Since order fulfillment is a "behind the scenes" process, newcomers to ecommerce don't usually have a strong strategy in place for efficient fulfillment processes. In this post, we'll cover some fulfillment fundamentals to help beginners avoid the costly mistakes of over-stretching or over-complicating their fulfillment operations.
Free shipping vs. fast shipping
Yes, offering free shipping is a surefire way to increase sales. However, it's not free for the seller – and the costs can add up. Fortunately, there are many strategies you can use to reduce or recoup the costs of free shipping. For example, increasing the transit time decreases the cost while still appealing to most customers. In their 2016 "Pulse of the Online Shopper" study, UPS reported that 85% of shoppers are willing to wait 5-7 days for delivery if shipping is free.
Larger orders give you better margins on shipping
Packaging and fulfillment expenses aside, it's cheaper to ship two units instead of one. The profit margin from selling an additional unit will offset the increased shipping costs that result from sending a bigger, heavier package. This is important to remember when adding new SKUs or running promotions. For example, it may be more cost effective to kit products together, rather than offering them for sale individually. When it comes to promotions, the above UPS survey also found that 52% of consumers added items to their cart to qualify for free shipping.
Too many SKUs can negatively impact fulfillment
It can be a great idea to provide flexibility for your customers by offering multiple SKUs containing variations of the same product. However, it’s important to strike a balance. While larger orders return higher margins, too much variety and volume can increase the costs and reduce the efficiency of your inventory management and order fulfillment processes. Before running a promotion, adding SKUs, or entering peak season, don't forget to account for the impact on your fulfillment operations.