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Thinking Outside the (Cardboard) Box to Reduce E-Commerce Packaging Waste & Excess Costs

Did you know? About 165 billion packages are shipped in the US every year, according to data from USPS, FedEx, and UPS. (LimeLoop)

The packaging required for that package volume is roughly the equivalent of 1 billion trees!

At a micro-level, the typical household throws away up to 13,000 pieces of cardboard in a single year. Additional packaging materials, such as plastic, tape, and bubble wrap, each contribute a fair amount of landfill waste, as they often cannot be or simply are not recycled. 

Shipping packaging is directly to blame for a wide range of environmental issues, such as overcrowded landfills, increasing greenhouse gas emissions, and litter pollution (both on land and in the ocean). 

As a result of this multi-pronged challenge of packaging waste, the battle to ship goods more sustainably is escalating. Nowhere is this more pronounced than in e-commerce shipping.

Let’s examine why and how online retailers can achieve greater profitability while transitioning toward a circular economy.

How does shipping packaging impact your business?

While the overall cost of packaging varies greatly by product and application, it typically accounts for 10%–30% of COGS. And if your packaging usage is excessive, you could be throwing away hundreds of thousands or even millions of dollars every year. Yet, because shipping packaging is assumed to be essential, it’s often not seen as a facet that can be optimized to achieve both greater profitability and sustainability.

Factors ranging from weight and materials to size can impact your packaging needs and costs, but fulfillment and shipping methods are also key. Here are a few examples of things that will affect your packaging needs/costs:

  • Rising packaging material costs –  One of the main reasons you may have experienced an increase in packaging costs is an increase in demand for the raw materials used to produce corrugated cardboard (and hence for the finished material itself).
  • Oversized packaging – If the dimensions of the cardboard box don’t closely match the product dimensions, your packaging is likely to be excessive. For instance, a t-shirt doesn’t need to be in a 15” x 15” box. Some e-retailers make the mistake of ordering oversized boxes under the pretext of getting a discount for bulk packaging purchases and having something that can fit most/all of their products. This can become unnecessarily expensive if your delivery carrier applies dimensional weight pricing, and it is also wasteful in terms of the excess material used.
  • Ineffective packaging materials – when your packaging is not sufficient to protect your product, you end up paying for it with higher return rates (due to damage) and customer churn. This can obviously increase your overall costs and even kill your business. Do NOT attempt to save money by reducing your protective packaging unless you are (a), confident your product can hold up in transit, or (b) using micro-fulfillment (i.e. Ohi’s instant delivery platform) to greatly reduce the last mile delivery distance.
  • Order fulfillment – If your e-commerce orders typically ship via standard ground delivery to the end customer from one or just a few traditional warehouses (whether in-house fulfillment or 3PL), your protective packaging needs are likely to be high, given that orders are traveling hundreds/thousands of miles in the back of a truck before they arrive to your customer. If on the other hand, you have your inventory forward-positioned into micro-fulfillment centers, your orders can be hand-delivered by a gig driver/rider and only need to travel a few miles to reach your customer. Many merchants on Ohi’s platform have completely eliminated the need for any cardboard or plastic protective exterior packaging, which is good for the environment and for their bottom line.

How can your e-commerce business cut down on wasteful packaging and costs?

The majority of packaging used today is still linear, meaning that the packaging for a product is created from raw materials, the product is used, and the packaging is discarded.

Renowned brands like Gucci, Nike, Puma, and Zara are starting to recognize the environmental impact of their packaging and are working to incorporate sustainability initiatives to achieve the triple bottom line by creating packaging for a circular economy. 

Consider the following strategies to optimize packaging and reduce shipping costs and waste:

1. Think outside the traditional cardboard box.

Cardboard boxes, as discussed earlier in the article, contribute to millions of tons of waste each year, and even in proposed reuse scenarios, they are often quickly discarded and dumped into landfills.

Using packaging alternatives that facilitate composting and biodegradable processes will help your brand amplify its sustainability efforts.

For instance, Puma, a leader in sportswear and shoes, launched ‘Clever Little Bag’ to replace the traditional shoebox, using 65% less cardboard. 

Source: Fuseproject

The bag and box system has no printing or tissue, assembles easily, takes up less space, weighs less in shipping (saving money and fuel on the delivery), replaces the plastic retail bag, and is completely recyclable.

There are many options available to choose from as compared to a few years ago when there were limited options and they were more expensive.

  • Easily biodegradable/compostable packaging like molded pulp packaging. 
  • Reusable packaging like eco-friendly tote bags is ideal if you use a micro-fulfillment, as you no longer need a heavy layer of protection with a greatly reduced travel distance.

2. Make your deliveries faster, more sustainable, and more cost-effective with Ohi.

Ohi deliveries were shown to be 22x more eco-friendly than next-day air and 5x more eco-friendly than 3-5 day ground.

Here’s how Ohi’s instant delivery platform is eco-friendly as well as business-friendly:

  • Ohi’s e-commerce fulfillment platform generates the least carbon emissions because products are shipped from micro-fulfillment centers that are located very close (often just a few city blocks) to your end customers. 
  • We use foot couriers and bike, e-bike, and scooter couriers in densely populated urban areas (instead of vans/trucks), which results in faster deliveries (due to the ability to avoid traffic) and less overall fuel consumption.
  • Ohi promotes the use of eco-friendly reusable totes for 2-hour and same-day deliveries whenever possible, as opposed to expensive/wasteful conventional packaging. Excess packaging is not needed for Ohi deliveries, because the risk of damage in transit has been virtually eliminated.
  • While Ohi’s model is sustainable, there is still a residual carbon footprint that remains from areas of the business that still require fuel or carbon consumption (e.g. middle mile line hauls).. So, we’ve partnered with EcoCart to calculate and offset the remaining carbon footprint, allowing us to offer our customers carbon-neutral e-commerce fulfillment. 

Ohi helped a leading kombucha brand, Health-Ade, increase its customer lifetime value (CLV) by 49% while greatly reducing their packaging waste and shipping damages.

Adopting a more sustainable approach to your e-commerce business doesn’t have to mean a loss of profits. By implementing sustainable solutions and strategies at each step of your post-purchase experience, you can provide a better customer experience, contribute to a circular economy, and even reduce your overall shipping costs. 


About Ohi

At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.

5 Ways for E-Commerce Teams to Improve Marketing Efficiency

A return to post-pandemic normalcy and the looming threat of recession have been challenging for some e-commerce teams in 2022.

Yet, history shows us how the best businesses can thrive when the circumstances are seemingly against them. 

For example, during the pandemic, restaurant chains that embraced digital ordering and added new capabilities like curbside pickup or contactless delivery mitigated the worst of it and sometimes even thrived. Many that didn’t embrace mobile ordering at all have since been shuttered.

It can be easy for marketers to stop advocating for new strategies when the cards are seemingly stacked against them. However, staying agile and making the right investments can help e-commerce marketers thrive against the odds. 

5 ways for e-commerce teams to improve marketing efficiency

1. Focus on customer loyalty and improving CLV

On average, repeat customers spend 67% more in the third year of their relationship with a company than they do at prior stages. Small increases in customer retention can lead to large increases in profit. 

Given that it’s harder than ever to acquire new customers, fostering the health of your existing customer relationships can be far more productive than throwing ad dollars at people who have never tried your product. Improving customer loyalty in this way can drive meaningful improvements in your CAC:LTV ratio, ROAS, or whichever metrics you use to understand marketing efficiency.

But how do you increase customer loyalty? 

Traditional loyalty programs that incentivize increased engagement and more frequent purchasing (e.g. points programs) and membership perks are an obvious starting point, but there are many other ways to drive customer loyalty, too. Let’s go over some of them.

2. Offer “fast and free” same-day delivery

Research from Ohi (based on actual anonymized client data) shows a substantial boost to repeat purchase rates and customer lifetime value (CLV) for customers who chose instant delivery with Ohi versus those whose orders were fulfilled with standard shipping.

What’s more, merchants can leverage instant delivery as a selling tool, boosting website conversion rates.

Together, these effects work in tandem to help marketers drive improved return on ad spend (ROAS) by delivering more bang for the buck.

Read more about how “fast and free” shipping has an outsized effect on shopper behavior.

3. Reduce CAC by weeding out low-performing ads/programs and focusing on best-performing audience segments

When times are good, marketers tend to cast a wider net. More programs, more campaigns, more ads. When conversion rates go down, it’s important for marketers to reprioritize efficiency.

  • Go through your programs, campaigns, and ad sets to determine which are actually bringing in new customers and which are wasting valuable dollars and ad impressions. Trim everything that isn’t working, or pivot into more relevant messaging.
  • Use split testing to boost performance further, even for ads that are already performing reasonably well. See what reduces CAC for your ads by experimenting with creative, copy, CTAs, and audience targeting. Once you’ve made some optimizations and have enough performance data to review, rinse, and repeat.
  • Targeting: As the times change, so too can your ideal customer profile (ICP). Continually update your understanding of who (demographics, interests, etc.) is best suited for your products, and ensure your advertising campaigns are optimized to target your ICP segments, specifically.

4. Recoup lost sales with remarketing strategies

Did you know that the average documented cart abandonment rate is 69.99%? That’s right — seven out of 10 shoppers that add something to their shopping cart don’t go on to complete their order.

Cart abandonment can be extremely damaging to your company’s bottom line and marketing success, causing both acquisition and retention costs to skyrocket.

Shoppers who have recently left the site without completing their purchase can be retargeted using techniques such as these:

  • Send personalized abandonment email campaigns with enticing offers such as free same-day shipping or a discount to get them to complete the purchase. “Your cart with (Product Name) is still waiting for you.”  
  • Similarly, you can run customized display ads to re-engage cart abandoners by letting them know they still have items in their baskets and teasing that they’ll have a special offer upon their return.
A remarketing email from Tipsy Elves highlighting a first-time discount.

5. Offer an excellent post-purchase experience

Increasing revenue while lowering costs is near the top of every company’s priorities. But in order to accomplish that, your customer experience must be on point.

While e-commerce teams and marketers understand the importance of the customer experience, they often over-prioritize everything leading up to the purchase decision.

After all, getting a new customer to order one time means a lifetime of blissful re-ordering, right?

Not quite. The key to boosting your revenue over the long term is heavily dependent on the post-purchase side of the customer experience.

What is a customer’s actual experience with your product, how quickly did it arrive, and how have they successfully incorporated it into their lives?

Here are a few ways to enable an amazing post-purchase experience: 

  • After a purchase is made, point customers to a “thank you” page that goes beyond the “order confirmation” function. Take the opportunity to thoughtfully address how this is more than a transaction for your team – how every order contributes to something bigger and more meaningful, e.g. societal impact, a movement to do X, Y, and Z.
  • Send out follow-up emails with product care tips, how-to guides, or interesting use cases to help customers incorporate your product into their lives successfully.
  • Encourage customers to join and interact with your community of happy customers.
  • Reminding customers to restock (e.g.: 50 days into a two-month supply) is another excellent way to provide value, stay in touch, and increase CLV.
  • As discussed earlier, ensure a fast and reliable delivery experience. Ohi’s research shows that providing same-day delivery results in a significant boost to CLV and repeat purchase rates, suggesting the importance of last-mile delivery within the overall post-purchase experience.
  • Give customers the option to schedule and reschedule deliveries (e.g.: Ohi allows customers to schedule the delivery in a four-hour window, up to seven days out), especially for subscription orders. Delivery scheduling allows customers to enjoy e-commerce on their terms while reducing the risk of package theft and removing much of the friction that receiving a package can present.

While the post-purchase experience is not traditionally a focus for marketing teams, advocating cross-functionally for some of these best practices can dramatically improve overall marketing efficiency, and that’s reason enough to have the conversation.


About Ohi

At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.

Holiday Shipping Tips to Gear Up for the Seasonal Rush  

While October might be a little early to start playing Mariah Carey on repeat, it isn’t too early to start planning your e-commerce holiday shipping strategy.

Experts predict that the ongoing economic woes and persistent inflation will cause customers to shop earlier for gifts this year. A Salesforce survey suggests the same: 37% of US shoppers (and 42% worldwide) plan to start buying gifts earlier this year due to inflation.

Meanwhile, traditional parcel carriers like UPS, FedEx, and USPS have been in the headlines lately for the wrong reasons, including discussions of strikes, rate hikes, more surcharges, and possible holiday shipping delays.

With changes in consumer behavior afoot, coupled with uncertainty among the major carriers, it’s important to lock your holiday shipping plans into place early this year. 

Here are six tips to help you power up your holiday shipping strategy this season and ensure a great customer experience and optimal results for your business. 

1. Forecast demand to manage your supply chain and fulfillment operations.

Sure, the high surge in demand and order volume is all a brand wants for Christmas, but is your business ready to handle it all? What is your game plan?

When demand spikes, will you have adequate inventory in place throughout your fulfillment network to avoid stockouts or delays? 

By forecasting early on, you will be able to:

  • Hone in on future demand scenarios for peak sales months, keep pace with holiday demand, and mitigate inventory shortages and stockouts. 
  • Plan ahead to have enough inventory available for any surprises during the holiday shipping season.
  • Ensure smooth and early inventory transfer processes (to your fulfillment centers) to dodge any delays in middle mile logistics that can rear up during the holidays.
  • Determine which products to promote and which will naturally sell through (e.g., you can offer discounts on SKUs you are overstocked in to help reduce excess inventory).

2. Diversify your carrier mix to ensure on-time delivery and keep customers happy.

Shipping delays are a holiday killjoy, and it would be a Christmas miracle if orders shipped via the largest carriers aren’t delayed at all this holiday season, considering the industry challenges. 

But to quote Kate McCallister, “This is Christmas, the season of perpetual hope.”

Now is the perfect time to upgrade your carrier strategy and ensure ultrafast and on-time deliveries during your peak sales months. 

Here are a few easy ways to diversify your carrier mix: 

  • Get onto Ohi’s instant delivery platform. Ohi uses 20+ last-mile delivery carriers, all pre-integrated with Ohi, to offer on-time and fast deliveries across your most important regional markets.
  • If you’re set on sticking with the traditional carriers, at least be aware of the “last day to ship” for delivery by Christmas. Check out this free resource to stay on top of holiday shipping deadlines for UPS, FedEx, USPS, and Ohi. 

Service
2022 Last Day to Ship
2021 Last Day to Ship
FedEx
FedEx Ground®
Dec 14, 2022
Dec 15, 2021
FedEx Ground Economy
Dec 8, 2022
Dec 9, 2021
FedEx Same Day
Dec 23, 2022
Dec 24, 2021
FedEx Express Saver®
Dec 20, 2022
Dec 21, 2021
Home Delivery®
Dec 14, 2022
Dec 15, 2021
2Day® Services
Dec 21, 2022
Dec 22, 2021
USPS
Retail Ground®
Dec 15, 2022
Dec 15, 2021
First Class Mail®
Dec 17, 2022
Dec 17, 2021
Priority Mail®
Dec 19, 2022
Dec 18, 2021
Priority Mail Express®
Dec 23, 2022
Dec 23, 2021
UPS
UPS Ground®
Check ups.com/ctc for details.
Check ups.com/ctc for details.
3 Day Select®
Dec 20, 2022
Dec 21, 2021
UPS 2nd Day Air® services
Dec 21, 2022
Dec 22, 2021
UPS Next Day Air® services
Dec 22, 2022
Dec 23, 2021
Ohi: Instant Delivery Platform
Two-Hour (Rush)
12pm local time, Dec 24, 2022
12pm local time, Dec 24, 2021
Same Day
12pm local time, Dec 24, 2022
12pm local time, Dec 24, 2021
Next Day
Dec 23, 2022
Dec 23, 2021

3. Offer fast and free delivery to extend and maximize peak sales

In a survey conducted by Shopkick last year, 94% of customers said that free shipping was the perk they wanted most when shopping online this holiday season, followed closely by fast shipping (60%).

Numerous surveys and studies emphasize how important fast and free delivery is to shoppers during the holidays, but what doesn’t get discussed enough is how offering fast delivery can extend the holiday shopping season for sellers.

By offering instant delivery through a platform like Ohi’s, sellers can add more than a week of holiday shopping (right up to Christmas Eve) versus standard delivery via FedEx/UPS/USPS standard. (See the table above for specific cutoffs.)

When it comes to pricing shipping during the holidays, it’s hard for some retailers to resist the urge to charge more for shipping (given rate hikes, the importance of on-time delivery when Christmas is fast approaching, etc.). But the data shows that charging for shipping is not a winning proposition.

Recent research of Ohi-enabled brands shows that customers choose instant delivery 5x more often when brands price instant delivery either, 

  1. free 
  2. free above an order amount threshold,
  3. or in line with their standard shipping than when instant delivery was priced higher than standard shipping (i.e., 3-5 day ground). 

It is evident from the research that merchants hoping to maximize sales this holiday season should strongly consider “unpricing” shipping.

Did you know: With Ohi’s instant delivery platform, you don’t have to lose sleep over increased shipping costs and holiday surcharges. Because Ohi uses micro-fulfillment centers near your end customers, you enjoy low, flat-rate pricing regardless of parcel weight/size, and your customers get ultrafast delivery. 

Pottery Barn’s holiday free shipping banner begs for attention. (Image Source: XL Plugins)

4. Clearly display your shipping deadlines to manage customer expectations.

Holiday shipping deadlines are typically made available a few months prior to the start of the holiday season. You can refer here for a summary of the “last day to ship” for the major carriers and Ohi.

Once you’ve worked through the deadlines and your own team’s constraints, it’s critical to communicate what these mean to your customers, so they can buy or send gifts in a timely manner.

These shipping deadlines should be prominently displayed on your e-commerce websites (and any apps), and proactively communicated to customers well ahead of the deadlines.

Here are a few ways to do that:

  • Add a banner to your website explicitly calling out the last day to order for delivery by Christmas.
  • Create a dedicated holiday shipping page that shows all the pertinent dates and recommendations.
  • Post regularly on social media as the cutoff dates get closer.
  • Send “last day to order” emails: Remind everyone on your email list that time is of the essence!

Macy’s holiday sale and the last day to ship banners are hard to miss. (Image Source: Website Magazine)

5. Plan your holiday customer service strategy to handle the rush.

Did you know that, according to a recent Coveo report shared by Retail Dive, 73% of shoppers will ghost a brand after three or fewer bad customer service experiences. 

Navigating holiday customer service peaks is never “fun.” When you account for supply chain hiccups, shipping delays, holiday-related stress, and a significant increase in online shopping, CX becomes a completely different ballgame during the holidays.

During the holidays, you need customer support that is trained to work patiently and empathically with these customers and present fixes instead of excuses. And your CX team must be sufficiently staffed to handle peak volumes and the inquiries that will inevitably come in.

Here’s an instant fix: if many of your complaints/inquiries are about delayed orders or order status, then maybe it’s time to switch to an instant delivery platform like Ohi’s. When orders arrive in as little as two hours, that’s a whole lot of “where is my order?” calls your CX team will no longer have to deal with.

6. Run holiday promotions and campaigns to kick off early sales.

The best way to spread Christmas cheer is by singing loud for all to hear.” -Elf 

Sometimes all a savvy shopper wants for Christmas is a special offer. And they are a perfect way to kick off your holiday sales.

Launching holiday promotions and campaigns early on will save you tons of time during the busy season, and it will also help you stake some of your customers’ mindshare before your competitors do the same.

Here are a few ways to kickstart your holiday sales: 

  • Run/share holiday promotions across all your channels, including social, email, SMS, ads, and website.
  • Plan an early holiday giveaway. Sephora partnered with GlamZilla, a well-known beauty influencer, as the face of their campaign to drive interest in consumers’ creating their own personal wish lists with Sephora. The campaign has generated tons of user-generated content.
  • Make use of good old email marketing to send out discount and promo emails. Make sure to highlight the offer in the subject line. 
  • Run holiday-themed display campaigns early on because a study by Amazon discovered that display campaigns that ran for 90 days or more performed 20% better.  
  • Create and share gift guides to encourage your shoppers to see your products as excellent gift ideas, and make sure to offer exclusive discounts to get them to buy. 
  • Showcase holiday-themed products on your website to encourage customers to begin shopping early.

Tipsy Elves has already restocked on ‘Ugly Christmas Sweaters’.

‘Tis the season to gear up for the rush  

While most people are out hanging skeletons and cobwebs, the best retailers and brands are already getting plans in place for the holiday season. 

By taking concrete steps to ensure a smooth holiday shipping experience for your customers, you’ll also be in a prime position to maximize your store’s profits and end the year with a bang!


About Ohi

At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.

Holiday Shipping Deadlines 2022: December Cutoff Dates (Last Day to Ship) for USPS, FedEx, UPS, & Ohi

Note: This is a live resource, and the table below will be updated as new information is released.

While the holiday shopping season is unequivocally exciting for many merchants because of the outsized revenue they realize in a short period of time, the spike in orders can strain both merchants and their logistics partners. Therefore, it’s imperative that brands plan their holiday fulfillment and shipping strategy ahead of the holidays to avoid costly supply chain disruptions and shipping delays. 

To help e-commerce merchants map out their holiday shipping strategy ahead of the peak season, we’ve put together a live guide highlighting the “last day to ship” for major fulfillment/delivery providers for delivery before December 25, 2022. 

Holiday shipping deadlines for Christmas 2022

Here are the last days to ship for on-time delivery by Christmas for USPS, UPS, FedEx, and Ohi’s instant delivery platform. These are for U.S. to U.S. shipping only.

Note: We’ve also included 2021’s cutoffs for reference, as it will be interesting to see how the cutoffs change this year.

Service
2022 Last Day to Ship
2021 Last Day to Ship
FedEx
FedEx Ground®
Dec 14, 2022
Dec 15, 2021
FedEx Ground Economy
Dec 8, 2022
Dec 9, 2021
FedEx Same Day
Dec 23, 2022
Dec 24, 2021
FedEx Express Saver®
Dec 20, 2022
Dec 21, 2021
Home Delivery®
Dec 14, 2022
Dec 15, 2021
2Day® Services
Dec 21, 2022
Dec 22, 2021
USPS
Retail Ground®
Dec 15, 2022
Dec 15, 2021
First Class Mail®
Dec 17, 2022
Dec 17, 2021
Priority Mail®
Dec 19, 2022
Dec 18, 2021
Priority Mail Express®
Dec 23, 2022
Dec 23, 2021
UPS
UPS Ground®
Check ups.com/ctc for details.
Check ups.com/ctc for details.
3 Day Select®
Dec 20, 2022
Dec 21, 2021
UPS 2nd Day Air® services
Dec 21, 2022
Dec 22, 2021
UPS Next Day Air® services
Dec 22, 2022
Dec 23, 2021
Ohi: Instant Delivery Platform
Two-Hour (Rush)
12pm local time, Dec 24, 2022
12pm local time, Dec 24, 2021
Same Day
12pm local time, Dec 24, 2022
12pm local time, Dec 24, 2021
Next Day
Dec 23, 2022
Dec 23, 2021

Sources

FedEx – Shipping Deadlines for Holiday Packages (2022)

FedEx – Shipping Deadlines for Holiday Packages (2021)

USPS – 2022 Holiday Mailing Deadlines

USPS – Holiday Shipping Deadlines (2021)

UPS – 2021 Year-End Holiday Schedule

UPS – 2022 Year-End Holiday Schedule


At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today

Fast & Free: How to Price (or “Unprice”) E-Commerce Shipping to Perfection

According to the zero price effect, traditional cost-benefit models cannot account for the psychological effect of getting something for free. “Free goods have extra pulling power.” (source)

A store could be offering a free ice cream cone or even a free sticker worth less than a penny. Regardless, there we are waiting patiently, grinning ear-to-ear for the opportunity to get something for nothing.

There’s no better example in e-commerce than “free shipping.” 

Let’s discuss the arguments for and against providing free shipping from an e-commerce merchant’s perspective. 

Shoppers hate add-on fees, and speed matters

According to recent research by The Baymard Institute and shared by Shopify, the #1 reason why shoppers abandon checkout is because “extra costs [like shipping and taxes] were too high,” accounting for 55% of total cart abandonment. 

A 2021 global consumer insights survey conducted by PWC showed “fast/reliable delivery” as consumers’ #1 overall consideration when shopping online (ranked top three by 41% of respondents), beating out eleven others, including “in-stock availability of items I want (35%),” “ability to quickly and conveniently navigate the website to find products I’m interested in (30%),” “availability of online customer reviews (26%),” and “a good return policy (31%).” 

Want to reduce cart abandonment (and increase conversions) for your online shop? The research is clear: offer your customers fast order fulfillment, and don’t charge them for it.

Despite the body of evidence, many e-tailers remain skeptical about the merits of offering “fast and free” delivery, with “erosion to profit margins” being among the most common reasons given.

There’s a cost to “free” shipping

While free shipping is a proven way to get customers to buy from you, providing it isn’t exactly “free” for retailers. 

E-commerce shipping can sometimes be a very significant expense for retailers, particularly when it comes to expedited deliveries (learn how Ohi keeps fulfillment costs low for sub 2-hour, same-day, and next-day delivery) or heavier/bulkier goods. 

But what if you can generate ROI from offering “fast and free” delivery? Might there be a scenario where you’d want to eat free shipping costs in order to reduce cart abandonment (or increase conversions) and even increase customer satisfaction (i.e. through a better and faster delivery experience), leading to improved customer lifetime value?

To understand that scenario better, we need to first establish the ROI of fast shipping (or what Ohi calls “instant delivery”).

The ROI of instant delivery

Previous research from Ohi (based on actual anonymized client data) demonstrated a substantial boost to repeat purchase rates and customer lifetime value (CLV) for customers whose orders were delivered in less than two hours (via Ohi 2-hour instant delivery) versus those whose orders were fulfilled with standard UPS/FedEx 3-5 day ground.

Because immediacy and convenience are so valuable, instant delivery helps merchants grow in a major way. 

BUT (and this is a big “BUT”) – it can only do that if customers select instant delivery at checkout. And therein lies the rub. 

Brands that charge for instant delivery consequently have fewer customers choose instant delivery at checkout—thereby forgoing the retention/growth boosts they would have otherwise enjoyed.

Does it make sense to charge for instant delivery?

New research from Ohi shows that Ohi-enabled merchants that price instant delivery either (1) free, (2) free above an order amount threshold, or (3) in line with their standard shipping, have instant delivery picked five times more often than when instant delivery is priced higher than standard shipping (e.g. 3-5 day ground).

What’s more, merchants that (1), priced instant delivery this way (i.e. free, free above a threshold, or in line with standard shipping), and (2), had been optimized* on the Ohi platform, saw on average a 26% increase to repeat purchase rate (when orders shipped via Ohi 2-hour/same-day/next-day instant delivery vs. standard delivery), while those that priced instant delivery higher than standard shipping saw no improvement in repeat purchase rate.

When you consider how cost-effective instant delivery can be for many brands (e.g. learn how Greater Than saves 20% with instant delivery versus standard ground shipping), it’s not hard to see that charging more for instant delivery is counterproductive to increasing profits.

If this loss in potential ROI from not getting selected in checkout and the cart abandonment mentioned earlier aren’t enough to dissuade you from marking up e-commerce delivery, consider this piece of research: when retailers charge a high shipping fee relative to product price, shoppers believed retailers did so to earn additional profit (rather than simply to pass shipping costs on to the customer). It’s not a great look for any brand that aspires to be customer-first.

The overall implication here is that brands should strongly consider offering “fast and free” e-commerce delivery, allowing more customers to enjoy the best customer experience and setting the stage for increased retention and business growth.

How to offer free shipping

Now that we’ve established that “fast and free” shipping is great for conversions, amazing for customer retention, and can more than pay for itself, here are some pointers on how to make free shipping work for your brand.

  • Streamline the number of shipping options you offer in checkout to prevent choice paralysis and to ensure your customers easily find the option that’s best for them
OLIPOP has seen a 150% increase to CLV through “fast and free” Ohi instant delivery. This simple and clean shipping screen is optimal.
Too many choices can lead to abandonment, and the lack of an Ohi instant delivery option here results in cost-prohibitive expedited shipping costs.
  • If margin is a concern, consider including your average shipping cost as part of the product price, especially if you primarily sell DTC or if you are selling hard-to-find or highly unique products. This allows you to benefit from the “zero price effect” with free shipping and avoid preventable cart abandonment. Plus, your customers may not “feel” the additional dollars as much when they’re baked into the product pricing.
  • Free shipping with order minimums: If you’re concerned about losing money by giving away free shipping for low-value orders, you can simply set an order minimum for free shipping. Free shipping above a basket threshold can serve as a powerful incentive for customers to buy more from you, while protecting your bottom line.
  • Promote free shipping. (“If a tree falls in the forest…”, etc.) If the goal is to maximize sales, you need to be committed to letting shoppers know you offer free/”fast and free” delivery. A few common places to highlight this: website ticker (a horizontal announcement bar at the top or bottom of the screen), homepage leaderboard or box banner, product page (near add-to-cart button), in checkout, marketing emails/SMS, on social posts, and in paid advertisements.

At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.

*Merchants “optimized on the Ohi platform” are those with at least 200 orders shipped via Ohi instant delivery in the last 30 days and an efficiency rate greater than 30%. Efficiency rate is the percentage of Ohi clients’ orders within Ohi’s serviceable zips that Ohi does fulfill.

E-commerce Shipping 101: A Guide to Fulfillment Pricing, Costs, and Key Strategies

At a glance, e-commerce order fulfillment and delivery may not seem like the most significant cogs in your business, but that is where much of the post-sale magic happens. You can have the best product in the world, but without an optimal fulfillment/delivery solution, your business will soon be out of the running. 

There is a wide range of fulfillment providers and solutions to choose from, from third-party logistics companies (or 3PLs) and carriers like FedEx to instant delivery platforms like Ohi. Therefore, understanding the spectrum of different fulfillment solutions and how much they will cost you is crucial to your e-commerce success. 

Whether you’re a fast-growing brand that’s ready to expand nationwide or you’re just getting started, this guide will help you understand several of the most popular approaches to e-commerce order fulfillment and how they differ from a cost standpoint.

1. What are e-commerce order fulfillment services?

Fulfillment services entail a bunch of steps carried out by one or more fulfillment companies to get orders delivered to the end customer. 

Typically, if you hire a 3PL or a fulfillment partner, your business will be charged fees for each of these services and will be invoiced as part of the total fulfillment cost. Some services, such as pick and pack, may be further subdivided into different charges depending on your business needs.

Want to learn more about e-commerce order fulfillment services? Check out our straightforward guide.

2. What are e-commerce order fulfillment costs?

Put simply, it’s all the money you’ll spend on delivering an order to the end customer. The cost of fulfilling an order is determined by various factors such as receiving and storing products, processing orders, and shipping orders.

Typically, order fulfillment costs will vary depending on the provider, order pricing models, and any additional services.

The fulfillment fee comprises the following bulleted workflows: 

  • Receiving/storing inventory
  • Order processing
  • Picking/packing
  • Shipping
  • Reverse logistics

Many popular third-party logistics providers charge an additional surcharge on top of the standard fulfillment fee for SKUs that contain batteries or hazardous materials. 

3. How to calculate your e-commerce order fulfillment and delivery costs?

Fulfillment and shipping costs can seem like a black box at first, but understanding how your costs accrue and what each cost is will offer you better control over your budget and enable you to confidently use fulfillment as a growth lever.

In addition, you’ll have a better sense of where and how to distribute your inventory and which fulfillment solution(s) will be the most business-friendly, given your specific product and demand characteristics.

 Let’s take a look at the pricing models for some of the most common e-commerce fulfillment and shipping options out there. 

3.1 Pricing model for traditional 3PLs (third-party logistics companies)

Fulfillment fees vary from 3PL to 3PL depending on the services (you choose), their billing system, and their rates. But some fulfillment companies charge on a monthly or time-based basis, and many others charge on an order-by-order basis. For example, with Amazon, your biggest expense might be storage fees, which are typically premised on bin, pallet, or size and can add up quickly if products are left in the warehouse for an extended time.

A traditional 3PL houses your inventory in their warehouses or fulfillment centers, picks, and packs, and delivers products to your customers. If reverse logistics is a part of your contract, then they manage product returns as well.

speed delivery

When choosing a logistics partner, remember to base your decision on the services a 3PL offers and carefully consider its pricing model. These days, many modern 3PLs deliver orders from several distribution centers to minimize travel time and costs, enabling delivery in 2-5 days, for example. Here’s a leading 3PL’s approach to pricing, for reference:

  1. Delivery fees: These costs will vary based on the following order/parcel characteristics. This variability can make it hard to forecast and plan expenses, especially if there is great variability in the product mix and/or demand patterns:
    • destination 
    • weight and size
    • dimensions 
    • shipping speed, etc. 
  2. Pick & pack fees: These costs are often rolled into fulfillment costs but can be a standalone expense too. The fees will vary from standard packaging (e.g., generic poly mailers and boxes) to branded packaging. 
  3. Storage fees: Storage fees are determined by the amount of space required to keep your items safe in the warehouse. The pricing model may differ depending on the fulfillment provider and the product.
    • The per-pallet pricing model is considered the most cost-effective option. (With monthly rates ranging from $5 to $20.)
    • When you need to avoid ’empty space,’ the per cubic foot of space model is used. (The monthly cost for this particular example ranges between $.30 and $.60.)
    • The per bin model is used for quick fulfillment and costs between $1 and $2.50 per month.

Some other fees associated with fulfillment 

  1. Setup fees: there’s usually a one-time onboarding fee. Some companies charge a flat rate while others base the setup fee on the type of inventory they need to deal with, along with other factors from intake to delivery.

3PLs often calculate an item’s monthly storage fee by cubic foot, which is important to consider if your products are large. Besides that, fulfillment services may charge additional fees for temperature control (cold chain, for example) or fragile items in some cases.

  1. Inventory receiving and intake fees: typically cover the process of receiving a new inventory and sorting it at the warehouse. These fees can be charged in two ways:
    • Per hour
    • Per-unit basis 
  2. Kitting fees (if applicable): the fee associated with bundling individual products into ready-made sets or ‘kits’. Kitting is provided as an add-on by many 3PLs.
  3. Reverse logistics fees: costs associated with restocking or disposing of returned items. Some 3PLs accept returns on your behalf, while some don’t.

3.2. Pricing model of carriers (i.e., UPS/FedEx) 

If you decide to fulfill your own orders and partner with a carrier such as FedEx or UPS for last-mile deliveries, bear in mind that each carrier service provides a smorgasbord of e-commerce shipping solutions with varying pricing, giving you different options based on your budget and requirements. 

Here’s how a carrier typically calculates charges: 

  • Your shipment’s origin and destination 
    • Generally, the farther your shipment needs to go, the more zones it has to travel to reach the end customer, the more you’ll pay to ship it.
    • FedEx, USPS, and UPS create their zone lists by dividing the country into seven shipping zones (as shown in the table below) to calculate the distance a package travels from origin to destination.
    • These zones impact both the cost and delivery speed of your packages. Here’s a breakdown of shipping zones for FedEx and USPS:
Shipping ZoneMile Radius (from origin)
Zone 1 (local)50 mile radius
Zone 251 – 150 mile radius
Zone 3151 – 300 mile radius
Zone 4301 – 600 mile radius
Zone 5601 – 1000 mile radius
Zone 61001 – 1400 mile radius
Zone 71401 – 1800 mile radius
Zone 81801+ mile radius
  • Package type, dimensions, and weight 
    • The delivery service you pick will decide the price you pay.
    • The size and weight of your package also impact your shipping cost.
    • Carriers such as FedEx and UPS calculate prices using either the dimensional weight (dim weight) or the actual weight of the package—whichever is greater.
    • Usually, the bigger and heavier your shipment is, the more it will cost.
  • Other factors that affect shipping rates
    • Shipping/delivery prices can be affected by factors like: 
      • Fuel costs – carriers such as UPS and FedEx apply fuel surcharges to the base transportation rate.
      • Delivery and pickup conditions such as any areas outside the carrier’s range (rural, hard-to-access, or remote), or weather constraints causing the delay.
      • Special handling requirements for products that are fragile, large, heavy, climate-sensitive, or have special storage needs.
      • Holiday package volumes.

Now that you have a better understanding of how carriers price shipping, below is a list of shipping calculators for some of the most popular shipping carriers to help you find the most cost-effective option for your business needs. 

  1. FedEx – Shipping Calculator 
  2. UPS – Shipping Calculator 
  3. DHL – Shipping Calculator
  4. USPS – Shipping Calculator 

But before you choose a shipping carrier, it’s helpful to know the answers to the following questions:

  • Where are you shipping to?
  • Where are you shipping from?
  • What products are you shipping? Are your products heavy?
  • What type of packaging will you use? Standard or branded?
  • Have you determined a budget? Do you intend to offer free shipping, flat-rate shipping, or exact-cost shipping?
  • What do your customers anticipate from your delivery policy? Do they want their order to be insured, or do they have specific delivery deadlines?
  • How will you handle the other aspects of e-commerce fulfillment, including storage, pick & pack, and more? Will you need to team up with third-party logistics (3PL) providers?

Once you have the answers to these questions, you can then move on to select a carrier to ship your e-commerce orders—or several, if that’s what you think will work best for your business. Many businesses employ a mix of several carriers to improve coverage, keep an aspect of cost competition between carriers, and optimize delivery speed. 

One important thing to keep in mind with regard to traditional carriers like UPS/FedEx is that despite relatively mediocre delivery speeds (3-5 day ground, for example), prices can quickly get expensive based on distance traveled (related to fuel costs). And if you’re looking to ship expedited via UPS/FedEx, jet fuel costs can often catapult shipping costs into the $100+ range per order, particularly if your products are heavy/large.

That’s why micro-fulfillment based platforms like Ohi exist – to offer instant delivery (2-hour, same-day, next-day) at a reasonable cost. Ohi achieves great speed and efficiency by forward-positioning inventory in major cities, near the end customer.

Need faster e-commerce fulfillment? Choose an instant delivery platform.

If your e-commerce brand already enjoys substantial nationwide order volume, you could be eligible for an instant delivery platform like Ohi’s, enabling much faster deliveries and setting the stage for improved conversions, customer lifetime value, and repeat purchases. A successful e-commerce business is a consistent orchestration of pre and post-sale operations. With delivery standards continuously being raised by the likes of Amazon and customers demanding faster shipping, your direct-to-consumer business might consider adding instant delivery to your existing fulfillment strategy. 

For instance, with Ohi’s instant delivery platform your e-commerce business will enjoy the following:

  • Ultrafast two-hour, same-day, and next-day delivery
  • Simple, flat-rate pricing, regardless of weight, parcel size, etc. for nationwide deliveries, due to hyperlocal micro-fulfillment centers
  • Fixed monthly storage fees
  • Delivery without fuel surcharges (since last mile fuel consumption is very low)
  • Competitive per-order pricing inclusive of pick & pack, last-mile delivery, and live ops/CX support/account management
  • Reduced packaging costs due to micro-fulfillment (i.e.: less travel distance)
  • Keep your current 3PL; Ohi can layer on to your existing fulfillment strategy to provide delivery speed where it matters most.

If you want to learn more about Ohi, get in touch here.  


At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.

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