Manage your Dropship and Multi-Vendor Marketplace Shipping

Shipping can be a big pain point when you start selling through a multi-vendor marketplace. Learn all about how to manage costs and automate your operations.

Setting up shipping when you have multiple vendors shipping orders can be complicated. The fact that your customers can order from many different vendors can lead to high shipping costs on a single order. Of course, you can’t charge your customers too much for shipping, it’ll only put them off making a purchase. Equally, you don’t want to undercharge for shipping and say goodbye to your profits! The solution? You need to understand blending shipping rates and have a strategy for managing them. And that’s where we come in.

Understanding multi-vendor shipments

By default, Shopify always assumes a single origin for each shipment. Shipping costs are calculated on the basis that the order is being picked, packed and shipped from a single location (e.g. your warehouse or shipped via a vendor). So, what do you do when that isn’t the case?

When you’re operating a multi-vendor marketplace or dropship store, you’ll likely be shipping products from several vendors, within the same order. Your shipping costs can soon mount up. What you don’t want is a huge shipping bill that eats into your profit margin. Managing this badly could even leave your store making a loss! Here's an example...

A customer buys items from five vendors featured in your store. You charge the customer a flat rate of $10 to ship the whole order. Your vendors ship the items, each invoicing you $10 shipping. You've just lost $40, potentially making a loss on the order.

The merchant and vendor origins are another potential problem in multi-vendor marketplaces. What if a customer in the US places an order for items from a US vendor and a Canadian vendor? Their order will involve a both a domestic and international shipment, and that’s not something Shopify can manage for you, straight out of the box. With Jetti, though, orders like this are no problem at all. Here’s our two-step process for getting started.

Step 1: Paying vendors for shipping

If your vendors are shipping direct to your customers, you need to figure out how to cover the shipping costs. Most won’t ship for free. You have two options:

Option A - You supply vendors with shipping labels

With Jetti, vendors print shipping labels from a vendor portal from our discounted USPS or by integrating your own carrier. If you supply the shipping labels to the vendor, there’s no need to pay vendors to cover shipping costs. This is great for small vendors who can take advantage of discounted rates.

Option B - Vendors invoice you for shipping

If you don’t want to supply vendors with labels (e.g. maybe they want to use their current shipping app and carrier), the alternative is to have the vendor ship the item. In this case you need to pay the vendor to cover those shipping costs.

Whether you have one or 1,000 dropship vendors, with Jetti you can fine tune shipping rates for each vendor in the order, even if those vendors have different pricing structures or will be shipping from different countries. You can set live carrier rates from USPS, FedEx or other carriers based on the weights, location of the customer and location of the vendor. You can then set tiered weight-based or value-based shipping (e.g $10 up to a $50 spend, free over $50). Shipping zones can be set up across different regions, making managing vendors from various countries easy.

Once you’ve set up your rates, Jetti can then automatically invoice shipping charges and payout the fees to vendors’ Stripe, Paypal or bank accounts. This is a great way to automate the mundane, error-prone process of reconciling and paying your vendors for shipping!

Step 2: Charging customers for shipping

Once you’ve got your vendor rates all set up you can begin to automate the process of paying them. The next step is figuring out how to charge the customer for shipping.

Option A: Blend the vendor rates at checkout

After you’ve set the shipping rate for each vendor, their rates can be merged together at checkout, based on what your customer orders. Your customers can then review the shipping totals before completing their transaction. Recharging vendor rates means you can rest assured that you’ll always 100% break even on shipping. You can even charge an additional fixed, or percentage based, fee on top of each shipment to alleviate any transaction costs. If you’re planning to do this, we recommend setting up a page in Shopify which details the shipping costs for each vendor, so there are no surprises when the customer gets to the checkout.

Option B: Setup your own simplified structure

Blending vendor shipping rates at checkout does have an obvious drawback. As the number of vendor shipments in an order increases, so does the shipping cost to the customer and consequently, the risk of cart abandonment.

Being upfront and clearly setting out shipping charges on product and information pages can help. However, if you operate with a sufficient markup or commission rate, you might prefer to apply a single shipping cost, regardless of the number of vendor shipments in the order. For example:

  • Charge $10 per shipments, regardless of the number of vendor shipments.
  • Charge nothing! Offer free shipping or free shipping over certain order values.

On some orders you may make a profit, others a loss. But it’s your customer experience that benefits here, and that’s key to growing a scalable marketplace.

We strongly recommend using Jetti's payment and shipping report to monitor potential losses on shipping. You’ll be able to ensure your shipping bill doesn't eat into your overall profit, and you can keep a watchful eye on which shipments absorb the highest expenses. That way, you can tweak your pricing as you go, and manage potential exceptions for large or costly shipments.

Ready to automate your multi-vendor shipping?

  • Step 1: Decide how to pay your vendors for shipping. Either provide shipping labels for them or compile a list of shipping profiles from your vendors. Consider whether their charges are based on weight, carrier type or country of origin.
  • Step 2: Decide whether you’d prefer to charge your customers your vendors full shipping rates when they check out, or provide your own shipping structure.
  • Step 3: Book a call with Jetti. Here at Jetti, we’ve set up thousands of vendor shipping profiles, taking the stress and time out of managing shipping for our customers’ marketplaces. Is it time to automate your shipping? Give us a call.

And remember! Our shipping rates feature isn't limited to dropship or marketplace vendors. With Jetti, if you ship from your own warehouses, you can specify your own shipping rates and have these blended with those of your vendors at checkout.

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Written by Jon on August 1st, 2017

What is Jetti?

Inventory, order and purchase management software in the cloud. A single, efficient system for your inventory and order operations.