Shipping Management

In short, the eCommerce shipping process covers everything from organizing items transport to keeping your customer, that made the original purchase, updated.

Ecommerce shipping is more complex than just putting ordered items in the post, and it involves inventory management, choosing the suitable carrier, packing, budgeting, timing, and returns.
This guide will go over some of the basics of shipping your products to customers. We will talk about calculating your shipping costs, defining your product pricing, having those costs in mind, choosing your shipping strategy, packaging, labeling and insuring your packages, preparing customs paperwork, and selecting the fulfillment method.
Finally, we will also share how Multiorders can help you streamline and expedite your shipping process.

Shipping Costs

Calculating your shipping costs

Calculating shipping costs will help you choose a shipping strategy and decide what price to sell your products. Different factors can affect the cost of sending your products to the buyer, such as:

• Product dimensions and weight. Some major shipping companies use parcels’ actual weight and dimensional (DIM) weight to calculate the cost of shipping. If DIM weight is higher than the item’s actual weight, this is a factor defining the final shipping cost. Other carriers like USPS also offer cubic pricing for those who ship smaller but heavier items. Their shipping rates are determined by package size and distance traveled instead of weight.
• Shipping Destinations. You can expect shipping costs will be higher if you offer international shipping in your store. You should also consider the country’s shipping restrictions or customs authorities that may be involved.
• Value of shipped products. If you sell high-value products, it is recommended that you insure them, even though it will increase shipping costs. 
• Delivery times. Some buyers prefer to pay more to get their goods faster – this cost is based on the buyer’s location.

Shipping cost calculators for popular shipping carriers

Each carrier considers the factors described in the previous paragraph to offer different shipping pricing models and shipping methods. Here are the pricing models and calculators for the major US and UK carriers that offer shipping services: 

USPS shipping price calculator

FedEx shipping price calculator

UPS shipping price calculator

Royal Mail shipping price calculator

DHL shipping price calculator

DPD Local shipping price calculator

Hermes shipping price calculator

Parcel2go shipping price calculator

Parcelforce shipping price calculator

If you plan to use USPS to ship your orders but don’t yet qualify for USPS Commercial pricing, using Multiorders will automatically give you this privilege regardless of how many orders you are planning to ship.

Setting up business accounts

Once you are done with your research and have decided on the carriers you want to use, see if you can get business accounts. Business accounts offer a variety of additional services, but they will provide great discounts. For USPS, sign up through Multiorders for preferred rates and discounts:

• Royal Mail Online Business Account (OBA) – this business account with Royal Mail will get you unique shipping services, discounts, and online account management.
• DHL for business – by having a DHL business account, you can enjoy savings on shipping costs, efficient shipping solutions, alternative payment options, and experienced customer service.

Considering your profit margins

It is critical to keep your profit margins in check to succeed at eCommerce. You must always keep an eye on your profit margins.

Once you find a service to ship your products with, you need to ensure your profit margins can stay high with these costs.

You can use the below example to map out your shipping costs and add, let’s say, a 50% profit margin to figure out the price you should sell your products at:

Cost of Goods: $20

Shipping fee: $3

Packaging cost: $0.75

Credit card processing: $0.85

Total cost $24.60

Optimal Profit Margin 50%

Priced to sell at $49.20

$24.60 is the amount of money you will earn after spending $24.60 to produce your product.

Now that you’ve calculated the shipping costs for your products, you need to decide whether you, the buyer or both of you will pay for the shipping expenses.

Offer Free Shipping

According to the Q2 2021 Consumer Trends Report issued by Jungle Scout, 66% of consumers expect free shipping with every purchase they make online. An even more (80%) expect free shipping when ordering items for a certain amount of money.

Customers often abandon their shopping carts at checkout when presented with additional shipping costs. Thus offering free shipping may help you drive more conversions.

Free shipping is never truly “free” – someone always has to pay. Therefore, to make free shipping work, you have several options:

Increase your product prices to cover shipping costs

Customers like the idea of free shipping, and in most cases, they will not notice that the product costs more at your store than your competitors if you offer free shipping and they don’t.

Offer free shipping on a minimum order amount

Doing so will encourage your customers to add additional items to their shopping cart to receive free shipping. You will end up selling more and, by shipping the items together, can save on the cost of individual shipments.

Offer free shipping at certain times

You may not want to offer free shipping when you’re busy, and the money is coming in, but consider introducing it during slow periods to attract customers when you need them.

Setting free shipping threshold

If you will offer free shipping based on a minimum order amount, setting a free shipping threshold is crucial. To get it right, you have to do a little bit of math:

Step 1. Calculate your Average Order Value (AOV) without shipping costs. AOV = Revenue / Number of orders. For example, in October, your store sales were $10,000, and you had a total of 200 orders. $10,000 divided by 200 = $50, so October’s monthly AOV was $50.

Step 2. Calculate your average shipping costs (let’s say it’s $8)

Step 3. Calculate your Gross Profit Margin. Gross Profit Margin = (Revenue – Cost of Goods Sold (COGS))/ Revenue. For example, if your Revenue is $100k and your COGS is $60k, then the formula would calculate as ($100,000 – $60,000) / $100,000 = 40%, so your Gross Profit margin is 40%.

Step 4. Propose a minimum Cart Value – let’s say it’s $55.

Now, you have to test whether that minimum cart value you proposed will work:

• Determine the difference between the Proposed Minimum Cart Value and the Average Order Value ($55 – $50 = $5)
• Multiply this difference by Gross Profit Margin ($5 x 0.40 = 2$)
• Subtract your result from the Average Shipping Cost ($8 – $2 = $6)

You will end up paying $6 for shipping on qualifying orders, which will be too much of a hit for your bottom line. Try adjusting the Proposed Minimum Cart Value to $65 as the minimum:

• Now the Minimum Cart Value minus Average Order Value ($65 – $50 = $15)
• Multiplying the difference by the Gross Profit Margin ($15 x 0.40 = $6)
• Subtract the result from the Average Shipping Cost ($8 – $6 = $2)

By increasing your threshold by $10, you still provide value for customers while dropping your shipping cost to just $2 per order. Sounds more doable, right? You may have to play around with the numbers to find your sweet spot, but it’ll be worth it to your bottom line!

Offer Flat Rates

Flat rate shipping is often the most straightforward strategy to apply — you simply charge your customers the same amount regardless of their order size. 

Customers appreciate flat rate shipping because it’s straightforward and takes the guesswork of calculating rates.

You can benefit from offering flat rates if:

• your products are similar in size and weight
• you have continuous order deliveries and multiple orders
• you have a vast customer base within the same time zone

Otherwise, you risk overcharging your customers and losing sales or undercharging and losing money.

Offer Table Rates

Flat rate shipping helps keep things simple, but it doesn’t allow you to provide your customers with the most affordable or accurate rates.

With table rate shipping, you can define specific rates for specific scenarios by adding rule-based methods to calculate the final shipment fee.

You can create rules around a shipment’s destination, shipping zones, carrier availability, product weight, the number of items, product category, price, and many other circumstances.

Offer Real-time Rates

If you sell items that vary in size, getting live rates in real-time directly from a carrier like FedEx, UPS or DHL may be the best shipping strategy to implement.

You can add live shipping rates to your store, so they appear in the checkout for your customers. The rates take order weight, dimensions, and the customer’s shipping destination into account to display the accurate rate for the customer once they are done shopping.

Unlike flat rate shipping, real-time carrier calculated shipping means you charge customers the correct amount every time, and you don’t have to worry that it will be too much or not enough.

Combine Several Options

If you’re having difficulty deciding which shipping strategy to use, combine several to create the right fit for your business. Multiple shipping options will allow you to balance your revenue needs with promotional opportunities.

For example, offer free standard shipping with 5-10 business days for delivery alongside other options like Expedited shipping (for example, 3-5 day delivery at a table rate based on order value) and live rate options for Second Day and Overnight delivery.

When a carrier agrees to ship your goods, they are legally bound to get them insured, and this coverage is known as carrier liability. 

Carrier liability doesn’t always cover the total value of goods – for example, FedEx, UPS, and USPS cover up to $100. What is more, in case of loss or damage, the shipper must prove that it was the carrier’s fault in order to settle a claim. The claims process is often time-consuming, with no guarantee of success.

 

Therefore, the best way to get the maximum liability insured is to choose shipping insurance which protects your consignment from any damage, theft, or mishandling. 

The four main benefits of shipping insurance are a Sense of security and added assurance. Knowing that your cargo is ensured gives you relief and allows you to focus on running your business. You shouldn’t need to worry about your goods being damaged, shouldering all the shipping costs, or disrupting your business operations:

1. Less hassle and paperwork. Companies that send high volumes of shipments can benefit from having a centralized insurance provider. Instead of calculating landed cost and coverage and filling out paperwork for every package, your shipping insurance policy covers every shipment within a period.
2. Protection from mishaps. Many companies suffer heavy losses due to accidents that impact their ability to continue operations. However, if you have insured against such mishaps at your workplace, you are most likely to be compensated by the insurance company for them.
3. Better customer service. This will ensure that your customers will continue purchasing from you. Even after their ordered item was lost or received a damaged product, your business has to be ready to send an immediate replacement or reimbursement.

When should you purchase shipping insurance?

While any seller can purchase shipping insurance, it makes the most sense to have it in these cases:

• You send packages in high volume or of high value.
• You send packages internationally, and they go through multiple modes of transportation.
• You sell electronics, art pieces, or fragile items which are more prone to damage and are more expensive than the declared value coverage.
• During peak shopping seasons like Black Friday, Cyber Monday, or Christmas. The massive volume of shipments results in a higher likelihood of stolen, damaged, or lost packages.

Packaging Options

Before shipping your products, you need to package them properly for safe transportation. There are a few standard options to consider:

• Corrugated boxes. It’s the most typical type of packaging used by retailers that can carry nearly any item, from pharmaceutical supplies to bulk food products. The structurally sound design of corrugated boxes provides an excellent cushion for any product, keeping things protected through long-distance transport.
• You may want to offer Padded mailers. If you are looking for a way to safely ship smaller, flat, or delicate items such as jewelry, electronics, or handcrafted items without breaking the bank, padded mailers are the way to go. They don’t take up much space, stack nicely, and don’t require any assembly that boxes do, meaning you can pack parcels more quickly, but consider introducing it during slow periods to attract customers when you need them.
• Bags and envelopes. If you sell light products which are not fragile, like clothing, you can use poly mailers, envelopes, or plastic mailing bags to ship your goods. They are lightweight, strong, easy to store, and self-sealing, making sending your items more manageable, whether from home or a warehouse.

Custom declaration and forms

If you plan to ship your products internationally, having your paperwork in order is one of the best ways to keep your shipments on schedule.

Documents that don’t meet the strict customs requirements will be delayed, sent back, or even seized. You can prepare your customs paperwork with these eight steps.

Set up a commercial invoice template.  

Commercial invoices provide information for the customs authorities, which helps them assess if the goods are allowed to move in or out of a country and what controls are needed. It is also used to determine duties and taxes.

The key fields that must appear on a commercial invoice are:

• Document title: “Commercial Invoice”
• Contact details like the name and address of your business as the shipper
• Contact details like the name and address of the recipient
• Shipping number (typically the tracking number from the carrier)
• The Incoterms® are required for the shipment
• Reason for export (e.g., sale, consumption, e-commerce purchase)
• Date of shipment
• HS code
• Goods description
• Quantity/number of goods
• Value of goods
• Shipping and insurance costs 
• Package weight (NET and GROSS)

You can create a custom invoice template yourself, get it from your carrier or have it automatically generated when shipping international orders with software like Multiorders.

Once you ship your order and press to generate a shipping label, a customs form is automatically generated. 

Write an accurate goods description

It is a detailed description of the goods you are shipping – what they are, what they are made of, and what they are used for. Having the description of the goods on the commercial invoice allows customs to assess the goods accurately, confirm HS code classification, and determine the exact duties and taxes on the shipment.

Vague descriptions may cause customs to delay the shipment or charge additional costs like storage fees as they wait for a clear goods description.

Vague description: Jewelry

Good description: Ring made of 100% gold

1. Use HS code to classify goods. HS code is short for Harmonized Commodity Description and Coding System. It is a code made of at least six digits and is used by customs to classify the product being shipped. They can accurately calculate taxes and duties and apply any necessary restrictions.
2. You can get an HS code on your country’s government website or platforms like FindHS.Codes or ask your carrier to help you classify your product catalog with the correct HS codes.

Minor differences can result in different codes, so make sure to choose the right ones. For example, leather shoes with rubber soles (640399) are different from leather shoes with leather soles (640359).

Identify the country of manufacture

It is essential to state the country of manufacture on the commercial invoice, so the shipment can be exempt from duties under a trade agreement. The country of manufacture, sometimes known as the country of origin, is the country where the goods were made, or the last manufacturing took place, and it can be different from the country you are sending the goods from.

Check for any duties, taxes, or exemptions. Find out if your goods are subject to duties and taxes when entering a new country. Depending on the type of goods and where they were manufactured, you could qualify for a duty exemption or reduction from the receiving country. Check with your carrier if your goods qualify, and if so, you will need to prove it by including proof of origin in your shipping paperwork.

The two most common types are:

• A statement of origin – is just a few lines of standard text included in the commercial invoice. You should ask your carrier or local customs authorities what the correct text should be, depending on the product and destination.
• A certificate of origin – is a separate document verifying a product’s country of origin. ​​Check with your local chamber of commerce if you need one.

Inform your customers of the Incoterms you’re applying

The Incoterms determine who pays for shipping costs and any duties and taxes on a parcel. As the seller, it’s vital that you state this on your website (often at checkout) and the commercial invoice. The most common Incoterms® used in e-commerce shipping are:

Delivered Duty Paid (DDP) – this means you cover all costs yourself

• Delivered At Place (DAP) – the buyer pays the customs charges when the goods are delivered to his country.
• Comply with product regulations. You may need to prepare extra paperwork to ship products like drugs, food, apparel, toys, electronics, and other goods. For example, if you send shoes to the US, you must include a footwear declaration for US customs. Ask your carrier which authorities regulate your product in the destination country and what documentation they require.
• Prepare your documents. Once you know what you need, check with your carrier if your documents should be provided in digital or physical form.