#13 - Understanding the REAL costs of eCommerce Shipping for your business

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Welcome my fellow eCommerce Entrepreneurs! My name is Matt Edmundson and this show is for those of us Kurious About eCommerce and want to know how to get better at digital business.
 
Coming up in today's show we’re going to get into all things to do with shipping/ delivery. If you deliver your products directly to your customers or are thinking about offering a delivery service to your customers, you are going to want to listen up as this is quite an in-depth discussion with lot’s of good stuff.
 

After product cost, the second biggest direct cost that your eCommerce business faces is shipping. As a business your aim has to be to offer the lowest shipping rate possible while still giving your customers the shipping options they want and at the same time covering your own costs.
 
There are five key costs that you need to consider when it comes to shipping products to you customer:
 
1. Operational
2. Environmental
3. Packaging
4. Shipping
5. Hidden
 
So let's dive in!
 
#1 Operational Cost
These are all the costs that make up the processing of orders. You'll need to consider:
 
Who is going to pick and pack the order? How much time does it take? How many people do you have to employ to do this job?
 
At Jersey Beauty Company we found great efficiencies in simply rearranging the layout of our warehouse. For example, we grouped products together that are often sold together and placed bestseller items nearer to the picking station. Having most everything in arms length and laid out in a more organised manner made the process much quicker. We also wrote some code to start scanning orders. If after scanning the light was green it meant everything had been packaged correctly, if red it meant that something wasn't quite right in the order. In our first month of implementing this scanner we saved £7K in our operational costs. Suddenly processing orders was easier because we didn't need an extra person to check orders.
 
Consider ways that you can change your order processing to be more cost effective and efficient.
 
#2 Environmental Cost
We all have a responsibility when it comes to our environment and even more so as eCommerce businesses who provide a delivery service. 
 
eCommerce can be more environmentally friendly as folks aren’t driving around as much and shopping from the comfort of their homes and offices. Delivery services can be more environmentally friendly too when packages are grouped together and then shipped. Time in transit has a direct relationship to the environmental impact of a given delivery service. The faster it is, the bigger the impact. We need to be more mindful of this even though it may not be a direct cost to our business, it is a direct cost to our environment.
 
Consider ways how your business can be more carbon neutral. At Jersey Beauty Company we stopped using plastic bubbles and turned to popcorn! Not only is it a great low calorie snack, it is also cheap to produce, lightweight and biodegradable.
 
Think about your environmental impact as a business - everything from processing orders, packaging to delivery. Sustainable shipping has a real potential for good. 
 
#3 Packaging Cost
Packaging costs kick in when you've picked the products off the shelf and now need to package them into something to send to your customer.
 
How do you package your orders? Are your customers happy with their orders when they receive them? Whether you package up your products in envelopes, padded envelopes, jiffy bags, cardboard boxes - you need to think about what you customer expectations are when it comes to receiving their orders. Look around see and what your competitors are doing.
 
Be aware of all your packaging cost but sure to never compromise your service for cost. 
 
Based on our customer expectations and our priority of delivering orders in good condition, at Jersey Beauty Company we decided to use cardboard boxes from recycled materials. Yes it is a bit more expensive but it gives us peace of mind that our customers are receiving their order in good condition and our customers are happy. It was the same reason that we moved from plastic bubbles to popcorn. 
 
#4 Shipping Cost
Offering your customers the right shipping rates and options is key to your success as a business. You don't want to be the business that charges too much for delivery and loses customers or charge too little and not profit. 
 
Understand your service and choose a shipping strategy to make sure you deliver accordingly. Define what you want to accomplish with your strategy - is it to increase conversions? Increase average order value? Decrease costs? Improve operational efficiency?
 
Shipping rates are based largely on four factors:
 
i) Service and speed: Most customers expect a number of shipping options with as short delivery times as possible. Plus, they want it to be for free! Essentially the more expedited the shipping the m

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