Being able to offer two-day shipping will give your business a huge competitive advantage and help you maintain customer loyalty. These are a few good ways you can execute 2-day deliveries to your customers.
Step 1: Figure out if you want to DIY
Work with Amazon FBA and they’ll let you know where to send products so that they can offer 2-day delivery to all their Prime customers. This works very well, especially if you use Amazon Seller and other Amazon services.
Trying to replicate Amazon FBA by yourself is where things get tricky. I’ll explain the best way to do this yourself or work with sophisticated fulfillment partners who can make this work for you.
Step 2: Questions to ask before you DIY
- What types of customers are most sensitive to 2-day shipping?
- Where do your customers typically live? Query your orders by city and state and figure out which are your top cities.
- What types of orders do you want to offer free 2-day shipping e.g. orders over $35, orders going to major cities, orders with items purchased in certain quantities, etc.
- What are your top order profiles? For example, in our analysis of our customers we found the top 3–5 profiles account for 70%+ of all orders made on the site. Query your orders by SKU & quantity and figure out which are your top SKU/Quantity mixes.
- What percent margin do you want shipping to account for [1]? Or are you willing to lose money on some orders to offer 2-day shipping to every customer?
- Look at your volume over the course of the year and show an estimate of growth going forward. Simple forecast.
Step 3: Negotiating with current vendors
Once you’ve answered those questions, think about how you want to store inventory.
As an aside, the best thing you can do for your e-commerce company, especially if you are the manufacturer, is limit your number of SKUs. A key book to read more about this: Competing Against Time (recommended by Tim Cook to his staff).
Go to your top carrier/fulfillment company and start talking to them about negotiating down your rates from the warehouse you ship from currently. Tell them what you expect to grow into and in what time frame. Most carriers will take you at your word and compete aggressively to win your business.
Next, talk to your carriers about something called Zone-skipping for your top cities so that you can start shipping those volumes separately and get even better pricing thus improving your overall margins.
Step 4: Expanding your network to lower your costs
Finally, what you’ll want to do is talk to warehouses [2] near your top 3 cities. Have your main facility actually pre-pack the top 3–5 order profiles and send it to warehouses near those cities to label and ship to your customers.
Most warehouses will be okay as there’s little work and you’re only giving them 3–5 SKUs to handle, especially since all they’re doing is label + ship. Make sure all those boxes are clearly marked. You can use branded boxes from companies like Lumi.com [3], different colored envelopes, or put colored stickers to differentiate.
If you have questions, leave them in the comments below or follow us on Twitter!
Footnotes:
1. A study shows that average e-commerce store spends 25% of their revenue on fulfillment + shipping: Democratization of Retail
2. We offer this service for our customers: www.shotput.com
3. Another clever trick is getting a stamp from Lumi.com, then just stamping boxes which looks really good too.
