Shipping Strategies to Run a Marketplace
Shipping is one of the core components of running a marketplace. You need to ensure your clients have a clear understanding of shipping rates and that their orders will be received within your promised timeframe, while also assuring profitability for you and your vendors.
What are the decisions I need to make to establish my shipping strategy?
The number one thing that should guide your shipping strategy at all times, is your business scale. The ideal shipping solution might be to have a customised network of carriers, with costs fully optimised and great service levels, but until you are able to buy your own cargo planes like Amazon, you’ll need to adapt your strategy to your scale.
Carrier accounts (internal vs bundled vs vendors)
One of the key decisions is deciding who has the relationship with the carriers that will be delivering orders for your marketplace. There are a few options on the table:
- Setup your own carrier accounts and have your vendors use the shipping labels generated through them - recommended for businesses with sufficient scale to negotiate better rates than bundled carrier accounts - Jetti allows you to setup any number of carriers by connecting to Carrier Aggregating Services like Shipstation and Shippypro.
- Use bundled carrier accounts to quickly access discounted rates - Jetti offers a bundled USPS account that will get you up to 67% discount from standard USPS rates, you’ll also find discounted carriers with Shippo that connects directly with Jetti.
- Have your vendors generate their own shipping labels using their existing carrier accounts - as long as your vendors are already selling online, this is the easiest way to get started, as they will have access to either their own or bundled accounts, that they can use to create the shipping labels to ship orders for your marketplace. The tracking information can then be automatically pulled into Jetti, or added manually by your vendors, which in turn will sync with your store and keep your customers updated.
- Combination of the previous options - perhaps a vendor already has access to better rates due to his volume of shipments, but another one might not even have a carrier account, so you’ll need to setup a combination of the previous options to cater for the needs of your marketplace. Luckily you are in good hands, Jetti is able to cover any combination of the above scenarios!
What service options do I need to offer to my clients, to ensure they are satisfied with how quickly they received their order?
This comes down to the niche or sector you are operating in, and what level of service customers are expecting from it, while also maintaining a balance with your profitability and how much you could be charging customers for shipping.
If you are selling expensive goods, customers will often be more demanding and expect orders to arrive as soon as possible (check out Farfetch’s 90-minute delivery for Gucci items), however, if you are selling apparel at a more modest price point, customers may be willing to accept delivery times anywhere between 2-7 days. Assess what your competition is doing and try to assure you are at least on par with their service levels.
Carrier selection should deliver on the service levels that are right for your business at the right cost. Closing carrier contracts may require you to already have some scale in order to negotiate better than off-the-shelf rates. Reach out to different carriers to understand if the services they provide are in line with your needs, and if they are able to provide them at a reasonable cost. Consider the specifics of the service being provided (customer notifications, number of delivery attempts, additional services such as leaving with a neighbour) and find the best fit for your business. Even though you are dropshipping, you could also implement ways of monitoring carrier performance to ensure you’ve picked the right partner. If nothing else, you should at least pay close attention to customer feedback, the step up would be to monitor carrier performance metrics (delivery times, failed deliveries, delivery reattempts, etc.)
This is an introduction to what are some the considerations behind the logistics network for a marketplace, in the next blog post, we will relate these decisions to your profitability, and the different models for charging customers and vendors for shipping costs.