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With the buzz around cryptocurrency, Web 3.0, NFT and the blockchain, you may have considered taking Bitcoin as payment for your eCommerce business. Even if you don’t, it pays to familiarize yourself with how crypto changed the eCommerce landscape.
While cryptocurrency prices have been relatively volatile, many companies support crypto payments. Major eCommerce service providers like WooCommerce, BigCommerce and Shopify accept crypto payments through digital wallets like BitPay and Coinbase Wallet.
In this article, we cover the advantages and disadvantages of implementing cryptocurrency payments in your eCommerce business. We also provide a guide to accepting cryptocurrency on your eCommerce website.
Cryptocurrency is a digital currency (i.e. lines of computer code) not issued by a bank or government, allowing users to spend money anonymously. Bitcoin is one of the most prominent cryptocurrencies, which can be traded on crypto exchanges like Coinbase. Some businesses also accept bitcoin and other cryptocurrencies as payment.
Bitcoins are stored in a digital wallet, available online through cryptocurrency exchanges or offline in a flash drive-like device. You use this wallet in crypto transactions by transferring funds from your digital wallet to the vendor.
According to the major cryptocurrency exchanges, these are the four most popular cryptocurrencies:
Bitcoin and cryptocurrency in general has been widely adopted these past few years. Here are some businesses that accept crypto:
Many large eCommerce companies accept cryptocurrency as payment, but is it a good idea? Let’s discuss the advantages and disadvantages.
Adopting crypto payments for your eCommerce brand helps you reach more clients and finish transactions faster. Here are four reasons to start taking cryptocurrency payments:
Taking digital currency payments means reaching a new market of tech-savvy clients. Moreover, accepting crypto means you don’t have to go through the hassle of converting currencies when doing business with international clients.
However, expanding your client base to other countries means you may need to make international deliveries, so make sure your shipping and last mile delivery solutions can handle them.
Credit cards and bank transfers take hours, sometimes even days to process. Cryptocurrency transactions only take minutes to arrive in your digital wallet, letting you access the money faster.
Credit card companies and most payment processors can charge up to 5% in transaction fees. Crypto transaction fees tend to fluctuate, but they generally don’t go higher than 1.5% per transaction. This number may seem small, but it stacks – giving you considerable savings in the long run.
Cryptocurrency transactions are transparent because they’re recorded on a publicly viewable digital ledger called the blockchain. Additionally, crypto transactions are very hard to reverse, so clients can’t ask to withdraw money from your account without your consent, preventing fraud.
Many major brands accept bitcoin and other cryptocurrencies. Here are several examples of online retailers and stores that take bitcoin as payment:
Credit card companies and payment apps like Stripe or Square charge transaction fees anywhere from 3-5% on each transaction. Many eCommerce companies build these fees into their online store prices. Cryptocurrency transactions often don’t have fees or are as low as 1%. However, there are cryptocurrency conversion fees when transferring cryptocurrencies to national fiat currencies like USD.
Cryptocurrency allows for anonymous online purchases by using encrypted wallet addresses — it’s basically like using unmarked cash. This allows your clients to purchase items without compromising their personal information and allows you to do business without worrying about any privacy regulations.
Contrary to popular belief, developers built cryptocurrency's blockchain technology specifically to reduce fraudulent activity. By accepting cryptocurrency, money is exchanged immediately, it cannot be rescinded and it cannot be forged; therefore, the ability for fraudulent chargebacks or returns is drastically reduced.
The value of cryptocurrencies tend to fluctuate wildly, compared to the relatively stable movements of fiat currencies. If crypto values drop, you may experience cash flow issues and difficulty in daily operations.
Credit card companies and banks usually have strong client protection measures to safeguard you from unauthorized spending. However, cryptocurrencies have no buyer protection, so you may need to build trust with clients before they warm up to crypto payments.
Bitcoin is produced through mining, an energy-intensive task that consumes more electricity annually than the entire country of Argentina and has a large carbon footprint that equals New Zealand. These issues can hurt crypto prices, like the bitcoin price drop that happened after Elon Musk and Tesla refused to accept bitcoin as a form of payment because of its environmental impact.
Although Bitcoin isn’t subject to regulations, the government requires you to report your Bitcoin transactions and the revenue/loss from holding the “property” – as declared by the IRS.
According to the IRS, “a taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received.”
If you’re planning to take cryptocurrency as a payment method on your website, you need to prepare these things first:
You need a digital wallet to receive, send and store many cryptocurrencies like bitcoin and Ethereum. For eCommerce users, we recommend cryptocurrency exchange wallets like Coinbase because they let you make transactions faster.
Adopting cryptocurrency means you're opening yourself to international clients. Review your shipping capabilities to prevent any delivery issues and ensure you can handle orders from abroad. If not, upgrade your 3PL software, and don’t promise two-day shipping unless you can guarantee it.
Many eCommerce platforms like Shopify and WooCommerce already offer cryptocurrency payment integrations. If your platform doesn’t offer it, look for a crypto payment gateway that suits your needs.
You need to announce that you’re accepting cryptocurrency payments. Do this through your eCommerce website, social media and other marketing tools at your disposal.
To start accepting Bitcoin on your eCommerce site, simply integrate a BTC payment processor into your store. Many major eCommerce providers like Shopify and WooCommerce already have BTC payment processor integrations, so you can implement them immediately.
Different BTC payment gateway solutions offer different features, so examine the following when making your pick:
Once you accept BTC as payment, market your progressiveness and tech-savviness to your consumer base. You can display signs on your site that say, "Bitcoin accepted here."
If a direct integration isn’t possible, consider alternative options such as the following:
If you decide to accept Bitcoin and cryptocurrency on your online store, you'll want to ensure that your system, transaction and funds are all as secure as possible. So, use strong passwords and multi-factor authentication (MFA) for your crypto exchanges and wallets. Also, regularly update, backup and encrypt your systems and crypto wallet.
To keep your cryptocurrencies safe, buy an offline Bitcoin wallet and put your funds into it regularly. This way, you won’t lose a lot of money if something happens to your crypto exchange account.
While new technologies can be confusing and a bit scary, cryptocurrency has the opportunity to transform eCommerce and international trade as we know it. So while you may not be comfortable with this, at least you'll have a deeper understanding as the internet and eCommerce landscape continues to evolve.
You must integrate a payment gateway on your eCommerce website to accept cryptocurrency payments. Some eCommerce platforms have built-in integrations, but, in some cases, you may need to make custom buttons or build your own integrations.
The first modern cryptocurrency is Bitcoin, created in 2009 by a pseudonymous programmer, Satoshi Nakamoto. As the cryptocurrency space developed, more digital assets like Ethereum and Cardano started appearing.
Crypto is changing eCommerce by enabling fast transactions with low fees and improving fraud protection. Additionally, adopting cryptocurrency lets businesses reach a larger market of tech-savvy clients.
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About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With over 5,000 brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
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Ecommerce shipping is a key link of the supply chain that can make or break your business. Think that's a bit of an overstatement? Well, last-mile delivery is recorded as the most costly part of the order fulfillment process - it's one of the most pressing logistical challenges. Moreover, if order inaccuracies occur, and items are shipped to the wrong location, then have to face the additional costs of returns and refunds.
This is why it's so important to optimize the shipping process. You need to cut down labor costs, transit times, fuel costs, and establish a seamless workflow. Easier said than done, though, right?
In this article, we're going to take a look at how you can optimize the shipping process from different angles. Questions such as how much to charge your customers, what sort of hits your business should absorb, how to protect your own investment, and which data-driven tools to use, will be addressed and answered.
Shipping is a vital part of the order fulfillment process for ecommerce merchants. It consists of order receiving, order processing, and order fulfillment.
Fulfillment starts as soon as your customer hits the checkout button on the ecommerce platforms and purchases the products in their shopping cart. Once the site confirms the order, the chain moves forward. Small-scale ecommerce stores often store their inventory in their garages. At the same time, as you go up the scale, vendors usually employ the services of inventory storage facilities and warehouses. Upon confirming the purchase, service providers package, label, and ship the products to the destination address.
Shipping can be pretty challenging to handle on your own, especially if you have a growing business. This is the point where third-party logistics companies can be of big help. They optimize the fulfillment process and cater to your needs, and even help you minimize logistics costs. Various companies have different shipping policies and shipping rates, such as Amazon Prime, which offers overnight shipping.
ut not every business can pull this off. This is why your company’s shipping policy should be based on a combination of your budget and your customers’ needs.
There are many factors that ecommerce merchants have to account for when it comes to shipping. All the seemingly small details contribute to your overall shipping costs and total transit times. These factors ultimately determine customer satisfaction and directly impact your business’s reputation and future growth. Since your company’s ecommerce shipping strategy is so important, it's worth investing time and resources to conduct proper research. Here are some of the best practices that online stores employ for shipping, to help you decide which one may suit your business best.
An effective way to reduce shopping cart abandonment is to provide some incentive to your customers. Companies usually use discounts and coupons to their customers for this purpose. Offering free shipping to your customers makes them feel more comfortable about placing an order.
Contrary to what the name might suggest, free shipping isn’t actually free. Either you take the hit and pay for the fees outright, or the fee is absorbed in a way that customers pay for it. You can do this by incorporating shipping costs into the sale price of your products. This way, you can offer free shipping without compromising on your own profits.
Another popular shipping strategy among online vendors is charging real-time carrier rates. This process is transparent and gives your customers a little wiggle room. How? Well, let's say you partner up with multiple carriers. You can now let customers pick and choose the shipping option that best suits their need.
Shipping labels like FedEx, USPS, and DHL have different shipping costs, and no one carrier offers lower rates across the board - the pricing depends on numerous factors. Ecommerce platforms such as Shopify integrate real-time shipping rates of these carriers into their dashboard so that they are easy to handle. Customers can then choose what works for them, whether it is overnight shipping, two-day shipping, or flat-rate mail.
If you don’t want the hassle of calculating shipping prices for each package, then flat-rate shipping is another reliable option. As the name suggests, this shipping option charges a single rate for each shipping order, regardless of the size or nature of the product.
This option is most suitable for businesses that sell a small variety of products with similar dimensions and weights. However, be sure not to set a very high flat rate for the items- it might scare away the customers. Postal services like USPS usually have several flat-rate shipping options.
If your customer base is near to your inventory storage facility, then offering local delivery is one way to go. Keep in mind, though, that this only works for local customers. You can set up the local delivery zone through the use of zip codes - customers within this area qualify as local customers.
Suppose you are catering to a large customer base outside your local area. In that case, you can still offer the local customers this option by putting an appropriate button at the checkout. The local delivery option can be set to be free of charge or at a low flat rate, depending on your budget. This option is best for strengthening your local customer base.
An essential part of devising your shipping strategy is determining your shipping costs. If you partner up with a shipping label, couriers base their shipping rates on a number of factors. These factors range from the package weight and size to the origin and destination address. The bigger the product is and the farther away you have to send it, the more you'll typically end up paying for shipping.Before settling on your company’s shipping rates, be sure to assess the following factors.
One thing ecommerce merchants should focus on is their profit margins- they determine the success of your business. Shipping fees are a significant part of the total fulfillment expenses- deal with them improperly, and you could end up losing money. Before you set up the total price of a product, consider all the little expenses like shipping costs, credit card fees, and packaging, in addition to the cost of the product. Your sale price should leave room for profit after taking care of all of these expenses.
From a historical perspective, packaging and shipping were just ways to get the products to the customer. The up-gradation of technology and the evolution of business strategies have now transformed packaging and shipping into a marketing opportunity. And why not - telling your brands’ story with your product packaging and creating a memorable unboxing experience is a brilliant opportunity.
Packaging inserts and other items could take the whole experience up a notch when the customer unpacks their order- think of unboxing videos online and the publicity they gather! Of course, this type of marketing is another shipping expense and would add to the total costs.
While you can utilize packaging for marketing purposes, don’t lose sight of its original purpose - the package still has to securely hold all the goods. Of course, the safety level for each product depends on its nature. For example, you can ship sweaters and other clothing items in poly mailers, and they would be secure. But for fragile items with higher value, you might need to invest in sturdy boxes and maybe even packing peanuts.
While the nature and size of the product help determine your packaging needs, your customers’ values and preferences also need to be accounted for. Eco-friendly packaging options are often pricier than the standard options, but they appeal to the growing number of eco-conscious consumers. This is why it pays to at least provide eco-friendly packaging as an option to customers.
Insurance and tracking help increase customer loyalty among online shoppers. They help secure your products and provide you with a safety net in case of any mishap. Shipping labels often provide relatively inexpensive or even free options for insurance and tracking. Like UPS and USPS Priority Mail, some carriers offer free coverage for mail orders above a specific price limit.
International shipping requires proper customs documentation that details the nature and the size of the shipment. More often than not, international shipping also comes with specific regulations and tariffs. Of course, these fees add up to the total shipping cost. Suppose you are catering to a global customer base. In that case, it’s wise to set your shipping policy so that it includes these costs. If you let the customer know of the customs fee beforehand, they won’t be surprised at the unexpected charges once they receive the parcel.
Now that you have an idea of what constitutes the shipping expenditures, the next step is to determine whether to offer free shipping or not. Free shipping options are attractive to customers and directly impact conversion rates, but can your business afford to eat the costs and offer them? Well, several factors determine the feasibility of this decision.
The most important factor to consider is your company's available budget and revenue. If your profit margins are high, offering free shipping probably won’t hurt you. Moreover, package dimensions, and the destination’s zonal distance are also factors to consider. Don't forget to further account for the shipping rates of the shipping company you have partnered up with.
So far, we have discussed costs on the business owner’s end. Your customers are another critical determinant of your decision to offer free shipping. For example, if your target audience isn't really interested in free shipping, then you won't have to offer it in the first place. Of course, you can only determine how important free shipping is to them after doing some A/B testing. To sum things up, every company’s needs are different. As such, their decision to offer free shipping may vary.
Offering free shipping to your customers might not be feasible for every business. Sometimes, you end up losing more money than you make by taking this route. So, how can you realistically offer free shipping without breaking the bank?
Here are some pointers:
If you want to offer free shipping, first determine how it affects your business. As stated earlier, you can utilize shipping as a marketing opportunity. If so, then free shipping expenses can be considered as marketing expenses. This is a profitable investment if it drives your sales up.
If free shipping isn't doing much for your sales though, then the shipping costs might be an addition to the Cost of Goods Sold (COGS), and you may need to adjust your sale prices accordingly. Of course, new businesses might realize that this is more of a hit and trial procedure. You will have to test it first to determine whether the shipping expenses are a marketing expense or COGS.
One way to realistically offer free shipping is to limit the free shipping to specific zip codes and areas. For example, a US-based business might offer domestic free shipping. Still, since shipping to other countries like Canada and Australia comes with tariffs and customs fees, the free shipping offer might not extend to those countries. Shipping carriers base their rates on the zonal distance of the shipment, so it might be expensive to offer free shipping to far-flung areas. The point is to establish your free shipping policy on your carrier’s shipping rates and limit free shipping to nearby areas.
To offset your free shipping expenses, you can increase the rates of expedited shipping. This only works if your expedited shipping option is attractive enough. As an example, between free shipping with 10-day transit time and expedited shipping with 2-day transit time, chances are both options will attract a fair share of customers. So, you’ll be able to offer free shipping to the customers by surcharging the expedited shipping rates.
Setting a shopping threshold for free shipping is among the best practices employed by eCommerce platforms that offer free shipping. Amazon Prime is such an example. The logic behind it is simple enough. Customers must have a fair number of products in their carts before they can avail free shipping. The profit margin from the sold goods covers the free shipping expenses.
Ecommerce sites like Shopify have integrations or built-in shipping cost calculators that determine the total shipping costs based on several factors. These include the shipping partner, package dimensions and weight, the zonal distance between the point of origin and the destination, and the transit time.
You can calculate the total cost of shipping through several determinants - some companies use shipping software for these calculations. These shipping costs include packaging fees, transit fees, and in the case of international shipment, tariffs and customs fees. The transit fees depend on the carrier rates that differ for normal, flat-rate, and expedited shipping options.
Ecommerce stores either go for self-fulfillment or employ the services of a third-party logistics company. In the latter case, the fulfillment partner handles shipping by teaming up with different couriers. Once the eCommerce store confirms the order, the fulfillment partner sources the product from an inventory storage facility, packs it, and sends it out for shipping. The courier then ships the product to the destination.
The cheapest shipping option for a small business is the mail service. USPS is a great shipping carrier with affordable rates. If you want to cut down on the transit time, you could partner up with a third-party logistics company-they also sometimes offer discounts.
ShipHero is a powerful warehouse management solution that seamlessly integrates with your online store and handles warehousing and shipping for you. Shopify merchants can add ShipHero to their existing store on the platform; it is the #1 Warehouse Manager Software on the Shopify app store.
ShipHero integrates seamlessly with major ecommerce platforms such as eBay, Amazon, Shopify, and more.ShipHero aligns its goals with your own, to ensure that your customers are receiving the best services.
With ShipHero, you can enjoy great discounts on shipping rates from our partner carriers. The ShipHero integration on your online store dashboard lets you compare the shipping rates of different carriers like UPS, USPS, and FedEx. You can then determine which option works the best for you and eliminate the chances of overpaying for shipping. The fulfillment software allows you to save on shipping costs by identifying orders that you can merge. Furthermore, our algorithm picks out the fastest shipping routes, saving both on transit times and shipping costs.
ShipHero’s eCommerce integrations make the whole order fulfillment process a breeze. ShipHero’s mobile app lets you manage your operations from anywhere- you can track the inventory movement of your store in real-time. You can set rules to simplify packing and shipping tasks. Inventory synchronization and warehouse automation increase the efficiency of the supply chain - meaning that your customers ultimately receive their orders faster. Additionally, ShipHero sends order shipping confirmation and tracking data to customers when their orders are shipped, earning you the brownie points.
You can access ShipHero’s premium reporting and analytics tools and use the data to enhance your brand's growth strategy. The reporting tools give a comprehensive insight into shipment expenses, sales history, inventory stocks, cost of goods, and team performance. Essentially, it allows you to keep track of everything from one central place.
Ecommerce shipping is a vital part of the supply chain, and one of the most expensive stages too. To avoid hefty transit costs, delayed orders, and unhappy customers, optimizing the shipping process is vital. A powerful ecommerce shipping solution like ShipHero can help you meet your business goals and optimize your shipping process.
Effective supply chain management is vital for any business, big or small. Without the help of proven, efficient supply chain management strategies and practices, your company may suffer from poor workflows, high costs, unreliable order fulfillment, and major losses.
One of the most vital parts of the order fulfillment process is the pick and pack stage. If the pick and pack stage is not optimized, then a number of issues may arise. This includes order delays, order inaccuracies, delivery of damaged goods, and more.
So, to guarantee the success of your business operations, optimizing the pick and pack process is vital. This is easier said than done, and there is no single 'right' way to do it. Business owners must consider different strategies and methods, and determine which one suits their needs best.
Pick and pack is a three-stage part of the supply chain management process. The process is pretty much exactly what the name suggests. Pick and pack involves the following:
Pick and pack fulfillment can be done in many ways, depending on the warehouse. Here are the different methods of picking and packing.
This pick and pack strategy is most commonly employed by small businesses. It involves taking the packing slip of one individual order at a time as they come in for the pick and pack process.
In batch picking, different items from various orders are grouped together because of a common similarity. For example, if they are located close to each other in the warehouse. This method is used when there are many small orders to fulfill at one time and to do so, a pick and pack software is required. By grouping items together in this way, you save time for your order pickers. This is because they now only have to go to a designated place in the warehouse once to pick up an item that is required for several orders. Pack workers can then redistribute said items to the specific order during the packing process.
As with any part of the supply chain, the pick and pack process may face certain challenges. Below are some challenges that may come up.
An inaccurate inventory count can make it difficult to manage the pick and pack process. This is because an inaccurate count can lead to further problems such as scheduling errors. With an incorrect count, the inventory stock is incorrectly recorded, and shortages may occur when the orders are meant to be picked, causing order delays.
An inefficient storage layout may negatively affect your turn-around time (TAT). TAT is the overall time it takes to pick orders and pack a customer's order. If you have an unorganized warehouse, it is difficult to efficiently find the desired items as orders start to come in. This inevitably leads to delays.
Inventory data is an essential factor when it comes to the pick and pack process. For example, in the picking process, inaccurate recording of the average number of lines per order or improper listings of complementary goods may cause problems to arise. This leads to order inaccuracies or order delays. Similarly, in the packing process, if factors such as the weight or fragility of the items are not recorded, then problems in the delivery process arise - such as customers receiving damaged goods.
Here are some methods to help increase the efficiency of your pick and pack process:
There are ways to organize your warehouse facility that minimize your turnaround time. By performing an ABC analysis, which categorizes your inventory into 3 parts, based on factors such as sales, the most popular items can be made easier to access, quickly. Also, you can place items that are usually ordered together in the same place. This will be beneficial for your warehouse in long term, as it will not only increase the efficiency of the pick and pack process, but reduces operational costs too.
A tidy work environment can make all the difference. This is especially true for warehouses. Make sure your warehouse is free of as much clutter as possible to avoid accidents or problems in maneuvering around the premises. Also, keep the packing station organized, with any and all supplies needed to pack different items for shipping.
Your Warehouse Management System, or WHS, makes for easy picking, by listing the items of an order in terms of where they are located. This will reduce the time it takes to find a complete order, and is less manual work for a picker.
Although technology is becoming increasingly efficient, you should still have a person assigned to double-check orders after they are picked, packed, and made ready for shipment. This will reduce the chances of mistakes occurring and corresponding needs for reshipment. Reshipment is pricey and decreases revenue, so the likelihood of it should be minimized.
Having a detailed inventory organization system can make all the difference to your pick and pack process. For large companies especially, spreadsheets are not the best choice. They can get messy and complicated.
For accuracy, opt for barcodes and RFIDs. A perpetual inventory management system will also help - as it's technology-enabled. A perpetual system keeps a record of stocked and sold items as they change, and continuously updates your accounting system when sales are made or new stocks are bought.
Warehouse fulfillment can be tricky to optimize. The goal for any business is to minimize labor costs, optimize quality control and order accuracy, and maximize customer satisfaction. E-commerce fulfillment can be difficult though, especially if you lack the right resources. This is where warehouse fulfillment companies can really help retailers grow their businesses.ShipHero is a data-driven warehouse management system that optimizes workflows and even handles order fulfillment for you. Here's how ShipHero helps optimize your business operations and logistics.
ShipHero provides users with a distributed inventory, which means that your inventory is divided up and stored at different storage facilities. This means that when a customer places an order in a specific area, the order is fulfilled and shipped from the nearest location, reducing delivery times and costs simultaneously.
ShipHero's warehouse management platform optimizes order management through technology. The advanced software integrates effortlessly with your business systems and provides you with multiple customization options. Users can create custom workflows to cater to their business's specific needs, and set automation rules to make the processes more efficient. When an order is placed, ShipHero's system automatically assigns them to the nearest warehouse.
ShipHero has evolved into more than just a warehouse management system - we also offer efficient order fulfillment, just for you. For as little as $5.58, ShipHero will pick, pack and ship your orders. ShipHero's order fulfillment is also especially reliable, thanks to our distributed inventory and network of fulfillment centers across the country. When orders are placed, the WMS has them routed to the nearest location, minimizing transit times, costs, and the possibility of order delays.
ShipHero's warehouse management solution comes with built-in shipping multicarrier shipping options and automated label generation and shipping quoting. The advanced software determines the cheapest shipping option for individual orders, making sure you always have the most cost-effective option.
Getting your pick and pack processes right can be tricky, but it's well worth the time and effort. After all, the success of any ecommerce business comes down to happy customers, and efficient picking and packing are necessary to achieve this. Late orders, high shipping fees, and order inaccuracies won't keep your customers coming back for more.
Effective warehouse management and the best pick and pack strategies can help improve your workflow and optimize the order fulfillment process, but this isn't always enough. Sometimes, you need a third-party with a team of experts to handle the logistics while you focus on growing your business. This is where a warehouse management solution like ShipHero can help you out.
A dollar now is worth more than a dollar tomorrow. That’s the underlying principle behind some of our greatest financial instruments, such as interest rates, credit, loans, and even insurance.
Today, we see companies that allow customers to “buy now, pay later” are experiencing increased online sales and reduced cat abandonments by offering more flexible payment options. Customers are also more likely to purchase high priced items when they can split up the payments and pay them off over time.
You may have seen it through Amazon checkout, Paypal or Apple Pay, where you can select to pay an amount over the course of 4 payments (i.e., the Pay in 4) with no interest payment. This allows you to work solely with your trusted payment provider instead of opening a line of credit with a company.
But what is the Buy Now, Pay Later payment method? Should your business offer this? Let’s dive in.
Finance technology has reimagined the concept of layaway -- putting something on layaway means a retailer would let a customer pay in installments, and finally take home the item when the debt was paid in full. Now, customers can receive the product while they pay off their interest-free loan using the “Buy Now, Pay Later” payment method.
Yes it is still a loan, but consider it a micro-loan where companies like PayPal vouch for you to pay the installments in exchange for a small transaction fee to the merchant. The two types of Buy Now, Pay Later loans are:
This point-of-sale loan charges the merchant a transaction fee, and offers the customer a loan at no interest. Examples include payment methods offered by Klarna, Splitit or AfterPay.
Is this for my business? This type of loan is typically offered by larger merchants whose margins can absorb the transaction fee for the sake of vastly decreasing cart abandonments and increasing order volumes.
Conversely, this point-of-sale loan is offered to a customer by a third-party with a contractual down payment and interest rate, whereas the merchant pays no fee. The customer can receive the item immediately, but must pay installments plus interest.
Is this for my business? This type of loan is typically offered by retailers with higher value items. Because potential loss is more detrimental to a business with high value items, loan companies charge customers an interest rate for the increased risk.
The customer benefits for offering Pay Later services include:
Customers are more likely to purchase items when the payments are spread out over time. With tight budgets, customers would still be able to purchase an item even if they don’t have the money at the time of purchase, as long as they are confident that they will be able to pay the bill over the course of the month.
Given some countries reliance on credit (e.g., United States), a customer would be especially more likely to purchase higher priced items when the payments are split into reduced sums.
Not to mention, if you are the first of your competition to offer Buy Now, Pay Later services, this could become a competitive advantage and attract more customers to your brand.
According to recent studies, 6% of cart abandonments are caused by a lack of payment options. If your website has high traffic volume, this could spell thousands of dollars in lost revenue. In today’s realm of e-commerce, your shopper journey must have every consideration in mind. Offering more flexible payment options allows you to stay competitive.
This also simplifies the checkout process, because customers don’t have to enter their card details or billing information; instead, they just need to log in with their payment provider (e.g., PayPal, Klarna, etc.). By logging into a payment provider, customers may also feel more secure about not having to share their personal data with the company.
Buy Now Pay Later fits seamlessly into your product return experience. While many customers are not able to sample or try products, they can now take your products for a test drive without committing financially. This simplifies back-end accounting and budgeting.
You can affiliate with an app that offers “buy now, pay later” services, like the free Klarna application that offers Pay in 4 options, partners with global retailers, and offers reward programs for users.
You can also integrate your checkout process with a Buy Now, Pay Later service. According to G2, the top Buy Now, Pay Later services are:
The Buy Now, Pay Later payment method gives customers flexibility, and allows merchants to offset risks and protect themselves from loss in the process. The Buy Now, Pay Later method increases customers’ likelihood of purchasing items, especially those of higher value. If your competition is already using this option, it may be a good time to look into it for your business.
Providing customers with fast shipping options is vital to success, but for items on the heavier side, this can end up costing you an arm and a leg. Small packages? Those are easy to ship, and major carriers often give you nice discounts on them. But what about the big stuff?
When it comes to the shipping process, big carriers have come prepared to efficiently manage the logistics of oversized shipping. USPS and FedEx can even have heavy items delivered by the next business day. But at what cost?
Well, there’s a blueprint that you can follow to cut heavy package shipping costs down significantly and avoid unwanted expenses. If you trim the costs down from all around, the result is noticeable savings.
The right packing method ensures the safety of your large items. Here are four shipping strategies for oversized products:
Naturally, heavier and larger items need sturdier boxes. Always use new boxes when shipping large items because secondhand boxes may have some wear and tear on them.
If you can’t find double-walled or reinforced boxes, pack your original box in a larger box to add extra protection layers. Make sure to add extra cushioning with bubble wrap or packing peanuts between the boxes to minimize movement during transit.
Don’t be cheap by using duct tape or masking tape. When sealing boxes containing large objects, always use heavy-duty packing tape to seal every seam of your box so it won’t break open.
Oversized shipping can be expensive, so calculate your package’s weight, length and girth before going to the mail carrier. Once you have the package’s dimensions, you can calculate a shipping estimate and know how much money to prepare.
Sometimes, sending your items in several boxes is cheaper than sending all of them in one box, even if there’s only one recipient. Consider dividing your shipment if the cost of shipping several boxes at once is cheaper than sending all the items in one box.
When it comes to shipping heavy items and figuring out how to cut costs, you first need to ask, what am I being charged for? Knowing what factors count towards the shipping rates helps you direct your attention towards trimming these costs.
The concept of dimensional weight was introduced around 2015, and it differs from your package’s actual weight. Dimensional weight is a theoretical weight that factors into your package’s dimensions. Shipping companies adopted this model because they lost money on large packages that weighed less.
How does this concern you? Well, when your shipping partner calculates the shipping fees, they will take the greater of the two weights – dimensional or actual – into account. If your package weighs less than its dimensional weight, that’s what you’ll be charged for – so this is important to look into beforehand.
If the goods you are having delivered are damaged during the shipping process, then that’s going to send your costs sky-high. Damaged goods mean expensive returns and refunds, which you really want to avoid. So if you’re looking to ship items that need extra care, find a carrier that offers commendable fragile shipping services.
Big or small, the shipping fees you pay on a package will always incorporate the shipping zone into the calculation. This means that if the package travels a long distance to reach the customer, it will cost you more.
How can you cut these costs down? Opt for a distributed inventory! You can dramatically reduce shipping costs with distributed fulfillment centers in strategic locations.
The shipping costs you pay also depend on which carrier you’re using. Some are more generous when it comes to shipping oversized or fragile items, while others aren’t so much.
Shipping fees also depend on the shipping services you’re going for. Is it a 2-day delivery? Is it next-day delivery? Does the product need to be shipped internationally? Also, the price increment for shipping zones varies with the type of service. So, your zone-to-zone shipping fees for 2-day delivery may not increase as much as for overnight delivery.
As a small business owner, shipping large items can be expensive. Here are some top tips to try the next time you’re sending oversized products:
Heavier packages are more expensive to ship. While you can’t reduce your product’s weight, you can use lighter packaging to cut shipping costs.
Some good ways to reduce package weight are:
Reducing your package weight may only save you a few cents per package, but the savings add up, and you’ll save hundreds of dollars in the long run.
Many businesses adopt a one-size-fits-all approach to packaging, where they buy a lot of big boxes and use them to ship everything. While convenient, using large boxes to ship small products means paying more because of the bigger packages.
Instead of adopting a one-size-fits-all approach, you can buy several types of boxes that perfectly fit all your products and use them appropriately. This approach cuts down your average package size, meaning you’ll save on shipping costs.
Flat-rate shipping means the delivery cost is always the same, regardless of the package’s dimensions. If you can get a reasonable flat-rate shipping cost, you don’t have to worry about selling oversized products anymore because you’ll be charged the same regardless of package size.
If your business sells locally, you can provide local delivery or curbside pickup to people in your area. Since you can assign staff to deliver products or have buyers come to pick their purchases up, you can reduce or even eliminate the cost of shipping.
Major carriers have their own prices and services for shipping heavy and oversized items; one carrier isn’t necessarily better than another across the board. You need to determine which carrier specifically offers you the best package for what you’re shipping.
Carriers such as USPS, UPS and FedEx provide services to small businesses and even individuals, so they put their prices up in the open for you to see easily. But freight carriers such as DHL and FedEx freight that focus on serving large businesses don’t have their prices up publicly, so you need to contact them for a quote.
Here are some things to consider when choosing a carrier to ship oversized items:
Many carriers offer large item shipping solutions for your business, but each offers different benefits. Here, we look at three of the best large item shipping companies available today:
The United States Postal Service (USPS) is the largest carrier, so it should be no surprise that they offer pretty diverse shipping solutions to cater to different needs.
The USPS Priority Mail option is available for items that weigh 70 pounds and under, and the packages range from small envelopes to large boxes of around 1 ft x 1ft x 6 inches. If you’re looking to send a heavy item that is small or medium-sized in a reasonable amount of time, then the Priority Mail option is a good choice. While it’s not the fastest option, the delivery service gets the items to your customers within 1-3 days, which is great.
The Priority Mail Express is USPS’s fastest shipping option, where orders are guaranteed to reach your customers by the next business day. For packages under 70 pounds, the Priority Mail Express option is good if you can fit the item into the flat rate shipping envelope. Otherwise, the prices are pretty high for larger packages, and you might be better off with a different carrier.
Media Mail is a niche-specific shipping option from which select eCommerce businesses can benefit massively. With Media Mail, media items such as CDs, DVDs and books can be shipped at extremely affordable rates – the best rates you’ll find. So if you’ve got some heavy media items that need to be delivered, Media Mail is your best bet.
If your package is too big to fit in the Priority Mail flat rate box, then enter the Ground shipping option. This option still limits you to 70 pounds, but the size limits are less restrictive.
As you can see, the trade-off is that Ground shipping is a lot slower than Priority Mail. The prices are calculated depending on the shipping zone and weight.
Since we’re discussing major carriers, it should be no surprise that FedEx made it to the list.
FedEx doesn’t offer you the same guaranteed speed options as USPS, but they make up for it by offering you more liberal weight options. Unlike USPS, which limits you to 70 pounds, FedEx is far more generous, giving you the option to ship items as heavy as 150 pounds. They’re also more relaxed about package sizes – letting you ship items as large as 108 inches long or 165 inches for length plus girth.
So if your items are too big or too heavy for USPS, then head on over to FedEx.
If you’re shipping heavy items in large volumes, FedEx’s Freight option is one of the best picks. The prices vary immensely, depending on the product’s size and the shipping zone, but you’ll get an exceptional rate if you’re shipping a lot of oversized items.
Need international shipping taken care of effectively? Enter DHL, one of the best freight shipping carriers out there.
DHL’s Air freight option has your goods delivered through flights that are scheduled along major routes. The best part about the Air freight service is that there are many options to choose from depending on your needs.
Need door-to-door, airport-to-door, or door-to-airport delivery taken care of? DHL will manage all three. If speed is a priority, then Urgent Air Freight will have your delivery taken care of in just 1-2 business days. If you’re not in a rush, then Air Economy takes care of shipments within 5-7 days. If you have special cargo or temperature-sensitive items, DHL has options for those too, including delivering shipments in temperature-controlled environments.
Similar to the Air freight option, the Ocean freight service is great for shipping heavy items in bulk, except overseas rather than by air. The two main options are Full Container (FCL) and Less Than Container (LCL), but they offer special options for freight shipments like temperature-controlled environments and transportation facilities for liquids.
Our advice? If you’re looking to send big, bulky items in large quantities, then freight shipping is the way to go.
Before shipping large and heavy items, it’s important to ensure they are properly secured and in packages of the right dimensions. This involves using the right amount of dunnage where appropriate, and if you’re shipping fragile items, opt for something like bubble wrap to keep it safe. Large and heavy items are usually more costly, so you really can’t afford to have them damaged in shipping.
A package is considered ‘oversized’ when it’s either too large, too heavy, or a combination of both. Carriers traditionally consider packages oversized if the item’s length and girth are greater than 165 inches, if the goods weigh more than 150lbs, or if the length is greater than 108 inches. However, many carriers now limit the combined length to 130 inches. Let’s see what each carrier considers ‘oversized.’
USPS classifies items as oversized if they have a length of 108 inches and no more than 130 inches combined length and girth. For this range, businesses pay a standard Parcel Select oversized fee which is reasonable. Beyond these dimensions, though, you’ll have to contact USPS for a specific quote. USPS specifies oversized items by dimensions but not weight.
UPS has three criteria for classifying an item as oversized; if its weight is more than 150lbs, if the length alone is more than 108 inches, or if the combined length and girth exceed 165 inches. If your package dimensions or weight fall under these conditions, then you will have to pay UPS’s Over Maximum Limits charges subject to DIM.
FedEx classifies items as oversized if the length exceeds 96 inches or 130 inches in length plus girth. Dimensional weight calculations apply to oversized product calculations, and there is a minimum 90lbs village weight charge too. While FedEx still lets you ship oversized products by ground, there is an oversized shipping charge of $90 per parcel. Also, during annual peak shipping times, an additional charge called the oversized peak surcharge ($37.5 per package) is applicable too. So, FedEx may not be the most cost-effective option.
DHL classifies an oversized item as one that exceeds 70kg (around 155lbs) in weight or has any one dimension that exceeds 120 cm (that’s 47.24 inches). So, for oversized classification, DHL considers all the dimensions rather than the length. The oversized package cost is $89, but they have different services available that you can contact them about.
When it comes to shipping your large or oversized items, there are two things to prioritize; 1) keep the shipping fee as low as possible and 2) minimize the risk of damage. The steps themselves are quite straightforward:
This goes without saying, but we’ll mention it anyway – make sure that your items are secured in place and with great care.
Remember how we discussed the dimensional weight pricing model earlier? Well, when getting your items ready for shipping, look for the most efficient packaging option. This will not only help you score a lower shipping fee but is also important for keeping the goods safe. If your package dimensions are off relative to the items inside, then they might get tossed around during shipping and consequently damaged.
Weigh your package beforehand so you know exactly what pricing options it falls under. Is your package too heavy to be shipped by USPS’s conventional options, for example? Weighing your package is an important part of determining the right carrier and shipping option.
Calculate the rates that you will have to pay depending on the options available to you. Can you afford to go for the express options, or will that cut your profit margins down? Is one carrier giving you a better rate for your product’s dimensions?
Now that you’ve worked out which option is best for shipping your package, go ahead and book it!
Print your shipping labels out and fill the required details in – where is the package going to, how much does it weigh, etc. Different carriers have different shipping labels, so fill them in as required.
Put the labels on your package so that they’re ready to go!
All that’s left now is to send your package and wait for your customers to receive it. Hit the go button!
Heavy item fulfillment can be quite tedious, and not every business is equipped to manage oversized shipping efficiently. There are so many factors involved – calculating the weight, comparing weight vs dimensional weight, getting the right package sizes, figuring out which categories your packages fall under and more. So if this all seems too much for you, consider outsourcing the load to a competent third-party logistics partner.
ShipHero is a powerful warehouse management solution that many leading third-party logistics providers rely on. ShipHero also offers eCommerce merchants outsourced fulfillment options – we’ll take the hassle of heavy item fulfillment off your hands and perform all the calculations and leg work for you.
Remember how shipping zones were a big factor in calculating shipping fees and how a distributed inventory can help combat this problem? Well, ShipHero has you covered here too. Don’t have your own distributed fulfillment centers? That’s fine; you can have your inventory distributed amongst our own, ultimately reducing shipping distances.
An experienced logistics partner like ShipHero can help you make major savings on oversized shipping costs. With distributed fulfillment centers cutting delivery times and shipping costs down, powerful software solutions and an experienced team handling the technical stuff, ShipHero is the logistics solution that can help you slash unnecessary costs.
This depends on what carrier you are using. For example, FedEx considers a 100 lbs package oversized, so a $90 oversized fee will apply. However, carriers like DHL and FedEx may not consider this package oversized, so that shipping costs will be lower.
There is no single cheapest way to ship heavy items. Many factors come into play, including the package dimensions, package weight, dimensional weight, the type of items and whether or not you have a distributed inventory. A reliable logistics solution partner can help you find the most cost-effective way to ship heavy items.
To ship heavy items cheaply, you need to reduce as much weight as you can. That’s why large items must be properly packaged in boxes, parcels or containers of the right dimensions. The packages need to be weighed and measured so that you can determine the most cost-effective way to have them delivered. Correctly labeling packages before shipping them off is vital to make sure they reach the right destination.
This depends on many factors, including the carrier, the shipping option you are using and where the box is going. For example, let’s look at USPS’s Parcel Select Ground option, which is one of the slowest and most cost-effective delivery options. The 25-pound box can cost anywhere from $25 to above $70, depending on the shipping zone it’s headed.
Shipping heavy and oversized items involves far more complications than you might have imagined. The worst part is that if you don’t take the time to perform the necessary calculations and consider all the important factors, your business may incur significant losses. You're all set if you have a dedicated team with a skill set that can optimize your heavy item fulfillment.
If oversized shipping seems daunting and beyond what your business can comfortably handle, look no further than ShipHero. Outsourcing your fulfillment process to us means that we’ll work all the technicalities out for you, and find the most cost-effective way to ship your heavy and oversized products.
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About ShipHero: We make it simple for you to deliver your eCommerce. Our software helps you run your warehouse, and our outsourced shipping solutions eliminate the hassle of getting your products to your customers. With over 5,000 brands and 3PLs relying on us daily, we’re here to help with all your logistics needs.
Let us know how we can help you today by scheduling a call HERE.
The secret to success with any ecommerce business is to keep your customers happy. Rapid order fulfillment, free shipping, and excellent customer service are some of the best ways to do that. When determining an ecommerce business plan, many fail to factor in (or underestimate) product returns.
Returns are a necessary evil for any ecommerce business, and if you don’t handle them properly, they could swiftly break you. Frequent returns negatively impact your profit margins but also destroy conversion rates, bring down customer loyalty,, and threaten the survival of your business as a whole. Developing and enforcing a strong returns policy is a must if you want your business to be successful. Counteracting return fraud should also be a focus to further prevent lost profits.
In this article, we’ll cover the ways in which your return policy impacts sales and how to change your policy to benefit your business. We’ll also cover some of the best ecommerce return practices to make sure that returns don’t ruin your business.
In 2017, there were over 1.6 billion digital buyers around the globe – that’s more than 20% of the world’s population. What’s more is that number is projected to increase to over 2.1 billion by 2021. Though the e-commerce market presents nearly limitless possibilities for retail businesses, it does come with its challenges.
Reaching your target audience can be tricky when you have billions of potential customers, and you must compete with dozens or even hundreds of businesses like yours. In the wide world of ecommerce, it’s the little things that make your business stand out – things like your return policy and refund policy.
According to Star Business Journal, returns at brick-and-mortar stores hover around 8% to 10% while returns for online retailers are nearly double at 20%. Furthermore, returns can be extremely expensive for a business – particularly during the holidays. Here are some eye-opening statistics:
To account for the logistics of returns, many businesses take steps such as increasing their workforce, adding more warehouse space, and creating separate departments to handle returns. All of these factor into an ever-dwindling profit margin as the cost of returns grows higher.
Before getting into the details of how you can keep ecommerce returns from potentially ruining your business, let’s take a closer look at some of the ways returns affect your overall profitability.
To a certain degree, keeping your customers happy is about transparency. Customer expectations in the world of online shopping are high considering they can switch to a competitor’s site or Amazon in just a few seconds.
The customer experience in today’s world is critical to success. Your customers want to know that the products they are purchasing are of the highest quality and they are getting the best value for their money. Customers want to know their order will be processed quickly and efficiently and that they can contact customer service with questions or concerns, which will be resolved in a timely manner. They also want to know what your return policy is upfront, before clicking “buy”.
Your ecommerce return policy affects your business more than you may realize. According to recent research, about 67% of online shoppers will check a company’s return policy before buying. What do customers like and dislike about return policies? Let’s take a look…
As an ecommerce business owner, you need to account for all variables when it comes to profitability. While it might cost your company money to offer free returns, doing so could, in turn, boost your sales. In fact, customers are twice as likely to make a large purchase (over $1,000) online if free returns are offered.
To give you an example of what a good return policy can do for your business, consider the Zappos model. They were the first ecommerce retailer to offer a 365-day, free two-way shipping, and returns policy. What’s more, is that the free return shipping policy allowed customers to return their shoes for any reason. This was absolutely unheard of in 1999.
According to Zappos’ VP of Services and Operations, the company’s best customers have the highest return rates (up to 50% of everything they purchase) but they also spend the most money which makes them the company’s most profitable customers. At first glance, it may sound like their return policy is hurting business but, over time, those loyal customers end up spending more, which offsets their returns.
Simply put, a lenient return policy (when properly executed) can make a huge difference for your business and for your profit margins by creating a more loyal customer base.
In order to improve your returns policy, you first need to gain a better understanding of who is returning your goods and why. Here are some of the most common reasons for returns:
In addition to identifying why certain items are being returned, it is also helpful to develop customer profiles to determine who is making the most returns and how to prevent it from damaging your business. For example, some customers intentionally take advantage of lenient returns policies by purchasing items to wear once and have no intention of keeping them after. There are also others who order multiple sizes and options for the sole purpose of trying them on at home.
Having developed a better understanding of your customer base and the most common reasons for returns, you can now work on developing a stronger return policy.
Now that you understand that the majority of customers will check a company’s return policy before making a purchase. It is also important to note that nearly 50% of customers will continue buying from a company if they have a hassle-free return policy. So, how do you create a return policy that improves your profit margins while also retaining your customers?
Here are some simple tips to help you develop a strong return policy that wins over customers while keeping return rates low:
Your customers want to know that if they aren’t satisfied, they’ll be able to return the item easily. For example, if you sell footwear, your return policy can state that all shoes can be returned within 30 days if they’re still in good condition.
A clear return policy makes it easy for customers to understand which products can be returned and which can’t. If you have products that have a separate return policy, be sure to list them on the product page so customers are aware of any special return policies.
Your customer shouldn’t have to search for it. A strong return policy should show that you stand behind your product to instill confidence in your business to build trust with the consumer.
You should personalize your return policy to your business and products. While there are templates available to help you craft a return policy, they’re meant to be customized to your brand’s unique return policy.
Avoid phrases like “you must” and “you are required to.” You want your returns process to be easy, not scary.
Some customers expect immediate refunds or a gift card when returning a product. Your return policy should list out the steps involved during the return process so they know how it all works.Make it clear whether you offer an exchange for returned products or if you provide store credit or a full refund.
The bane of any online retailer’s return policy is deciding between full refunds or store credit. While there is no one clear answer as to which one to choose, we recommend surveying your customers to see what they’d prefer.
Tell the customer whether they need to use the original packaging or if they can use their own. Tell them if they need to include the order slip and if they can print a return label online.
So they understand the return policy and can communicate it to your customers quickly and efficiently. If your staff is confused about the returns policy, it could lead to negative interactions with customers when they try to return products.
No company is perfect but having a strong returns policy will prevent returns from destroying your business. Even with a strong policy, however, you should be prepared to take a hit now and again. If you make a mistake with shipping or packaging, you may be forced to eat the cost yourself for the sake of keeping your customer happy. Unlike physical stores, customers can’t just walk in and return a product at no cost to you. Always keep the customer and your long-term bottom line in mind.
The term reverse logistics is sometimes used interchangeably with returns, but they are not quite the same. Technically speaking, reverse logistics refers to monitoring the life-cycle of a product after it arrives at the customer’s door. This includes the ways the product can be reused, how it should be disposed of, and other ways to create value with an expired product – it also involves the return of products from the end consumer back to the manufacturer.
In order to develop a reverse logistics procedure, you need to first think about the different stages a product goes through during a return. First, you’ll need to consider the physical shipping of the returned product – how you will get it from the customer back to the warehouse. Next, you may need to test the returned item to identify existing flaws and document any problems. Then, you’ll need to repair, recycle, or restock the item.
To help you get a better understanding of the reverse logistics portion of your company’s supply chain, there are four key analytics to consider:
Once you’ve gathered this information, you can gain a deeper understanding of your company’s reverse logistics and use that information to optimize your workflow. Improving the efficiency of your reverse logistics system provides numerous benefits, including the following:
When you plan ahead for returns and implement a system to ensure that orders are fulfilled correctly, you can minimize related costs for administration, shipping, quality assurance, tech support, etc.
By implementing a reverse logistics system, you can increase the speed with which orders and returns are processed which keeps your customers happy.
A poor return policy can prevent a customer from coming back, but a strong policy instills confidence in the brand and makes customers more likely to purchase again, even after you’ve made a mistake.
By using a reverse logistics system to gather data on returns, sellers can decide how best to use returned products to reduce losses. You could fix and restock the product, scrap it for parts, or repurpose it in another market.
ShipHero is a leading 3PL for ecommerce merchants. We work with over 4,000 ecommerce merchants to ship out millions of orders a year and process returns as they come in. Here’s why you should let ShipHero handle fulfillment and logistics for you.
Don’t want to handle every return that comes in? Leave it to us. With ShipHero, we handle all returns as they come in. With our integrations with your ecommerce platform and marketplaces, returns are easily processed on our end.
ShipHero currently integrates with Returnly to make returns management even easier. With our open API, ShipHero can be connected to any of your returns software to make the returns process easier to integrate into our workflows.
With ShipHero, you’re able to offer customers 2-day and overnight delivery as shipping options. These can be powerful conversion drivers that help you compete against the likes of Amazon and other major brands so you stop losing sales to them.
Handling returns in a quick and efficient manner is the key to keeping your customers happy. With a strong returns policy, you can minimize the damage caused by shipping errors, manufacturing defects, and other issues that necessitate a customer return. When your customers feel like they can trust your company to correct errors in a timely manner, they will be more likely to become repeat customers.
While brick and mortar stores are convenient, nowadays eCommerce platforms are growing fast in popularity among consumers and retailers alike. Online stores created with Amazon, BigCommerce, Shopify, and other platforms make the sales process easier for both customers and businesses. However, a digital storefront invites some supply chain management challenges for merchants. Inventory management is essential for smooth order fulfillment, and it directly impacts your online store’s efficiency and growth potential.
What exactly is inventory management, and why should you, an eCommerce business owner, focus on optimizing it? In this article, we'll go over the ABCs of inventory management, detailing the terms and formulas in this field and how you can optimize inventory management for your online store.
eCommerce inventory management is a vital link of the eCommerce supply chain that starts from order placement and ends with the products getting delivered. It consists of the products being picked from the suppliers, stored in the warehouses, and upon the order placement, being picked, packed, and shipped to the destination.
Many 3PL companies handle outsourced fulfillment and inventory management for small and large businesses. Through inventory management, eCommerce companies get a better idea about how products are stocked and how they should be stocked in the future.
Inventory management is related to the direct estimation and organization of the products. It determines the proper functioning of the whole supply chain and can have dire consequences for the businesses if it isn’t optimized. Let’s take a look at some of these consequences.
If inventory management isn’t optimized, your inventory levels could cause problems. For example, overstocking can cause deadstock, especially in the food and fashion industry. No one wants to buy spoiled food or fashion that isn’t in line with current trends. Understocking can hold up the whole supply chain and cause delays that ultimately cost you customers.
If you’re reliant on manual inventory management, it can slow down the whole supply chain. It also doesn’t allow for the business to grow quickly. For example, using a warehouse management system integrated with barcode scanners could save you a lot of time and labor costs compared to workers with manual scanners.
Not having an organized inventory means more errors when fulfilling orders. Customers aren’t happy when they get the wrong products delivered. Having a proper inventory management system with automation can reduce these risks.
Not having a proper inventory management system also means that it is harder to sync with different fulfillment centers in real-time, resulting in potentially dire consequences on sales. For example, let’s say you sell on both Amazon and Shopify. If a customer places an order on Amazon, a lack of coordination can result in orders not being fulfilled or the same order being fulfilled multiple times.
If all the inventory details aren’t accounted for through proper channels, it can become hard to keep track of products. This potentially results in the loss of inventory records and can cause losses for the company in the end.
If the inventory management system isn’t equipped with the proper tech stack, it can often become hard to track the data and then analyze that data. A lack of data analysis means that you cannot correctly measure the inventory performance and often affect future decisions - especially when it comes to demand forecasting and inventory reordering.
Now that we've covered the dangers of not investing in proper inventory management, let’s cover inventory management basics. Of course, inventory management differs from business to business, based on their individual needs and setups, but the blueprint is similar.
You can get an idea of which inventory levels you might need by analyzing past sales performance. Look at your orders based on time frame to look for seasonal trends. Once you have this data analyzed, you can order the right inventory to prevent overstocking or understocking.
This also helps save money on storage costs as you won’t need to lease more warehouse space to keep up with the increase in inventory.
If your eCommerce shop is already up and running, you should set up the minimal stock levels for each product category. These levels measure how much stock you should have at a minimum to ensure smooth operations and prevent a stockout.
To ensure a better customer experience, it’s vital to prepare for busy shipping seasons like holidays. This way, you can ensure enough inventory to cater to the fluctuating purchase orders during a busy shopping season.
To correctly manage inventory, eCommerce businesses usually employ inventory management software. You can typically add integrations like a POS system for purchase orders. QuickBooks for keeping tabs on the bills and receipts, etc.
Inventory management is a versatile field and can be customized according to the needs of your business. There are many inventory management systems like ABC analysis, Set Par Levels system, etc. Here are some essential inventory management terms and systems that you’re likely to encounter.
This inventory management system relies on the principle that the first products to be received by the warehouse should be the first to be shipped to the users. This method ensures that the stock is cycled properly and is especially useful in food inventory management where expiration dates come into play.
This inventory management system is essentially the opposite of the FIFO mentioned above method. Here, the items that are added last to the inventory are the first to be shipped. This method is not suitable for perishable items but is also becoming obsolete in other industries as well.
This particular inventory management system isn’t for those who like to play it safe. Here, the inventory stocks are kept at the minimum possible levels where demands are still met. This is not a suitable system to prepare for emergencies and runs a high risk of out-stocking.
Safety stock is like the safety net for your inventory and helps you overcome emergencies. Safety stock quantities can be estimated by using the safety stock formula that uses the maximum daily usage estimates. The formula for safety stock is mentioned in the next section.
The reorder point measures the minimum inventory level that a business should have before they reorder. This point helps you avoid overstocking and understocking situations and ensures that you reorder the goods at the right time.
Inventory distribution is best when you think that one fulfillment center isn’t enough. This especially helps with cutting down the transit times and shipping costs upon order placement. If your ecommerce business receives a high influx of orders, inventory distribution might be the thing for you.
A perpetual inventory system records the real-time sales and restocking of the inventory stock through inventory management methods. Inventory management software can be used to automate this process. The system records changes in the inventory systems and updates the inventory counts automatically as goods are bought and sold.
When going about inventory management, it's crucial to get things right. A few formulas and metrics related to inventory management can help with the analysis and you can make your future decisions based on them. Here are some commonly used metrics and their formulas.
The finished goods inventory tells about the total stock available for customers to purchase that can be fulfilled. This metric can be used to estimate the amount and value of goods available for sale and how much inventory you need to prevent stockouts. The total value of finished goods can be calculated by this formula below.
To estimate the total costs for holding the unsold inventory including warehousing, insurance, transportation, labor, shrinkage, and opportunity costs, inventory holding costs are used. The following formula can calculate the total inventory holding costs.
Inventory safety stock helps you prepare for unforeseen circumstances by stocking enough for fluctuations. This metric enables you to stay prepared for emergencies and supply chain failures, etc. It is thus the safety net for your inventory stock. You can use the following formula to estimate the inventory safety stock for your business.
Measuring the inventory turnover rate helps you properly estimate and forecast future inventory needs. It essentially is a ratio of how many times inventory is sold and restocked in a specific period to determine the turnover frequency. To calculate the total turnover rate for your business, you can use the following formula.
This is another formula that tells you about the frequency of turnover and lets you assess how many days of inventory you have on hand so you can restock in time and prevent a stockout. You can also estimate the stock lead time with this metric. Use the following formula to estimate the total inventory days on hand for your eCommerce business.
This formula estimates the minimum quantity of stock you should have on hand before you reorder. This ensures both overstocking and understocking. It also makes sure that you reorder before it is too late. Many inventory management systems remind you about this in time. The inventory Reorder point formula is as follows.
Inventory shrinkage occurs when the accounted inventory levels aren’t the same as the actual inventory levels with the latter being lesser than the former. This can occur because of consumer theft, employee theft, management errors, or inventory damage. It is calculated as a ratio. To estimate the total inventory shrinkage rate for your business, use the following formula.
The reorder quantity is the number of goods you should request from a manufacturer or supplier when you restock your inventory. This reorder quantity mustn't be so high that you overstock, and not so low that you run the risk of understocking. The optimal reorder quantity can be estimated by using the following formula.
While you might have a working knowledge of inventory management now, some questions are still unanswered in the above sections. Here are some of the typical inventory management-related questions and their answers.
The four primary inventory types include raw materials, work-in-progress (WIP) inventory, finished goods, and sellable inventory. The WIP inventory includes raw materials, labor, and other overhead costs. Out of the four mentioned inventories, sellable items are the only ones ready to be shipped.
eCommerce stores get their inventory in the form of finished goods directly from a manufacturer or supplier. These goods are then shipped to a warehouse or fulfillment center where they are stored until they are ready to be shipped.
While there are plenty of inventory management techniques, like the ones mentioned in the section above, the commonly used ones include First In First Out (FIFO), Forecasting Demand, and Setting Reorder Points. These techniques can be used for the inventory management of your business.
The Economic Order Quantity (EOQ) is also referred to as the optimum lot size. It is a metric that measures the optimal order quantity for a business such that overstocking and understocking situations are prevented. It also helps a company minimize logistics costs, warehousing space, stockouts, and overstock costs.
ShipHero is a warehouse and fulfillment management software that connects eCommerce sellers and retailers to 3PL companies worldwide.
ShipHero works with integrations of popular ecommerce platforms like WooCommerce, Shopify, Amazon, Etsy, Magento, and eBay, etc. With ShipHero, you can do comprehensive inventory management by managing warehouse locations, returns, low stocks, cycle counts, and many other things. ShipHero allows you to sync your channels through integrations with ecommerce platforms, optimize shipping through robust shipping features, simplify operations through order management, and help from our dedicated customer support team.
With ShipHero, you can set reorder alerts for each product that notifies you when some stock needs replenishment. This way, you can stay on top of your restocking game and ensure that you do not run the risk of being out of stock.
With inventory tracking, replenishment, and reporting all in one place, you don’t have to worry about your inventory’s visibility. ShipHero helps you collect the data through inventory logs and reports and then analyze it to devise optimal inventory management strategies. With reporting and analytics, you can get an idea about how different products are performing on your eCommerce store.
You can create new purchase orders with ShipHero by specifying the supplier and the receiving warehouse. You can also replenish any depleting stock with just a click through the ShipHero dashboard. With ShipHero, you can also keep tabs on any PO change. For the returns processing, you can indicate whether a product is to be restocked or not.
By now, we've established why inventory management is vital for an eCommerce business and how organized order fulfillment encourages a better customer experience. While traditional selling through brick-and-mortar stores requires only one channel to be managed, the modern-day eCommerce setup with multi-channel selling can be more demanding to manage.
But you don’t have to worry about managing your inventory alone because robust logistics solutions like ShipHero provide you with the best inventory management solutions.
So, get started with ShipHero today to make managing your inventory that much easier.
We can rebuild it, we have the technology. We can make it better than it was. Better, stronger, faster… The next generation of supply chain is almost here, and it’s digital.
Supply Chain 4.0 incorporates emerging technology -- blockchain, AI, autonomous trucks, drones, 3D printing, augmented reality, and more -- into every aspect of the supply chain, rendering it nearly unrecognizable from today’s capabilities.
More and more logistics start-ups are gaining ground in the warehousing and fulfillment industry through agile pricing and advancements in one or more emerging technology, like predictive inventory management and automated workflows powered by machine-learning algorithms.
Take ShipHero for example. Advancements in machine-learning powered supply chain forecasting and platform-based integration capabilities have allowed us to intelligently distribute inventory to lower shipping costs and delivery times. That’s why ShipHero has rapidly scaled to ship over $5 billion orders to date.
So, what else does the future of logistics hold? Let’s dive in to find out.
Warehousing operations like picking and packing orders will be extremely precise and lightning fast, not to mention much safer, thanks to augmented reality (AR).
AR headsets (think, Google Glass) could illuminate the most efficient route around a warehouse like a GPS right in front of your eyes, and clearly point to the exact items that you need to pick.
High-tech wearables are already incorporated into warehouse safety protocols to allow employees to signal for help and receive emergency assistance, and AR headsets with live-streaming capabilities would further improve the safety of employees while allowing employers to monitor and optimize productivity.
Long-distance trucking and last-mile delivery will become quicker and cheaper with the advent of autonomous trucks and drones.
Today, truck drivers are restricted to a limited amount of time on the road, rightly so to avoid tired driving, reduce accidents and mitigate dangerous driving. With the help of automated driving systems, it could help the trucker shortage and bring renewed interest to the profession, while allowing truck drivers to spend more time on the road.
Amazon Prime Air has shown that drones can deliver packages under 5 lbs in 30 minutes to select locations. Though not yet in operation, the drones will autonomously zoom through the skies to deliver the package to an outdoor delivery target. New transport concepts like drones or robots help companies improve that last-mile delivery for high-value packages.
There’s Print on Demand, and then there’s 3D Print on Demand.
By sharing design specs with a 3PL or fulfillment provider, retailers could repurpose their fulfillment centers as small-batch manufacturers that use 3D printers to create products in-house, thereby reducing shipping times for expedited orders.
This would allow 3PL and fulfillment providers to offer full-service supply chains to the growing number of online brands and ecommerce startups.
Blockchain may sound a bit vague or abstract in the supply chain space, but essentially this can be used to scan QR codes and track the journey of an individual product (rather than groups of SKUs) throughout the supply chain. Once scanned, relevant product data is automatically synced for all business systems simultaneously.
Real-time data flowing between your systems allows for precise inventory forecasting and restocking capabilities. More in-depth tracking of your inventory also helps utilize the ‘shared economy’ where Uber and local delivery providers can seamlessly deliver products on your behalf.
This advanced form of collaboration also allows companies to easily detect fraudulent products, locate lost or stolen goods, and identify sources of product damage at each step of the supply chain.
Platforms like Shopify and Amazon have allowed ecommerce merchants to access a wide-range of capabilities that they otherwise would have to invest in and build themselves. In terms of supply chain, by linking via API to a large number of carriers and providing customers with negotiated rates, smart fulfillment companies like ShipHero allow their customers to directly compare their options and select the best shipping method.
Supply chain today is nearly unrecognizable to the paper-based and manual processes of the past. With exponential growth, the supply chain of the future will be far more integrated and efficient to what we have today. Startups like ShipHero are beating traditional carriers by leveraging tomorrow’s technology for today’s business needs.
Objects! with ShipHero talks with the entrepreneurs, innovators and idealists that put items on the shelf and bring packages to your doorstep. From hot sauce to board games, toothbrushes to frying pans, startup side-gigs to enterprise players, join ShipHero founder, Nicholas Daniel-Richards, as he demystifies the manufacturing and logistics behind some of our most beloved household objects, with transformational ideas that are guaranteed to make you say, why didn’t I think of that?. This fast-paced and intriguing podcast covers thousands of travelled miles in less than an hour, so next time you’re standing in your local store and see a label that says ‘Made in <A Land Far, Far Away>’, you’ll know just how it got into your hands.
If you are a successful entrepreneur looking to grow or an aspiring innovator with an idea, Objects! with ShipHero provides a detailed, 360° exploration with the masterminds behind modern ecommerce and shipping solutions. So settle in, buckle up, and prepare to get objectified! ... no wait, not that. Get ready to say “I objects!”... we’ll work on it. Available on Spotify, iTunes and at this link.
Episode FORE of Objects! with ShipHero gets into the rough business of golf gloves, as we’re joined by Adam Karger and his company Scotch & Skins -- a brand dedicated to upping your golf game with premium leather golf gloves and other high-end golf accessories.
“True differentiation didn’t have to be about being so different from everyone else, but rather celebrating really good materials-- really amazing, natural materials. And this glove did that… and so we found a little bit of our voice.” -- Adam Karger, co-founder of Scotch & Skins
As a tech consultant by day, an entrepreneur by night, and a new father around the clock, Adam shares his journey of designing and manufacturing a high-quality golf glove from scratch, with absolutely zero prior knowledge of making or selling gloves.
So how do you start a business selling a product you don’t know how to make? Join us as we learn how Adam, armed with only a laptop and an idea, forged the right partnerships to create his brand Scotch & Skins, set to tee off in the spring of 2021. (Already nauseous of these golf puns? Don’t worry there isn’t any more).
Although he started as a novice in the manufacturing and design of golf gloves, Adam Karger is no amatuer in the golf world. Adam played Division 1 Golf at Colgate University and in his Senior year competed in five tournaments, posting a scoring average of 83.2.
Adam and his co-founder and friend, Bryce, had toyed around with the idea of vintage-style golf gloves for some time. With no prior experience, the road seemed long and challenging, and a lot of questions stood in his way like, how do you find a manufacturer? How do you design and get tech specs? How do you ensure quality? How do you source the leather?... to name a few.
But like all journeys, Adam began with a single, brave step towards his new future, after a couple beers with his friend of course.
“For me, it was a really interesting problem to solve. Because, I think when you’re building a company or a brand or a product, really it’s just solving a bunch of little questions, and the amalgamation of those answers turn into the go/no go of building a product or a brand” -- Adam Carger
Where did Adam turn for the answers to these problems? Why, Google of course. The start of Adam’s journey was typing phrases “glove designer” and “glove manufacturer” into a publicly available search engine… Here he proved that there is no secret to success other than persistence, perseverance, and a little drive. (last one ;-p)
Adam’s philosophy of “partner with people who have the superpowers that you don’t” led him to Greg, a glove consultant with years of experience making all types of gloves, except golf gloves. Excited to work on a new project, Greg agreed to consult and Adam began to grow his team.
The first superpower Greg brought to the table was his large network of manufacturers, which they were able to whittle down to a few choices and eventually settle on a Connecticut-based leather manufacturer.
Currently, Adam’s home will be the fulfillment hub due to the minimum required investment and full control of the packing and boxing customization. In the spirit of partnering with people who have superpowers they don’t, Adam set the goal for his company to eventually work with a 3PL like ShipHero, because reaching that point means the company has gotten big enough to where order fulfillment takes up too much time and a 3PL partner is needed to help your business scale.
Golf gloves are typically made of natural leather or a synthetic substitute, so the question was which material was better for their business? With this first decision, Adam and Bryce decided that whenever they came to a similar fork in the road, they were going to take the path towards high-quality materials.
But, where would their journey’s excitement be without hitting the hazards early on? They wanted to use real leather, and golf gloves are typically made using Cabretta leather (not actually leather) because it is thin, form-fitting and “soft as butter”.
In hopes to stand out from this tradition, Adam and Bryce found an Australian distributor for kangaroo leather... and when the prototype was complete, they immediately realized their massive mistake. The kangaroo leather was extremely poorly suited for a golf glove, because the leather was not thin enough or flexible enough to be useful on the golf course. Luckily, they had a mulligan.
Their glove consultant Greg recommended UK-based Pittards, a top manufacturer of Cabretta leather with over two centuries of experience. A month after the kangaroo catastrophe, their next set of Cabretta leather golf gloves were a hole-in-one: thin, form-fitting, and supple. With this, Adam and Bryce realized that differentiating your brand doesn’t need to lead you down a difficult path; rather, choosing to celebrate really good materials is a way to differentiate in and of itself.
“We’ve evolved over time, but it makes you appreciate where you are when you think of where you started.” -- Adam Carger
Adam found that being laser-focused on their first product allowed them to bring one high-quality and thoughtful product to the market and helped them to determine their company’s manufacturing principles. They then applied what they learned to making their Cabretta leather ball markers and North American hickory alignment sticks with covers made from North American leather from North American tanneries. How boujee.
Officially teeing off in the spring of 2021, Scotch & Skins is currently going through the final process of creating sizes, finalizing logo design, and will go into full-scale manufacturing soon with their premium golf gloves and assortment of high-end golf accessories.
So remember... if the glove don’t fit, you must not have shopped Scotch & Skins.
And be sure to check out https://www.scotchandskins.com/ and join their email list to be notified of product release.
Have you been sketching the next big thing on the back of a cocktail napkin? Are you frantically Googling everything about it right now? Now, right now, is the time to make it happen. There’s loads of tools and resources available everywhere to convert the idea in your head into an OBJECT! on the shelf. All it takes is a little follow through. ⛳️
Today we venture deep into the minds of our customers to answer the age-old, controversial marketing question: does offering a “free gift with purchase” actually do anything?
Spoiler alert: yes, it does… but it doesn’t have the effect that you may expect.
Using case studies and scientific research, let’s look at the psychological effects of the free gift with purchase (GWP) to determine if it’s right for your business, or if there are more effective promotional campaigns.
First, why do companies provide a free gift with purchase? What are they trying to achieve?
Online retailers that offer a free gift with purchase (GWP), which is less than 50% of companies, believe that the added value of a free gift will inspire repeat purchases, increase brand loyalty, and stimulate social and word-of-mouth advertising. Companies that offer free GWP include:
Kinder (confectionary) -- free toy
Eileen Fisher (apparel) -- free organic ditty bag
Bentley (cologne) -- free chrome Bentley key ring
And more...
These case studies have been reported by companies that specialize in creating customized GWP for their clients, but do the benefits hold up under scientific scrutiny?
The answer... yes, but not how you’d expect.
As retailers constantly innovate promotional offers to provide more value to their customers, the “two items for the price of one” sales method has been framed using two distinct promotional tactics: the free gift, and the bundle… and it turns out how you frame the exact same deal actually has different psychological effects on your consumers.
For example, if your business sells household supplies, your promotions could be either:
Studies have shown that bundle offerings and free gift offerings tend to influence the perceived value of products themselves, rather than their opinions of the company offering the gift. Also, the promotional frame has an impact on product return rates!
Effects of Gift with Purchase
With a free gift promotion, the “free item” or “gift” is perceived as less valuable by the customer, while the focal item is valued more. Therefore, customers are less likely to buy the free item after the sale, but more likely to purchase the main item.
Of course, the likelihood of repurchase is directly related to how effective the gift promotion is in increasing the value of the main item, so if that value increases to surpass the customer’s intrinsic repurchase threshold, then they will buy again.
Additionally, with a free gift promotion, customers are less likely to return an item, because the perceived loss of giving back a “free” item is too high.
Effects of Bundle
In a bundle promotion, the opposite is true. The main item is perceived as less valuable, while the bundled item is valued more. Therefore, customers are less likely to purchase the main item as a single item, but the supplementary item is more likely to be purchased as a standalone
With a bundled promotion, customers do not mind returning an item included in a bundle.
TLDR; offer free gift promotion if you want to reduce return rates and sell more of the main product at the expense of the gifted product; offer a bundle if you want to sell more of the supplementary product at the cost of the main product.
The proven effects of “free gift with purchase” promotion are not proven to inspire net-increase in repeat purchases; rather, the promotion should be used to increase/decrease the perceived value of one focal item at the expense of a supplementary item. Also, the free gift promotion reduces actual return rates as well as the customer’s desire to return.
HOWEVER, these studies imply only the probability that customers purchase again, and this likelihood varies based on the personalization and relevance of the free gift and/or bundle.
That’s why there exists a vast amount of consumer data analysis tools and companies that make large profits off of customized gifts with purchase.
There does exist a customer group where the free gift with purchase has had immense, proven success: with products geared towards children.
You’re certainly familiar with the Happy Meal toy, which was so effective at marketing to children that McDonald’s was sued by a California mother in 2010 who claimed that the fast food chain used toys to unfairly attract children.
In the listed case study above, Kinder successfully offers a free child’s toy with purchase of chocolate, and there exist highly lucrative marketing teams like Kidoz that offer safe advertising and Gift With Purchase creation for children.
The positive results from a child-facing GWP campaign stem from two main factors:
We’re not saying all GWP campaigns should be geared towards children, it’s just that these are the only ones with a proven record for having net-increases in repeat customers and word-of-mouth advertising (they’re lovin’ it).
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