Believe it or not, an E-Commerce site’s success is often determined by how well it handles shipping. The cost of getting your products to the customer can eat into any profit margins you have built into sales. If you optimize your shipping then the affect on the bottom line will be minimal. The best way to control your shipping costs depends on your particular situation. There are three basic models for shipping depending on your needs.
The traditional inventory method:
This is the oldest strategy in commerce. It is all based on inventory and sales. You either make or buy the products you want to sell, and you use a warehouse or storage facility to keep the items until they’re needed. Then you ship the items out as they sell. This method usually requires up-front money to buy the items and includes an overhead cost for keeping the items in stock. If you make your own products then this is the best option for storing and shipping. You can optimize the inventory method by implementing an automated system that allows you to quickly find the item, pack it, and print a shipping label. Parts might be taken over by people (like the picking and packing) but the more you can automate the better.
The dropship method:
If you can manage it, this is usually one of the most cost effective ways of shipping your items. In this strategy you take orders and collect money through your site, but instead of having inventory on hand the item is shipped directly from the manufacturer. Not all manufacturers are willing to operate this way, but if you have the option you should take it. You’re going to save a bundle of money without the overhead associated with keeping inventory. This strategy isn’t without downsides, however. You have less control over the shipping process, so you could run into issues if your supplier is slow to ship. Make sure your contract with the manufacturer addresses these potential problems so you don’t end up losing business.
The custom method:
Some E-Commerce sites sell unusual items or act as an intermediary for people to sell to each other (think eBay, for example). In these cases, shipping is more of a custom affair depending on what is being sold. You might have to find a specialty shipper if you’re selling big stuff like boats or cars. In these cases, it’s usually a good idea to add a shipping fee as part of the cost of doing business. If you have data about what it usually costs to ship then you can make it a flat rate, or you can charge on a case-by-case basis. Make sure you disclose the shipping information early in the transaction so you don’t end up with people abandoning their carts again and again.
E-Commerce shipping doesn’t have to make a dent in your profits. Simply choose the right approach for your business and watch the money roll in.