One of the first decions every online retailer makes is which shipping courier to use: UPS or FedEx. They also have to decide which shipping methods to offer, whether to pad the shipping charge to cover fulfillment costs, whether to charge a flat rate or by zip code, and what to do for international orders. Obviously, there is no clear answer. What may work for one retailer, may not work for another. However, this article will provide information that will help retailers make these decisions.
I have been working for an online retailer for more than three years and have had my hand in shipping and operations since my beginning. I work for a software developing-turned-computer hardware retailer called Sewell Direct. We initially specialized in connectivity, but have since expanded our product line into several areas of computer hardware and accessories.
Originally, we only offered ground, 2nd-day, and overnight shipping via FedEx. When customers began requesting their orders ship to PO boxes and APO’s (military address that FedEx and UPS can’t deliver to), we looked into offering the post office as an alternative shipping method. When we discovered that priority mail was cheaper than ground rates (when under two pounds), that the post office would provide the boxes at no charge, that it takes shipments only two to three days to get to the east coast (we’re based in Provo, Utah), and that there were no surcharges, it was a no-brainer to offer it. In the beginning we used stamps.com to process the stamps but later found Dazzle which has an API, making it easier to integrate with our intranet software and streamline shipping.
Just before offering USPS shipping, we also added the FedEx Home Delivery shipping method. Home Delivery delivers in the same time frame as ground (1 to 5 business days), but it has a few advantages for customers shipping to their homes: tuesday thru saturday shipping vs monday thru friday for ground, shipping is slightly cheaper than ground shipping plus the residential surcharge, and they deliver into the night when it’s more likely that our customer will be home. However, Home Delivery comes with its disadvantages as well. FedEx will tell you that they use smaller trucks (vans) for home delivery saving you money but the real reason is because many of the time Home Delivery shippers are just contractors hired by FedEx that don’t have the FedEx box trucks (they just stick the FedEx decal on the side of their van). We’ve found that sometimes these guys don’t care how or when they deliver the package. Also, with Home Delivery you have to determine which addresses are residential and which are commercial in order to get the savings. We included a “delivery area” field on our online checkout process to help us but when customers could see that it was cheaper to have the order shipped ground, they would select ground though their address was residential. Other issues arised so we just decided to can Home Delivery and ship everything ground.
Just last week, we decided it was time to start listening to our customers again (just like we did when they wanted us to ship to PO boxes and APO’s) by seting up an appointment with the local UPS rep. In the online retail business you’ll find that some people love UPS and hate FedEx while others swear by FedEx and dispise UPS. While this usually happens because of a customer’s previous less-than-desirable experience with one of the couriers, there is an explanation for this: FedEx is king of the air and UPS is king of the ground. In the beginning, FedEx was known as the quick, pricey overnight shipper. Though UPS has always offered air shipping, when one needed something shipped quickly, FedEx was the sure way. Because UPS has been doing ground shipping so much longer, they have the advantage in that arena. We’ve also found that most businesses will provide a UPS account before a FedEx account so we have to call them to get a FedEx account (and they don’t always have one). As soon as we can free up some of our programmers’ time, we’ll be adding UPS shipping to our store.
Up to this point, we have always charged our customers based on their zip code but it would be really nice to charge a flat rate so that customers on the east coast aren’t turned away by high shipping rates. In other words, I’d rather have everyone paying the same rate than the close ones paying little and ones further away paying a lot — it just makes sense. Why would the east coast buy from us if the shipment is going to take five days and they have to pay more? That doesn’t make sense.
Offering free shipping to customers that order $100 or more of merchandise is another no-brainer. These are the customers you want to cater to. They’ll come back to you because they know you do free shipping (that’s one of the reasons why we always get our office supplies from staples though they may be cheaper elsewhere).
One of the common problems we face with FedEx is surcharges. Surcharges make it very difficult to know exactly how much to charge our customers. In an attempt to alleviate this problem, we’re changing the way our site produces the shipping rates. Now, instead of pulling the rate from a table in our database, we’re going to query FedEx/UPS’s database in order to get the rate with the surcharges. By doing this, we hope to have no more surprises when the invoice comes. Because of all the unknown surcharges we’ve had to pad our shipping maybe a little more than we’d like.
Maybe this was a little more information that you wanted but, hey, it’s not easy to fit everything I’ve learned about shipping in the last three years into one article (there’s actually lots I’ve left out… to be shared another day…. ).