A new merchant's guide to shipping & fulfillment options
Setting up an online store is easy. Pick a theme, plug in some products and supporting content, and boom, you’ve got an operational storefront, open for business.
Don’t get too comfortable, though. To really settle into your groove as a new online merchant, you’ve still got to solidify a supply chain, sort out your marketing approach, and develop a strategy for filling and shipping orders in an efficient and cost-effective manner.
Many new merchants don’t give much thought to the last of those tasks, either because they don’t know their options or because they fail to appreciate the impact it has on their customers’ buying experience. Shoddy shipping and fulfillment practices can lead to delivery delays, order errors, and a general lack of communication between merchant and customer. Select the wrong strategy and you could also find that your business becomes unprofitable.
In this post, we’ll provide a high-level overview of several options for shipping and fulfilling ecommerce orders, along with the pros and cons of each. Keep in mind that there’s no “one-size-fits-all” approach for this stuff, and what works well for one business may actually hamper another. By knowing your options and choosing the one that fits your store best, you’ll be well-positioned to provide first-rate service to your customers, from checkout all the way through delivery.
Option #1: Do it yourself (DIY)
For many ecommerce entrepreneurs, shipping and fulfillment starts with a pile of corrugated cardboard and bubble wrap in a garage somewhere. Now, that might sound dismal (long nights and paper cuts come to mind), but there are some distinct advantages (and disadvantages) to taking it into your own hands.
Pros of DIY shipping and fulfillment
- It’s cheap. Few beginner sellers have the capital to outsource shipping and fulfillment from the get-go. By handling it yourself, you’ll pay only the cost of materials and shipping, making it the most cost-effective option by far.
- Anyone can do it. If you’ve got two hands to assemble boxes and two legs to schlep them to the post office, then you can ship and fulfill orders yourself. No special skills or experience necessary!
- You’re in control. If you’re fussy when it comes to right angles and wrinkle-free packing tape, this is the approach for you. Not only does it allow you to inspect each and every order leaving your store, it gives you complete control over how your products are packaged, branded, and shipped.
Cons of DIY shipping and fulfillment
- It’s tedious. No matter how big a thrill you get from packaging and shipping your first few orders, once they start adding up, you’ll find that the novelty quickly wears off. There’s only so much folding and stuffing and sticking one person can take.
- You need space. Yeah, you can hold a small amount of stock and shipping supplies in a home office, but when that stock starts to spill into the living room and you can’t remember the last time you ate off your kitchen table, you might start to reconsider your DIY strategy.
- It takes away from more important stuff. As an ecommerce entrepreneur, you need to wear a lot of hats. Product design, business development, customer support—these aspects are crucial to your success and can be neglected when you’re spending half your day slapping labels on boxes.
Option #2: Outsource it to someone else
There will come a time in most successful online stores' lifespans when in-house shipping and fulfillment no longer makes financial and logistical sense. As Mobilized points out, “It’s ironic in a way that retail success can actually slow down your business if you aren’t able to cope with the volume.” When you reach this tipping point, you have two options: hire up or hire out.
Since many online businesses don’t have the resources to build up a dedicated shipping team, partnering with a third-party logistics provider is a popular and effective response to growing demand. With outsourced shipping and fulfillment, inventory is stored in an off-site warehouse where employees pick, pack, and ship products on your behalf. You simply forward them the order details, and they take care of the rest.
Pros of outsourcing
- It frees you up to do other things. By taking shipping and fulfillment off your plate, you’ll save yourself a ton of time that can be used to grow your business.
- It smooths out peaks and valleys in order volumes. In some cases it’s easy to predict the busy periods (the holidays) and the slow ones (January). But other times you get hit with a surge you’re not expecting, and that’s where a third-party service comes in handy. They can scale up and down much faster and more easily than you can, and it’s nice to know that even when you aren’t there, someone has your orders in hand.
- You can take advantage of special discounts. Carriers like FedEx and UPS frequently extend discounts to shipping and fulfillment companies that little old you would never have access to on your own. Partnership has its perks.
Cons of outsourcing
- It can be expensive. Outsourcing doesn’t come cheap. If you’ve been DIY-ing your shipping and fulfillment up until now, the added cost might sting a little.
- You’re at the mercy of your service provider. How products are stored, packaged, and shipped is out of your hands, so you need to trust that the company you’ve hired is working to your standards. This includes everything from packaging quality to speed of delivery to salability of returned merchandise. Remember, if any of these aspects aren’t to your customers’ satisfaction, it’s you, not the service provider, that’s going to be on the hook.
Option #3: The wonderful world of dropshipping
Ah, dropshipping. As an online business owner, you’ve probably come across this term at some point, but do you actually know what it means?
According to Shopify, dropshipping is “a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product, it purchases the item from a third party and has it shipped directly to the consumer.” With this approach, your store never has any excess merchandise, because you only purchase it whenever a customer places an order.
Pros of dropshipping
- It eliminates the headaches of DIY shipping and fulfillment. No more messes of tangled tape, no more long lines at the post office, no more filling your home with inventory you may never sell. With dropshipping, none of that is your problem anymore.
- You don’t need as much capital. Because you don’t have to purchase products ahead of time—or pay for storage space—your business expenses can actually be quite low, and the risk you take on quite minimal, because you only pay for what you sell.
- You can offer a wide variety of products. Instead of having to buy large quantities of inventory you’ve never sold before, dropshipping allows you to test out new products on your customer base risk-free.
Cons of dropshipping
- It can hurt your margins. When another company is assuming so much of the risk and performing a valuable service for you, it’s no surprise that they expect a substantial cut of the profits. Plus, since you’re only ever ordering one product at a time instead of buying in bulk, you’ll never benefit from wholesale discounts that can boost your bottom line.
- You need industry contacts. It’s easy enough to connect with dropshipping companies via Google, but finding the right products in the right place at the right price point is a tall order if you don’t have any insiders guiding you.
- It can get complicated fast. When you’re working with multiple suppliers and dropshippers, all of whom have different rates, practices and standards, it can be difficult to keep on top of everything—especially when your customers assume that everything ships from a single warehouse. Remember, it’s your reputation on the line if an order goes awry, so do yourself a favour and partner only with a select few reputable dropshippers.