MARKETPLACE SHIPPING – PART 1 : Choosing a shipping model

MARKETPLACE SHIPPING – PART 1 : Choosing a shipping model

1024 683 WC Lovers

History can vouch for the power of good shipping strategies. Early merchants, traders and dealers helped build empires through their excellent ability to transfer goods from one region to another. During those days, ships were their chief mode of transporting physical goods – hence, the term “shipping”.

Today, however, ships aren’t the only means of transit. Technology has put its feet forward to make shipping of items faster, safer and easier. But the concept remains the same – good shipping strategies can build a successful marketplace.

On the flip side, bad shipping can ruin your marketplace’s reputation altogether. Shipping and delivery largely impact brand loyalty. 84% of customers might never return to a marketplace simply because of a bad delivery experience. As a marketplace owner, you wouldn’t want that, would you?

A successful shipping strategy is something that you should plan from the very inception of your marketplace. A number of factors affect your shipping strategies – type of product, products’ dimensions, shipping time, marketplace model, customer’s requirements etc.

This blog will throw light on the different elements of shipping and will help you plan the basic shopping model for your marketplace.

 

What customers want

Customer expectations are rising each day. Marketplace giants like Amazon have made people habituated to shipping advantages like free shipping and same-day delivery. This has become an indispensable benchmark for startups.

Free shipping is still the biggest fuel for online shopping. A survey says that free shipping drives 77% of customers to purchase online from a brand. While 35% of customers are satisfied with next-day delivery, 39% of customers demand same-day delivery. Surprisingly, 20% of customers expect a 2-hours delivery window when they choose a brand!

Likewise, high shipping costs or hidden fees is the number one reason why customers abandon their online shopping carts with 50% of customers citing this reason. Delayed delivery and unsatisfactory return policies deter another 18% and 10% of customers from successfully checking out.

As we can see, most customers might abandon your website if they don’t get free shipping and faster deliveries. Now, it is quite understandable that all marketplaces cannot provide free shipping. However, it is important to set a feasible shipping charge that won’t drive away your customers – something that we’ll discuss in another blog. But expedited delivery is something that you cannot discard. Accordingly, you’ll have to plan your fulfillment model and shipping strategies.

 

What products you’re selling

Planning a shipping strategy depends a lot on what type of physical product you’re selling. For example, if you’re shopping large and heavy items, you need to determine the weight and dimensions of your products as shipping charges might depend on weight. If you’re delivering groceries, then your packaging should be good enough to retain the freshness of products. Also, you might have to deliver perishable items faster than any other product. Before you move on to plan anything, ask yourself these questions:

  1. What kind of product am I selling?
  2. What is the shelf-life of my products (in case of edible and perishable products)?
  3. What are the dimensions and weight of my products?
  4. From where do I source my products?
  5. How far do I have to ship my products?
  6. How fast do I need to deliver my products?

Once you answer these, you’ll have a clearer picture of your shipping requirements.

Usually, in case of smaller items, shipping through roadways or airways can be chosen depending on the distance and charges involved in the shipping. For larger and heavier items, railways and ships can do the work.

Bulk items like coal, iron, agricultural products or crops, oil and petroleum and machinery are usually shipped through waterways. Because heavier or larger items, and often odd-shaped machinery cannot always be shipped through airways, ocean freight becomes preferable. In fact, 90% of shipments are done through oceans and seas. The only drawback of this mode is its transit time which is considerably more than the other modes.

Air freight caters to faster deliveries and is one of the most commonly used modes of transportation for outstation shipping. For shipments of perishable items like flowers, certain pharmaceuticals and even food, airways are considered to be the best option. However, there are weight restrictions in air freight which is quite negligible in ocean freight. Also, air freight is one of the most expensive forms of shipping due to its expedition demand and high cost of fuel.  

Roadways are one of the most convenient ways of shipping packages that need to be delivered in nearby areas. While trucks and trailers can transport large items to a greater distance, quick deliveries of small items are done by smaller trucks, vans, cars or bikes. It is also cheaper and faster when compared to the other modes. However, weather conditions, road conditions and traffic can affect the speed of deliveries through roadways.

Often, just one mode of shipment is not enough for the complete fulfillment of an order. Especially if you’re sourcing the products from one place to your inventory and then shipping it to another place, you might have to consider multi-modal transportation. Through a combination of different modes of transportation you can ship your products from start to end in a cost effective yet expedited manner.

 

Choosing a fulfillment model

Order fulfillment is the entire process that entails right from the moment a customer places an order to the final delivery of the item. It involves various intermediate steps like order processing, product packaging and labeling, picking up the package from the source point and delivering it to the customer. Returns and exchanges are also a part of the fulfillment process.

While considering the shipping unit of your marketplace, you can choose among 3 broad models of order fulfillment – dropshipping, self-fulfillment, third-party shipping. Each models have their own set of advantages and disadvantages and it completely depends on your marketplace model

 

Dropshipping

Dropshipping allows the vendor to fulfill the entire shipping procedure after the store admin passes down the order to the seller. As soon as the order is received by the admin of the marketplace, he/she informs the seller about the purchase. The seller then processes the order, packs and prints the labels and ships the product directly to the customer. The dropshipper chooses his/her mode of transportation for the product shipment. The seller might also take the help of a third-party logistics solution. In case of returns or exchanges, it is usually the responsibility of the dropshipper to fulfill them.

Dropshipping spares you the hassles of managing your own delivery unit and shipping of your orders. However, you do not have much control over the shipping process and cannot have an overlook on the quality of the shipment. Also, you cannot always be sure of the stock your seller has. However, it is most suitable for startups or businesses with low initial capital as you don’t have to focus on inventory management or shipment expenditures.

Advantages:

  1. No need to pre-purchase from the seller. Purchase is done only when an order is placed in the marketplace.
  2. No need to maintain an inventory/storehouse.
  3. Seller ships the product(s) so no need to have a dedicated delivery team for your marketplace.
  4. Easier for startups and new marketplaces where capital is low.

Disadvantages:

  1. Cannot control the quality of the product and/or packaging or speed of delivery.
  2. In case an order has been placed and your seller doesn’t have the product in stock, you might get into a false position.
  3. Might have to take the responsibility of missing/wrong products and face bad reviews against the marketplace.
  4. No customization in packaging, hence reduced brand establishment.
  5. Harder to scale when dealing with multiple dropshippers.

 

Self-fulfillment

If you choose to have a complete view over your shipping unit, then this is for you. Self-fulfillment refers to the process where your marketplace has its own inventory and delivery team and the shipment is fulfilled in-house.

 

It is quite common for marketplace owners to start with an inventory and involve a team to pack and deliver the products. However, in-hose fulfillment typically takes up a lot of time; you have to set up an inventory and manage it, recruit a team to pack, label and ship/deliver the products to the customers, etc. Also, the cost of managing a warehouse and required machinery for packaging might become a headache for startups. You might also have to tackle some of the well known challenges of marketplace deliveries

On the brighter side, you could do your own custom packaging for your products, thereby, increasing your brand’s face value.

Advantages:

  1. Total control over the entire fulfillment process.
  2. You have an inventory of your own, manage your stocks and can assure the quality of the products dispatched.
  3. Ability to choose custom packaging thereby increasing brand popularity.

Disadvantages:

  1. Additional load of managing an inventory and assigning different teams for packaging and shipping orders.
  2. Setting up an inventory and machinery could be expensive.
  3. Self-packaging might become time-consuming.
  4. Might become difficult when business grows and the number of orders increase.

 

Third Party Shipping

If you want to outsource the fulfillment in a hassle-free and relatively cheaper way, then you shall consider third party shipping solutions. In this model, third party logistics (3PLs) agencies/companies fulfill the various elements of shipping like picking up the ordered product, packaging and printing labels, quality checking, shipping and delivering, and even return/exchange processing. All you have to do is contact and tie up with a good and reliable third party logistics company and let them do the job.

3PLs often work with a lot of marketplaces and fulfillment centres and, therefore, have expertise in the logistical area. Also, they often ship in bulk from different fulfillment centres so they can ship substantial bulk at a lower cost.

Some 3PLs like ShipBob offer custom packaging to their clients, thereby fulfilling their clients’ brand visibility.

However, you need to choose a 3PL solution very carefully. If you don’t receive enough orders than expected or ship your products in smaller amounts, shipping charges might get significantly higher. Negotiating with the logistics company is important if you want to maintain an economic yet effective shipping structure.

Advantages:

  1. Hasslefree shipping solution since most of the fulfillment procedures are carried out by the 3PLs.
  2. Expertise in shipment and logistics.
  3. Cost effective when orders shipped in bulk.
  4. Cuts on inventory costs, shipping and delivery management expenditures.
  5. Shipping is significantly faster than self-fulfillment and dropshipping.
  6. Scope of custom packaging is available.

Disadvantages:

  1. Quality can be compromised if a trusted shipping service is not chosen.
  2. Shipping charges can rise up significantly for small numbers of order shipments.

 

Deciding on a shipping model suitable for your marketplace could be a bit tricky and might require some research. A wrong shipping model can cost you millions and even break your marketplace. On the other hand, with an effective shipping strategy, your marketplace can quickly rise the steps of success. Your shipping strategy should be one which is not just convenient and economical for your marketplace, but also adds some value to your customer. You wouldn’t want to risk delayed delivery for the sake of cheaper shipping rates, right? Do a bit of research and look around what others are doing. It’s not necessary that you have to follow just one shipping model for your marketplace. For example, Amazon utilizes multiple shipping models for successful shipping. All you have to do is analyse your customers’ demands and market trends, figure out your product specifications and then choose the best shipping solution for your marketplace.

Leave a Reply