can significantly cut costs.
Optimizing packaging reduces costs while improving sustainability, which can also attract eco-conscious shoppers.
Choosing the right suppliers is crucial to your business's success. The right suppliers will ensure you get high-quality products that meet your customers' expectations. They will also help you deliver orders promptly so your customers receive their packages quickly and efficiently. If you want to run a successful dropshipping business, you must take your time and find the right suppliers for your products.
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