Ottemo Blog

Shipping Options - Getting as close as possible to Amazon's Fast Delivery Model

by Mark Swanson

Posted by Mark Swanson on Jul 12, 2016 3:02:42 PM

With the rise of eCommerce over the last 10 years, new delivery options have been made available. No longer are UPS and FedEx ground delivery the only options, let alone the standard. Digital age buying is as fast as a mouse click. Why shouldn't delivery after the click be as fast as possible?

Amazon recognized the trend toward customers’ desire for instant gratification and same-day delivery. They have set the bar for all eCommerce companies. So how can you play in this game? As you probably understand, the cards are stacked against you since you likely don't have the influence and buying power of Amazon. The good news is that you can come close without going broke.

Some Options

First, here are some basic transit times for the main US-destination carriers and services:

  • USPS First Class Mail: 1-3 days to anywhere in the continental US. Shipments under 14oz. or 16oz with commercial contract.

  • USPS Priority Mail: 1-2 days to anywhere in the continental US - Shipments over 1lb.

  • UPS/FedEX Ground: 1-6 days depending on distance within the continental US

  • UPS 3-Day Select: 3 days to anywhere within the continental US.

  • UPS SurePost/FedEx SmartPost/DHL Global Mail: 2-10 days depending on distance within the continental US. These are often referred to as USPS last mile programs.

An important consideration for the long term is understanding where your customers are. A typical distribution across the country is 40% West Coast, 20% Midwest and 40% East Coast. Knowing that, where is the best place from which to ship? If you're in the Midwest, you are in "distribution central" - the sweet spot for the average shortest transit times to most customers.

Companies shipping will usually enjoy an average of 1-4 days transit time and 10%-15% shipping cost savings over shippers on either coast. This is based on typical UPS/FedEx ground transit times. Using a hybrid or USPS last mile approach where DHL, UPS or FedEx pick up and hand off to the destination postal facilities, the transit times are closer to 2-6 days when shipping from the Midwest. This is 2-4 days fasters than shipping from either coast.

Tackling Limitations

So what if you're not shipping from the Midwest or don't have 2-3 distribution centers scattered about the country?

Best case scenario: If your packages weigh under a pound you’ll opt for USPS First Class Mail and the ultra-cheap 1-3 day transit time . Over a pound and you'll pay $7.00 and above depending on carrier, distance zones, weight and how fast you want it delivered.

If your packages are over a pound and you still want 1-3 day delivery, USPS Priority Mail is the answer starting at about $7 depending on distance and weight. Or you can use a hybrid product like UPS SurePost, FedEx SmartPost or DHL Global Mail for shipments within your region for 2-4 day delivery but as long as 10 days if shipping across the country. So you might want to use a standard ground service for the next closest region and a UPS 3 Day Select for customers farthest away.

Check rates online and see how it pencils out. The costs will rise with the service level, distance and weight but at least you are optimizing. If you can negotiate good ts with the carriers, you have more flexibility. You can drive revenue and higher dollar carts by offering free shipping with a threshold (i.e. $75 = free shipping).

You still have the same shipping costs, but the cost as a percent of sales is reduced. Some companies will offer "standard" or "economy" shipping for free, then offer expedited shipping for small premium to offset the cost between the slow service and something like ground or 3-day.

One more thing… and it’s important!

Ship as soon as possible from your fulfillment center. There should be no reason why you cannot ship a package within 2-hours of the customer checkout. If there is, you should re-think your processes. Customers want to see order movement immediately. Every day delay in shipping is a day delay to your customers and another reason you will get customer service calls for “where’s my package??”

In summary: you can reduce shipping costs and maintain relatively good transit times by:

  • Reducing the shipping distance

  • Keep the weight of your shipments as low as possible (<1lb for USPS 1st Class Mail - 1-3 days and $3.00!)

  • Negotiate great rates Use a mix of shipping service levels to optimize cost and transit time
    Use order size thresholds to increase revenues and decrease shipping cost as a percent of sales

  • Offer free "economy" shipping" but provide the option for expedited service

  • Ship same day

A knowledgeable advocate or consultant can assist with the entire process from strategy thru negotiations and implementation.

Topics: e-commerce, ecommerce, shipping

Mark Swanson

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