How to Manage Shipping on eCommerce Marketplace

Why shipping is a crucial part of your marketplace business

Throughout history, shipping of products has been a crucial part of trade and economics. Remember the Silk Road, a network of trade routes that connected East and West? It was the center of trade, economic, cultural, and technological interactions between the regions. The wellness, wealthness, and sometimes even the existence of nations depended on how fast and secure merchants deliver goods.

Times change but the rules of trade don’t. Modern customers still expect their products to be delivered as fast as possible and in one piece. That’s why modern online marketplaces continuously adopt new shipping technologies and delivery methods.

According to eFulfillmentService research, eCommerce shoppers value fast shipping as much as affordable prices.	97% of consumers consider same-day shipping to be fast shipping
Modern consumers expect the marketplace to ship products the same day or the next day. 89% consider 2-days shipping to be fast. Then the number drops to 42% for 3-4 days shipping. So, your best option to retain your customers is not to go beyond 2-days shipping.	95% of consumers are okay with next-day shipping
Amazon experiments with its shipping and delivery strategy all the time and goes even further. The pioneer marketplace introduced free same-day delivery in the US for orders over $35 and continues to improve it marking the delivery even faster. And guess what—25% of consumers are willing to pay a premium for same-day delivery.	25% consumers are ready to pay a premium for same-day delivery

Badly organized shipping forces customers to leave a marketplace with a full cart. This often happens because the shipping is too slow or too expensive. For example, 49% of customers abandon their carts at checkout because of high shipping costs. And at the same time, free shipping is one of the most powerful sales drivers.

What experts say

Ethan Howell, Co-Owner Of Florida Environmental

When developing a shipping strategy, keep in mind your consumers’ location, preferences, and expectations. Because of Amazon, online buyers anticipate premium shipping services, such as free shipping. But no two clients are alike.

Millennials (54%) demand same-day shipping, whereas older generations are ready to wait. Younger buyers demand free delivery on every order, too, at 66%. Sell iPhone cases? Consider free shipping. Hearing aids? You can probably get by. Exporting? Your customers are more patient, however, 70% of purchasers would prefer to add delivery insurance. Evaluating shipment expectations in terms of cost and delivery time. Buyers are frequently more patient when receiving high-value or bulky items rather than cheaper, smaller items.

Finally, make sure your shipping alternatives appeal to your target market. Keep in mind the customer experience when looking for low-cost courier services. Of course, you can change your mind afterward.

Gerrid Smith, CMO at Joy Organics

Customers will be more likely to seek out your business in the future if they have a sense of trust and confidence from marketplaces, even if they have never purchased from you before. When comparing online merchants, delivery can drive more repeat purchases because customers want to spend their money with sellers who are convenient and reliable. A variety of delivery alternatives allows people to choose the delivery method that best suits their needs, while also ensuring that you can follow through on your promises and ensure that products arrive when your customers expect them to.

This is why it’s critical to ensure you have the capacity and technology in place to handle multi-channel order fulfillment, so you can ship goods quickly and provide customers with tracking information.

Components of the marketplace shipping landscape

What’s an eCommerce marketplace, basically? It’s not just a sales spot on the Internet. It’s an online sales spot complemented with shipping. Shipping is an important separate business process in your multi-seller eCommerce website because it just can’t exist without shipping and delivery.

This business process has its components that you can improve to make the whole shipping process more efficient and convenient for customers. Which in its turn reduces cart abandonment.

1. Order management

The shipping starts from receiving an order from a customer. It drops to your CRM, which can be an external application such as Hubspot or Salesforce, as well as a CRM built in to your marketplace software platform. CRM helps you and your sellers track order statuses and don’t fail shipping in time.

2. Preparation and packaging

Once a seller gets an order to the CRM, they start to process it: checking availability, collecting the order, packing it, and sending it out to the customer through a carrier.

Different sellers ship orders from different locations. When you launch your own online marketplace, it’s important to know in advance what kind of seller you will be working with. For example, small businesses usually store items in one warehouse or brick and mortar store. While big retailers and enterprise sellers ship from multiple warehouses and often use dropshipping. So, make sure the marketplace software you are using for your marketplace supports warehouses at least.

Check out this video to see how you manage warehouses in CS-Cart Multi-Vendor from the marketplace admin side:

Packaging is very important at this stage. You must pack the order safely so it doesn’t get damaged. But there’s another equally important thing about packaging: make a great presentation out of your order. You can achieve this by packing the order in a fancy way so it looks like a present.

Another great way to make the package more attractive is to complement it with an insert—a discount, product sample, or a free gift. Be ahead of the customer’s expectations!

3. Physical delivery

This stage starts from handing over an order to the delivery service and ends on the actual delivery to the customer. In an eCommerce marketplace, you should offer multiple shipping methods to your customers so that they have a choice.

The choice of carries to work with ​​impacts cost, delivery speed, and reach. Popular international and local carriers such as FedEx, DHL, UPS, USPS, and others usually offer different delivery options for different business sizes and regions. Just make sure your marketplace platform integrates with popular carriers. For example, CS-Cart Multi-Vendor integrates with eight world’s popular carriers: DHL, Canada Post, USPS, UPS, FedEx, Swiss Post, Australia Post, and Temando.

4. Customer service

You and your sellers should offer exceptional customer service at every stage of the shipping process: inform customers about the shipping status, resolve issues and complaints in a satisfactory manner.

A lot of things can happen during the order delivery process: the package could be lost, damaged, a delivery vehicle can break causing delays, etc. At this point, you must do your best to communicate with your customers in the right manner to not dissatisfy them.

Your goal here is not to lose a repeat customer.

5. Returns

This is a pain point. No one likes product returns—neither the seller nor the customer. But you can’t avoid returns, it’s a normal operation on an eCommerce website. Bad return processing can easily turn your customers away from your marketplace.

The key to customer satisfaction here is to make the return process as smooth as possible with minimum effort and time expenditure from your customers. Big players such as Amazon offer hassle-free returns: the marketplace provides a customer with a pre-printed return label. A customer just hands over the item to the post office employee and that’s it.

What experts say

James Khoury, an online retailer and CEO of Zendbox, the intelligent eCommerce fulfillment solution driven by AI

Like it or not, returns are an important part of any eCommerce operation. At its most fundamental, it’s simply fulfilling your obligations as a retailer to provide customers with a channel for returning defective goods, or those that are not sold as advertised.

But returns are also an important part of the marketing process. In some sectors, it’s vital to let customers know that being able to return a product is a routine part of your transaction with them, even if the products are exactly as described.

Let them know it’s not something you’re going to kick up a fuss about and you’ll find people speculatively buying from you with fewer misgivings about being saddled with unwanted goods. In fact, a satisfying return and refund can turn a disgruntled customer into a loyal one. Here’s how to make a streamlined returns process:

1. Maximize fulfillment efficiency

Ensure a smooth and well-maintained fulfillment process and you can reduce your returns straight off the bat. Remember also that packaging is an integral part of the fulfillment process too. When it’s rushed or scrimped on, damaged goods are the result. You guessed it—that means more returns.

2. Keep it simple!

One question should always be on your mind when designing a returns policy: could this be any easier? Think about including returns packaging, ready-addressed, with the order. For some items, collection might be the best option. If a small outlay today can lead to a long-lasting customer relationship, it’s worth it. 

3. Be transparent

Let customers know what they can expect from the transaction and if you meet or improve in their expectations, they’re less likely to be dissatisfied. It’s vital that your customers know exactly what to expect from a returned package, ideally at (or before) the purchase stage. How long will a replacement take? When will their bank account be refunded? How will the customer need to initiate the return? 

4. Utilize a 3rd partyThird party logistics (3PL) is one solution to a complex returns situation. With this arrangement, you simply supply the 3PL company with your products and they take care of the entire fulfillment process: that’s taking orders from your website, packaging, dispatching and returns.

Local and international shipping

Local and international shipping differ much in terms of costs, speed, regulations, and risks. If you’re running a global marketplace that ships local customers as well as beyond your borders, you have to tease these shipping types apart.

Local delivery is obviously less challenging for marketplace sellers: it’s faster, the risk of delays is lower, and it is usually cheaper to ship orders within a region. Sellers don’t need to rely on shipping carriers who tend to change their terms and increase the cost during the Holidays.

To deliver the orders within the city or the region, marketplace sellers can use these methods:

• Deliver orders themselves
• Hire employees to form an in-house delivery team
• Use third-party local delivery service providers
• Offer local pickup when customers come for the order themselves
• Combination of these four

But there could be exceptions. Your sellers can sometimes use local post service to send out orders. For example, a CS-Cart-based marketplace of food Yumbles.com fully relies on its food makers to deliver their yummy stuff to customers. The marketplace delivers only within the UK, so many of their small food makers use Royal Mail.

Usually, if your marketplace offers the same product from a local and an abroad sellers, the customer will be more likely to order from the former. Not only because local delivery is faster and more safe but also because many customers want to support local companies. It’s also a great opportunity for local offline businesses to go online and expand their sales beyond the city—to the whole region.

According to Shopify, online shoppers spend 23% more and have a 25% higher cart size when marketplace sellers offer convenient local pickup and local delivery.

International shipping can be challenging and beneficial at the same time. By shipping the orders internationally, your sellers get access to a huge audience not limited by the region a seller is based.

60% times faster

That’s how faster retailers who offer premium international shipping grow compared to those that don’t.

But the price for this growth is high. Besides longer delivery periods, higher costs, and dealing with third-party international carriers, there are regulations, restrictions, and prohibited items that vary from country to country. And you have to constantly keep track of any changes in regulations.

One of the examples of a limitation that can directly affect your sales volume is the Shimano case. Shimano makes equipment for fishing and bicycle components. In 2019 the company restricted bicycle parts online retailers from shipping Shimano components to a large list of countries. Bike parts online retailers lost a large base of customers in just one day.

What experts say

Daniel Carter, Debt Advisor at IVA Advice

Shipping to other countries:

Whether you’re established in the United States and want to expand internationally, or you’re based in another country and want to start exporting within the United States, international shipping may be difficult and costly for any company. Because different countries have different regulations, tariffs, taxes, and requirements for incoming shipments, it’s critical to find experienced fulfillment partners who can not only help you navigate the Universal Postal Union agreement and international shipping but also provide reasonable shipping rates.

Zones of shipping:

The distance between a package’s origin and destination is measured in shipping zones. These can range from Zone 1 to Zone 8 in the continental United States. Shipping zones are used by carriers to compute shipping rates. The shipping zones are determined by the origin of your product. This means that two separate origin locations sending to the same destination could be shipping to completely different zones. As a general rule, the higher the shipping zone, the more expensive it is to ship an item.

Two major ways of managing shipping on an online marketplace

There are two common ways marketplaces manage shipping of products to customers:

• Sellers ship orders to customers. Sellers take the whole shipping process on them—accept orders, pack them, and send them to the customers.

• Marketplace ship orders to customers. Sellers send items to the marketplace, and the marketplace ships orders to the customers through its own or third-party delivery service.

With the first method, sellers create and use their own shipping methods. A customer pays for their order, chooses the shipping method offered by the seller, and the seller packs up and ships the products directly to the customer.

A customer can have different products from different sellers in one order. In this case, they have to choose a shipping method for each seller and pay for several different deliveries.

Pros of shipping by sellers	Cons of shipping by sellers
+ You don’t need your own warehouse to store the products. All products are stored by the sellers.	– As you do not store the products, it’s your vendors who are responsible for updating the stock.
+ You save money on launching the marketplace. It is a great option to start a business with a minimum investment.	– A customer has to pay each seller for shipping.
+ Your location can be flexible. If your sellers ship products themselves and don’t move them to you first, you can run your marketplace literally from everywhere.
+ You don’t have to worry about the shipping costs. The sellers are responsible for the delivery expenses.

With the second method, the marketplace picks up or receives the ordered products from sellers and sends the order to the customers. The marketplace handles shipping, and therefore receives the money for it. All the extra expenses can be included in the vendor plan cost.

The important benefit of fulfillment is that customers can select a single shipping method for multiple sellers at checkout, and don’t have to pay for the shipping several times, even if they have products from different sellers in their order.

Pros of shipping by marketplace	Cons of shipping by marketplace
+ Customers can pay for shipping just once.	– The marketplace has to handle the shipping costs
+ Using fulfillment by the marketplace you can free your sellers from all the complexities related to shipping.	– Small businesses and new startups will likely have complications working with this model.
+ Sellers don’t have to worry about creating shipping methods.

See how both shipping methods work from the marketplace admin side in CS-Cart Multi-Vendor:

Shipping rate types: which is the best for your marketplace

It’s customers who always pay for shipping. Even if a marketplace seller offers free shipping, it’s not actually free: the shipping costs are usually a part of product prices. Sellers can offer three types of shipping rates and a mix of them:

• Free shipping
• Flat-rate shipping
• Real-time shipping rate

Which one to use depends on many factors. For example, on the types of products, the distance to potential buyers, the region marketplace works in, etc. Let’s take a closer look at what these types of shipping rates are and when you should offer each of them on your marketplace.

Free shipping

It’s the simplest shipping rate strategy and the one that customers prefer. eCommerce companies use free shipping as a promotional factor for attracting buyers. But the point is that free shipping can be free for customers but it’s not free for a seller. The sellers still pays for shipping to the delivery service.

To offer free shipping a seller needs to make sure that it doesn’t influence sales benefits negatively.

The best practices to offer free shipping and avoid negative impact on the sales benefits are:

• Including shipping costs in a product’s price
• Offering free shipping only for products you’re making enough on the sale to cover shipping and make profit
• Not offering free shipping for large and heavy products
• Offering free shipping by a minimum spend threshold like Amazon does
• Offering free shipping to only VIP customers or those who participate in your loyalty program or premium subscription

Pros	Cons
+ Competitive advantage	– Risky in terms of losing profit
+ Attractive for customers	– Not applicable for some products categories

Flat-rate shipping

This type of shipping rates are easy to administrate and it’s straightforward for customers, too. Customers pay a fixed amount for shipping. For example, the UK-based bike online store Chainreactioncycles.com charges a flat rate of £2.99 for standard delivery and £3.99 for priority delivery across the UK.

You can also charge customers a fixed amount for shipping depending on their distance from the warehouse or a fulfillment centre. Say, $5 for shipping within the city, $10 outside of the city, and $15 for shipping to a neighbouring city.

Pros	Cons
+ Still attractive for customers	– Not always suitable for international shipping
+ Easy to administrate	– Customers can sometimes overpay compared to live rates
+ Good for uniform products	– Not applicable for large and heavy items

Real-time rate calculation

With real-time rate shipping, customers pay the amount, which the marketplace pulls from the carrier’s API based on distance, dimensions, and delivery preference.

This is probably the best option for you in terms of your profits’ safety. And real-time calculation from the carrier often saves customer’s money on shipping: if a customer orders a small item and lives near the warehouse, he or she will be charged less than with a flat-rate shipping.

You can add a surcharge to the calculated amount for packaging and other operations you do with the order before handing it over to the carrier.

Pros	Cons
+ Automated	– Can be expensive for international customers
+ Saves customers’ money if the item is small and the distance is short	– May require integration with your marketplace platform
+ Works for any products
+ Protects you from losing profits on shipping

Best way to display shipping and taxes information to customers on a marketplace

As we already know, 49% of customers abandon their carts because of unexpectedly high extra costs at checkout—shipping cost, taxes, fees, etc. eCommerce shoppers strongly dislike unexpected cost increases after they put products to cart. This dissatisfaction not only leads to the increase in cart abandonment but can also negatively impact your brand image.

In a perfect world, you need to show final shipping costs and taxes early, even before a customer puts the product into the cart. Ideally, a product page should display shipping cost for the product a customer is browsing at the moment.

Airbnb shows the final price for rent right on the product page. It calculates the total amount for chosen dates, adds the service fee, and displays the total price:

Another great practice comes from Restoration Hardware. They offer an unlimited furniture delivery for a fixed shipping cost depending on the buyer’s location. A buyer only needs to enter her ZIP code right on the product page and the website shows the final price for unlimited delivery:

How to test your shipping strategy and why you need to do so

Look at big players like Amazon. They are constantly working on their shipping strategy: introduce new delivery options, improve shipping and return procedures, offer customers a more convenient and personalized way of order delivery.

You will have to stay up to date with the market and shopping behavior changes and tweak your shipping processes constantly. And you need to be clear with your goals here. Set the goals of your shipping strategy. The most common goals are:

• Increase conversions
• Decrease cart abandonment
• Increase average order value
• Expand market or target audience
• Decrease costs
• Improve operational efficiency

Let’s say, you want to decrease your cart abandonment rate. You now know that customers like to see all the extra costs before they place the order. You come up with a brilliant idea: to show total shipping cost for an item right on the product page based on the customer’s location. 

Let’s say your marketplace platform doesn’t allow you to do this by default, so you need to implement this new feature. And any feature development requires resources—money, time, people, etc. Spending resources on this new shipping feature can be risky.

What you need to do first is to build an MVP—Minimum Viable Product of this feature. With an MVP experiment, you’ll see whether showing shipping cost on a product page will positively affect your cart abandonment rate and conversions.

Your MVP experiment will have 6 steps:

1. Figure out what your problem and solution are. Your problem is the high cart abandonment rate. And the solution that you assume is displaying total shipping costs and taxes upfront—right on a product page. This way customers will see the shipping costs before checkout and make the final buying decision.

2. Identify your assumptions and find the riskiest. Your assumptions have to be true so that your shipping feature is successful. Pick the riskiest one—the one that if it’s not true, the feature will not decrease the cart abandonment rate. In our case, the riskiest assumption goes like this: a customer wants to know the total shipping cost upfront—before checkout so as not to be surprised at checkout.

3. Build testable hypotheses around your assumptions. To form a hypothesis, use this formula: We believe [subject] has a [problem] because [reason]. If we [action], this [metric] metric will improve. Our hypothesis goes like this: We believe a customer doesn’t know the total shipping cost upfront because it only displays at the end of the checkout process. If we show the total shipping cost upfront on the product page, the cart abandonment rate will decrease.

4. Establishing your minimum criteria for success. The minimum criteria of success will tell you if your shipping feature is worth building. To establish an MCS, take into consideration the cost and the reward of building the feature. The cost must be lower than the reward. Monitor your cart abandonment metrics to see if the feature works as you expected.

5. Execute the MVP experiment. Build a minimum viable feature. You don’t need to develop it completely—just give the customers an opportunity to calculate the total shipping cost right on the product page based on their ZIP code for example. A customer enters her ZIP code and your managers calculate the shipping cost manually and show it to the customer. This is so-called the Wizard of Oz MVP—when the feature looks finished but all backend actions are still manual.

6. Evaluate and learn from the experiment. See your metrics—if the cart abandonment rate seems to decrease, you’re in the right direction. Finish the feature and benefit from it!

Summary

Shipping is a crucial part of your marketplace business. Customer satisfaction and cart abandonment rate greatly depend on the convenience and speed of your shipping.

When planning your shipping strategy, you need to take into account and improve five components of the shipping landscape: order management, preparation and packaging, physical delivery, customer service, and returns management.

Local shipping is easier to manage and it’s less riskier for sellers. International shipping is way riskier and more difficult to organize but allows you to scale your marketplaces globally and gain new customers.

You generally have two options of organizing shipping on your marketplace: 1) sellers ship products directly to customers themselves and 2) sellers ship items to the marketplace, and then the marketplace ships to customers.

There are basically three types of shipping in terms of rate calculation: 1) free shipping, 2) flat-rate shipping, and 3) real-time rate calculation. There could be hybrids and mixes.

Customers prefer to know the total shipping cost upfront, before going to checkout. The best practice here is to show shipping cost for a certain product right on that product page.

To successfully test your shipping strategy, you first need to be clear with your goals. Once you know your goal, launch an MVP experiment of your shipping improvement. Check your metrics, and if the MVP works well, proceed with the implementation.