Customers shop online because of the convenience. They can order their favorite products sitting on their couch in their most comfortable clothes and have the item shipped to their front door.
It’s super easy for them, but not so much for the store shipping the product.
You don’t have to spend much time selling online to know the pains of shipping. Amazon really raised the bar with a quick and mostly free shipping process. Online sellers have had to adapt to that model as customers have gotten more and more used to that level of convenience.
Those of us who run online marketplaces have additional concerns. We have to make sure we offer something that pleases both our customers and our vendors. It has to help our sellers win while also making our buyers happy.
If you fall into this category, you have a few different marketplace shipping options to consider as three have risen to the top. We want to provide you with a helpful resource that breaks down each one and gives you some best practices that apply to each.
3 Popular Marketplace Shipping Models
Organizations on the perimeter of the ecommerce world have adapted to the recent boom in online selling. Stores and marketplaces need things like
- Platforms to build their sites
- Manufacturers to create products
- Logistical options for getting products to their customers.
That final point has led to a variety of innovations for those selling items online to choose from, and we’ll highlight the three most popular options here.
Option #1: Dropshipping
Dropshipping is a great low-risk shipping option for online retailers. Its greatest perk comes down to convenience for the marketplace and the vendor because neither has to even touch the product they sell.
Here’s how it works:
- The customer orders a product from your online marketplace
- The order gets sent to a third-party dropshipper
- The dropshipping company ships the product to the customer.
- Everyone goes on their merry way.
From a customer experience standpoint, nothing changes. They still get the product in an efficient manner with no real challenge.
Sellers appreciate the benefits that come with dropshipping like
- Limited to no inventory on hand
- Savings in areas of storage, warehousing, and manufacturing
- low-level risk to start with.
Like any model, however, dropshipping does come with its challenges. The dropshipper functions like a middleman between you and the customer, which can create problems, especially if you don’t partner with the right business
- Limited control over the quality and process
- Conflicting brand priorities between you and the dropshipper
- Low-profit margins.
These challenges make it difficult for higher-end brands to trust dropshipping long-term. Many choose to eventually “cut the middleman.” That being said, it often works great when brands start out or when they want to try a new product with limited risk.
Option #2: Third-party Fulfillment
The third-party fulfillment process gives a marketplace shipping model that provides some of the convenience of dropshipping with a bit more control.
Whereas dropshipping gives you the ability to partner with a product manufacturer who ships your sold items to the customer, third-party fulfillment allows you to partner with a fulfillment center that ships products you’ve stored in their warehouses. You still own the inventory at the end of the day.
This is helpful for marketplaces that work with more mature sellers that know their markets well and have established products. It usually allows for benefits like
- Greater control over inventory
- Faster shipping times
- Higher profit margins.
Of course, owning your own inventory comes with greater responsibility and risk. You and your vendors have to manage your inventory more closely. It costs more money. Plus, your capital is tied-together with your inventory in a way that doesn’t happen with dropshipping.
The pros can outweigh the cons, though. It can be a good deal, especially for marketplaces and sellers with the level of maturity to take on the risk.
Option #3: In-house Fulfillment
The third popular option comes with even greater control for mature marketplaces. With that, however, comes an increase in risk as well.
In-house fulfillment means you take on all the shipping responsibilities yourself. You store the products. You package them. You ship them out.
While this comes with all sorts of upfront and management costs, it can lead to saving for the brands ready to take it on. There’s a reason the big brands like Amazon and Walmart eventually go this route.
It also can be a great incentive for your vendors. The relationship between seller and marketplace requires so much trust, anyway. Having an option for them to use you as their fulfillment center can give them another reason to sell on your platform.
The biggest challenges here are probably obvious.
- Increased costs of operating fulfillment centers
- Greater staffing needs
- a Higher degree in inventory management.
The benefits are there, too. But it does require substantial planning and maturity for it to work well.
Best Practices for Marketplace Shipping
Each marketplace shipping option has the potential to work well for your brand. And you can bolster your shipping strategy by adding in some of these best practices, no matter which option you choose.
- Offer purchase protection to your customers
- Provide tracking information so buyers can follow their orders all the way to their door
- Think strategically about your partnerships
- Create great packages that promote unboxing and bolster your brand
- Ensure items get shipped quickly
- Be transparent about fees and other important shipping information
- Give an established delivery date and stick to it
- Stay on top of shipping issues and settle them quickly.
This isn’t meant to be a list of step-by-step instructions. Those rarely work for every brand in every situation. You’ll have to figure out exactly how these practices align best with your overall shipping strategy and make adjustments depending on what works for your marketplace.
Know Your Options for Marketplace Shipping Charges
Like fulfillment services, brands have various options to choose from when it comes to how they manage their shipping charges.
Many brands choose from the following choices:
- Free shipping
- Flat Rate
- Table rate
- Real-time
Of course, all brands would love to offer free shipping. It just makes sense in today’s market if you want to make your customer experience as great as possible. Shipping always costs something. It just comes down to how it gets paid for. Successful brands find ways to indirectly charge for shipping through things like:
- Including shipping in the product price
- Offering free shipping after a certain price threshold
- Building in a loyalty program like Amazon Prime
- Charge only for expedited shipping.
The other options can work, too, however. Flat rate shipping is a nice way to charge an average overall price across the board while table and real-time rates offer a flex price that adjusts depending on factors like customer location and product size.
Closing Thoughts
Your marketplace needs a solution for getting products to customers. And it needs to work well for the customer, the vendor, and your own brand. Brands use multiple marketplace shipping options to make this happen, depending on size, maturity, goals, and capital.
Regardless of size, all marketplaces require a robust platform to build and manage their site to keep customers ordering products. Your shipping strategy doesn’t matter much if you aren’t receiving orders.
WC Vendors exists to give marketplaces a scalable solution that will help them build and grow their ecommerce sites. It’s easy to set up, and we can adapt to the shipping options that fit your brands. Get access to the most scalable WooCommerce marketplace plugin today.