Tag: e-commerce

5 E-commerce Trends that will Define 2023

Aiza Chaudry
Insights

2022 was a wild ride! 

Despite the headwinds, US online retail sales hit $735.12 billion (in the 3rd quarter of 2022), and as per a study by eMarketer and Statista, e-commerce sales will reach a phenomenal $6.51 trillion by 2023. (source) 

E-commerce is unquestionably here for the keeps. Much of the growth we’ll witness this year will likely be driven by the customer’s appetite for connected and seamless experiences, fast delivery, social shopping, etc.  

So, with the calendar turned to 2023, it is crucial for businesses to stay abreast of the e-commerce trends that will set the course for the year.

Here’s a roundup of the hottest trends and topics to help online merchants fortify their strategies and stay on top of their game. 

1. Providing a consistent, seamless omnichannel retail experience will be a bleeding edge in 2023.   

In 2023, frictionless ‘phygital’ retail experiences will pick up steam because customer journeys are no longer linear. Shoppers now engage with brands and shop across a multitude of channels in various ways. 

And they want to be able to move seamlessly between these channels, whether it’s in-store, online, or a combo of both. 

Data from McKinsey shows that omnichannel customers shop 1.7 times more than single-channel shoppers—and they also spend more.

In 2023, brands that provide their customers the best of both worlds will have a competitive advantage over those that stick solely to traditional retail or a singular channel. 

Major retailers such as Amazon, Walmart, Target, and Best Buy are already maximizing omnichannel retail to provide a seamless and consistent experience. Even smaller retailers are getting in on the action. 

Here are a few ways retailers can enhance the shopping experience through a connected, seamless retail experience: 

  • By offering mobile-specific features such as personalized product recommendations or location-based offers
  • Integrating features such as in-store pickup for online orders, the ability to return online purchases in-store, and delivery speed for both online and in-store 

For instance, Walmart enables same-day delivery on its website as well as in-store. You can order online and pick up your order in-store. 

  • Using data analytics and AI/ML to better understand customer behavior and preferences and to personalize the shopping experience 
  • Offering 24/7 live chat support, personalized assistance via email or SMS, or other services to help customers throughout the shopping journey
  • Making sure that the inventory is accurately reflected across all channels to avoid frustrating customers with out-of-stock items or incorrect availability information
  • Offering same delivery and pickup options across every channel to give customers flexibility and convenience

2. E-commerce sales in 2023 will be significantly driven by mobile commerce.

Smartphones are a go-to option for most shoppers, whether it’s browsing for products, making purchases, or tracking their orders, etc.  

Factors like social commerce catching on and more brands enabling mobile-first experiences will drive mobile commerce sales to $4.5 trillion, or 69.9% of total retail e-commerce sales.

Let’s dive into the details to picture this trend better.

a) Growth of social commerce 

Do you know how much time an average user spends on any of the top 5 social platforms? two and a half hours per day. 

Initially, social media platforms served as a place for shoppers to window-shop. But within the last couple of years, the major social platforms like WhatsApp, Instagram, Facebook, Snapchat, Pinterest, and now TikTok have expanded their in-app shopping options, making in-stream commerce a bigger focus. 

“But are consumers actually buying products while browsing social media?”

  • About 1 million users regularly buy from Facebook Shops every month. (Statista)

And, if not experienced, we’ve all heard or skim-read about live selling. Although the US live-selling market is still in its infancy, with major players like Walmart, Nordstrom, and Macy’s experimenting with live shopping on their websites, it is expected to hit $25 billion in 2023.

So, whether you decide to sell directly through social media or not, these channels should not be overlooked in your e-commerce strategy in 2023.

b) The ease of buying that comes with mobile-first experiences & personalization

Mobile is changing the way we shop. The evolution of mobile-first and personalization features like one-click checkout, BOPIS, personalized recommendations, scheduleable delivery options, and mobile payment solutions such as Apple Pay, PayPal One-Touch, Visa Checkout, Amazon Pay, and Venmo have made mobile shopping more convenient and accessible compared to a few years ago. 

Mobile devices now make up 71% of all retail traffic, and they generate 61% of online shopping orders. (Statista.)

That’s substantial growth! 

3. Delivery speed and delivery certainty remain a top priority for shoppers.

Whether customers shop in-store or online, they want convenience, speed, and certainty—a behavioral shift caused by Amazon during the pandemic. And this isn’t changing in 2023. 

  •  According to a study by Digital Commerce 360, 80% of online shoppers in the US want same-day shipping options. 
  • Meanwhile, in another study, nearly 70% of consumers said the ability to track orders was one of their top three considerations when buying a product online, and 56% said it was a top consideration when ordering a luxury item. 

Consumers have come to expect quick and efficient delivery of their online purchases, and companies that are able to offer fast delivery options will have an advantage over those that do not.

Fast and convenient delivery options are also proven to boost conversions for businesses. ROI data from Ohi’s analysis of partner brands highlights that brands that delivered orders fast with Ohi’s same-day and two-hour delivery had 30% higher repeat purchase rates than standard UPS/FedEx. 

Here are a few ways businesses can enable fast fulfillment: 

  • Streamline their fulfillment processes by investing in new technologies and micro-fulfillment. (Setting up a distributed network of MFCs is not without challenges. And most businesses simply don’t have the time or budget to manage all this on their own.) 
  • The other way is to partner with a reliable instant commerce partner such as Ohi to ensure that orders are delivered fast, on time, and in good condition. Learn more here.

4. Sustainability will be on your customers’ shopping list. 

Consumers are becoming increasingly aware of the environmental and social impacts of their purchases, and this trend will likely influence the e-commerce landscape in 2023. 

A February 2022 survey of 16,000 global consumers found that 51% of people say environmental sustainability is more important to them today than it was 12 months ago. (source)

As more customers begin to demand sustainable products and delivery methods, we will see more businesses invest in sustainability. Top brands, including IKEA, Nike, Patagonia, Ralph Lauren, Lululemon, and Chanel, are already taking steps to reduce their carbon footprint and promote sustainable practices.

A 2022 Gartner survey of CEOs found that about 20% of CEOs and other high-level business leaders are also prioritizing social responsibility and environmental, social, and governance (ESG) issues in their organizations. This is the highest it has been in the past 10 years. (source)

Here are some ways businesses can be more sustainable:

  • Sell products made with more sustainable materials.
  • Invest in more eco-friendly packaging materials.
  • Allow shoppers to choose more eco-friendly shipping options such as Ohi’s sustainable instant delivery. It’s green and sustainable, because products are delivered via foot couriers or electric scooters from our distributed network of MFCs, located closer to customers.  

Moreover, Ohi deliveries were shown to be 22x more eco-friendly than next-day air and 5x more sustainable than 3-5 day ground. (Stanford Study)

  • Make it easy for people to recycle items, i.e., Nike’s sustainable and recycled shoes are a great example.
Puma launched ‘Clever Little Bag’ to replace the traditional shoebox, using 65% less cardboard. (source: the packaging cookbook)

5. Post-purchase experience will be a linchpin for brands. 

Make the customer the hero of your story. — Ann Handley

Most brands are so focused on increasing sales conversions that they completely neglect the post-purchase phase of the buyer’s journey. The post-purchase phase is where you make your customers fall in love with your brand and make a repeat purchase.   

Because 91% of customers say they won’t do business again with a brand that left them unhappy. (source)

By focusing on the following elements of the post-purchase experience, online retailers can create a happy and satisfying shopping experience for their customers:

  • Easy and convenient return and exchange policies
  • Providing timely and accurate order tracking and delivery updates
  • 24/7 customer support, and live chat features
  • Personalized communication and follow-up
  • Options for fast and schedulable delivery or pickup in store
  • Sustainable packaging of products
  • Include user-friendly product instructions and documentation within packaging and send out via email. 
  • Ask for feedback via email, SMS, or phone call 

In 2023’s competitive e-commerce landscape, a powerful post-purchase experience will be pivotal for merchants to differentiate themselves from their competitors as well as attract new customers. Nothing works like word-of-mouth marketing. 

In 2023, It’s Go Big or Go Home.

In the end, it all boils down to customers. By understanding and analyzing customer behavior, retailers can tailor their marketing and sales strategies to better meet the needs and preferences of their target audience. This, in turn, will help drive e-commerce growth, increasing customer loyalty, repeat purchases, and overall sales.

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.

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

Aiza Chaudry
Insights

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.

The Instant Gift Guide is Here!

Ohi Team
Other

🎉 We’ve just dropped our first-ever holiday gift guide, filled with amazing gifts and party items Ohi can have delivered in as little as two hours — right up until December 24th!

Feast your eyes on The Instant Gift Guide 🎄and have a holly, jolly holiday! ❄️

Check it out here: 👇
ohi.com/gift-guide

5 Ways for E-Commerce Teams to Improve Marketing Efficiency

James Hsu
Insights

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.

FREE Playbook: 10 “Post-Purchase” Plays to Maximize E-Commerce Profitability & Customer Retention

Ohi Team
Free Resources
DOWNLOAD FREE

Existing customers are 9x more likely to purchase than first-time customers, according to the Adobe Digital Index. 

The aforementioned insight has huge performance implications for brands that invest in customer retention. But how do you get a customer to shop with your brand again? 

One way that is often overlooked is optimizing the “post-purchase experience.” Optimizing a customer’s experience after checkout is the key to increasing repeat purchases, fostering better customer relationships, and boosting AOV and customer lifetime value.

Download our PPX Playbook to unlock 10 best practices related to:

  • Post-purchase communication/engagement to nurture relationships
  • Enabling fast and free delivery 
  • Designing a premium delivery and unboxing experience 
  • Establishing customer loyalty, and more. 

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

Aiza Chaudry
Insights

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 deliveries in Ohi metro areas, due to hyperlocal micro-fulfillment centers
  • ‘Pay as you go’ monthly storage fees
  • Fewer 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.