Seven ways to increase profit and value from your shipping operation

1-888-SHIPWIRE

www.shipwire.com

Shipping as a Profit Center

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085

Table of Contents

Ecommerce and the Need for Speed Meeting customer demands is not enough

Rising to the occasion

Ways to Profit from Fulfillment Gaining customers

Earning more money per customer

Freeing up time

Adding opportunities

Improving brand and customer satisfaction

Increasing conversions

Enabling more flexibility

Why It Matters

Conclusion

3

4

5

6

7

8

9

10

11

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 3

Ecommerce and the Need for SpeedThink about it. When you purchase online and decide who to buy from, the speed at which your products will ship and arrive at your door matters – right?

Ecommerce technologies are redefining the way we do business: enabling more people to become entrepreneurs and expanding markets domestically and internationally. With these developments, it makes sense that the changing landscape of ecommerce comes with a change in consumer expectations, and it’s important to pay attention so that you can retain and maintain happy customers.

In a nutshell, online shoppers want their experience to require minimal effort, and to happen at maximum speed.

In addition to simplified search and discovery and a quick checkout process, online shoppers expect fast shipping, regardless of whether they are buying from an independent merchant or a major retailer.

Meeting customer demands is not enough

As a merchant, you know the value of your customers and how important it is to maintain their loyalty. Providing them with a quality product and getting it in their hands quickly is critical to the success of your business.

But meeting customer expectations is just the first step – to really beat out the competition and create that “wow” factor, you should aim to exceed expectations. Personalizing their shopping and shipping experience is the type of service that builds a lasting relationship between businesses and customers. It gets people Tweeting, Instagramming, Facebooking, and telling their friends about you.

It doesn’t take a lot of salesfor most merchants to realize that impressing customers with shipping services is not easy. Calculating rates for various carriers, navigating international addresses, and tracking orders can quickly induce headaches. It is important to keep this stuff straight, though – mistakes can damage your reputation.

Rising to the occasion

The costs to create an efficient, effective order fulfillment system from scratch are very high, especially when you consider the logistics involved in global distribution. Everything adds up: the time and money it takes to find the best location for a distribution center, the cost to establish your facility, and the investment in staff and personnel.

By comparison, contracting a fulfillment center to handle all of the above relieves you, the merchant, of the bulk of shipping responsibilities. In one fell swoop, you gain access to powerful logistics technology, seasoned workers, affordable operating costs (often due to reduced carrier rates), and easy access to new markets should you choose to

Tip: Optimize your online store at every touchpoint – shoppers want their experience to require minimal effort, and for it to happen at maximum speed.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 4

Ways to Profit from FulfillmentYou’ve heard the old adage before: You have to spend money to make money.

While some dispute it, in the world of shipping, it’s a hard point to contest. Unless all of your customers are local, you have to pay to get their orders to them. So the issue isn’t really eliminating the cost of shipping; instead, the challenge is in optimizing the value of shipping.

In other words, since you have to pay for shipping in some way, shape, or form, you should aim to maximize what you get out of it.

While shipping may seem like a fairly straightforward task (i.e., move package from point A to point B), there are actually a number of factors to consider along the way. Not all carriers offer the same service levels or service the same locations; not all fulfillment centers connect to the same carriers or offer the same service levels and flexibility; and different countries require different import/export procedures. When deciding to outsource, these are the types of variables you need to consider, and your decision should be based on the combination of services that benefit you the most.

Let’s look at some of the ways you can create value for your business as you ship.

Gaining customers

To gain a significant number of new customers in one move, one tactic is to move – literally.

This sounds more daunting than it actually is. You see, not everything needs to move, and in fact, you can stay right where you are. It’s just your products that need to move. Why? Because when your products are closer to your customers, shipping is faster and less expensive.

Faster shipping from more locations at a lower cost? That sounds like a recipe for gaining new customers.

Tip: Expand your business territory to benefit from an entirely new market and a fresh audience.

expand your operation. Much like you’d hire an electrician to route your electricity, companies of all sizes are outsourcing the task of shipping.

The benefit of outsourcing – apart from access to expertise and efficiency – is the time you gain as a result. With more time saved, you can step back and relax, or dive deeper into new opportunities. The point is that outsourcing enables new opportunities, however you choose to direct them.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 5

By strategically placing your products in many locations, you may also benefit from a competitive advantage. Many companies assume they simply can’t reach far-flung buyers in a cost-effective manner, a mentality that causes them to cap their customer bases below what is truly possible. Setting yourself apart from others by offering service levels that they can’t achieve allows you to capture their would-be customers.

Now that we’ve outlined how staging products in new, high-volume markets enables customer growth, let’s talk about tactics for getting products to these locations.

There are a couple of different approaches to consider. One is to leverage a network of global warehouses from which you can store and ship products.

While you could theoretically contract individual warehouses in each of your desired locations, it’s significantly easier to use a network that’s connected so all warehouses operate in a similar fashion. The goal, after all, is to streamline your processes and make them more efficient – not to introduce headaches that come from navigating a web of warehouse processes. Look for a provider that boasts both scale and quality-control processes so that your goods will be stored safely and shipped securely. The best providers should be able to supply you with powerful analytics systems that give you insight into inventory management and can adapt as your business grows.

Once you select your warehouse provider, another key is to bulk-ship products to the overseas facilities so that you only pay customs fees once. Bulk shipping also allows you to send goods cheaply across the longest distance, thereby freeing up capital for the most expensive part of the shipping process: the parcel delivery service to the customer. From there, you can have pallets broken down and individual products can ship without international fees attached.

Additionally, your provider should be able to pinpoint the best and most cost-effective carrier, supply a variety of service levels, and offer packaging – all at the click of a button. By taking this approach, you can trim expenses and minimize the time you spend fulfilling packages and ensuring their arrival on your customers’ doorsteps.

Earning more money per customer

Once you have more customers, you should think about capitalizing on per-customer sales.

To do this, it is helpful to first understand what deters customers from buying. By identifying pain points, you can offer ways to avoid these obstacles while building sales boosters into the solutions.

For example, let’s look at something customers hate universally: high shipping fees. The perception of high delivery fees is a significant barrier in getting customers to complete purchases – they are also primary reason buyers shop around in search of vendors offering shipping deals.

Reminder: Shipping from a location closer in proximity to your customers is not only cheaper, but enables customers to receive products much faster.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 6

One good solution for helping buyers avoid shipping fees while simultaneously increasing your profit is to offer free shipping at a certain sales thresholds – essentially a free shipping reward for customers who purchase more. According to comScore, three out of four shoppers add items to their carts in order to qualify for free shipping. By offering free shipping and implementing the requirement that customers buy more to save more on shipping, you’ll see your per-customer sales increase. And remember, you can afford to absorb the shipping costs yourself since you will save money by optimizing your shipping and logistics strategy.

Speaking of affordable shipping costs, another way fulfillment providers can help is by giving you the keys to shipping options – and price breaks – from different carriers ranging from private companies like FedEx and UPS to public entities like the United States Postal Service. More carrier options translates into more service-level options with regard to both time and money, allowing you to cater to your customers’ shipping requirements. Fulfillment providers are always able to negotiate better rates with carriers than you’d find standing in line at the post office.

In summary, the trick to increasing per-customer sales is to reduce your own shipping expenses by roping in a shipping partner to increase your per-sale margins. From there, pass your savings on to customers by tinkering with shipping promotions, which will drive up your order volumes and profits per sale.

Freeing up time

We have established that managing shipping on your own is complicated, and the complexity only grows as you expand globally. Increasing responsibilities often require the help of additional employees, whose salaries add up quickly, and who require training on the vast array of shipping options, tax consequences, customs clearance rules, and international trade policies. By the time you’re ready to execute, it’s likely you’ll have spent more time than anticipated preparing the process.

If you don’t have the time or interest in calculating all these factors, consider outsourcing fulfillment. Offloading shipping means that everything – inventory storage, packaging, labeling, shipping, and even returns – is left to seasoned specialists who can handle anything from one order a day to a thousand orders a day. By cutting out the nitty gritty of picking, packing, and shipping, your team can run a leaner operation and kick back more often.

Adding opportunities

While some might choose to relax or take a vacation once the stress of shipping is handed off to a fulfillment partner, others opt to focus on big-picture questions and chase after new business opportunities with the spare time they have gained.

Still on the fence about how realistic this rumor about saving time could be?

Three out of four shoppers add items to their carts in order to qualify for free shipping.

~ comScore.com

+

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 7

“We started our relationship with Shipwire inFebruary of 2013, when the partners of the company realized that they were spending more time physically packaging shipments than producing sales and driving the brand.”

~ Ankur Garg COO, Shredz

Take the example of SHREDZ, a New Jersey-based supplements company that partnered with Shipwire to manage logistics and order fulfillment.

SHREDZ capitalizes on growth opportunity using Shipwire

With 2013 gross revenue estimated at $8 to $10 million and nine-digit goals set for 2014, the

company was busy gearing up for a B2B sales channel and further international expansion,

which took a lot of time and energy. “We started our relationship with Shipwire in February of

2013, when the partners of the company realized that they were spending more time physically

packaging shipments than producing sales and driving the brand,” explained Ankur Garg, the

company’s COO. “Shipwire also supported our need for freight shipping – not to mention we

saved money with great shipping rates,” he said.

SHREDZ has already done a lot of hustling and heavy lifting, and it’s ready for more. The

company’s long-term goal is to establish a positive lifestyle change for a billion people in the

world. Where will they go next? Said Garg, “We’ve set our sights on gaining a large percentage of

the market share in Mexico/Canada, Europe, Asia, South America, and Australia. We are growing

incredibly fast. Without Shipwire we wouldn’t be able to do it.”

SHREDZ is headed into new international markets, but there are other expansion options to consider if you’re looking for a less aggressive maneuver. For example, consider doing some research on cross-selling and upselling to increase your sales.

How you approach new opportunities will depend on your product and business model. The bottom line is that by spending less time on shipping, you can focus on improving your strategy.

Improving your brand and customer satisfaction

We won’t waste time talking about the value of customer satisfaction. You already know it matters. But one thing you may have overlooked is the role shipping plays in your relationship with consumers.

It’s not something we think about all the time, but it’s true – you can really make or break your business over shipping practices. At the very least, customers need to be able to trust that they’ll receive orders on time. But there’s potential to exceed their expectations, and with so few brands taking advantage of the opportunity to wow their buyers, it’s a no-brainer opportunity to make your mark and build your brand’s reputation.

The first step is to ensure fast shipping.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 8

In the early days of ecommerce, consumers viewed quick shipping as a perk. In the age of Amazon Prime, it is an expectation. Even if you’re only shipping a few orders at a time, making a trip to the post office every day can be burdensome. And if you’re shipping a significant volume, it quickly becomes too much of a time consuming task to handle yourself. Unfortunately, customers aren’t thinking about the how the messy logistics of shipping can affect your day, and they aren’t very sympathetic to delays; all they want is for their order to arrive – preferably yesterday.

If you’re worried about meeting demand in a timely fashion, remember that automated carrier options accessible through a distribution partner improve on-time or early delivery accuracy and offer the distribution power to meet buyers’ expectations. With a shipping partner at your side, you won’t risk receiving orders that require next-day shipping on a day when you can’t accommodate a mid-afternoon post office trip. Instead, your shipping needs are automatically handled, no matter the frequency or volume.

The second step is the wow factor.

It’s important to appreciate that fulfillment is more than a logistical responsibility. It’s actually an opportunity for branding. Merchants are sometimes wary of losing the personal touch that comes with DIY shipping so they avoid engaging a shipping partner. Fortunately, this worry simply does not need to be an issue. A good logistics company will allow you to use your brand’s custom packaging, marketing inserts, special rewards, and other tailored details. As you know, these are the things that demonstrate your company’s values and connect you with shoppers in a way that inspires them to buy from you again. Better yet, all of these things are still possible while working with a fulfillment partner.

Increasing conversions

Consider attractive shipping policies your deal-closer: It’s a measure to counteract the abandoned cart phenomenon that plagues so many ecommerce sellers. Every day, customers are following through on purchases they might otherwise have passed on thanks to free shipping or other promotions.

Reminder: Fulfillment is more than a logistical responsibility; it’s actually an opportunity to build you brand, so take care to make a good impression.

Unconditional free shipping: First things first. If you choose to make all shipping free, shout it from the rooftops. Free shipping can clinch the sale, so make sure potential buyers know that you’ve got them covered. As we discussed earlier, shoppers are more inclined to follow through with a purchase and to add more to their carts when shipping is free, so you want them to know about it before they begin shopping. If they only learn about the deal during checkout, its effectiveness in converting buyers is diminished. (list continuted on next page)

Ways to increase conversion rates:

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 9

(ways to increase conversion rates, continued)

Promotional free shipping: You don’t have to offer free shipping all the time to help boost your conversions. Sprinkle in a few promos now and then to develop loyalty with buyers. The results will speak for themselves.

You can offer Qualifying-item promotions that promote free shipping. The expense of shipping can sometimes be recouped in the purchase price of the qualifying items themselves, and promotions for particular products can help move inventory as needed. You might also determine that for certain products, the margins are high enough to justify free shipping on those selections.

Conditional free shipping: Conditional free shipping offers can run the gamut, so get creative. Some of the more common variations of conditional free shipping include:

Threshold free shipping: Even the giants do it: granting free shipping to customers who spend at or beyond a certain dollar value. Remember, setting a threshold at which buyers achieve free shipping incentivizes three out of four shoppers to add items to their carts. As we discussed earlier, offering threshold free shipping can not only boost your per-customer sales, it can help you close the sale altogether – not to mention help cover the cost of the shipping. It’s a win-win scenario.

Loyalty incentives: One “condition” could be that the shopper registers for your mailing list, allowing you to keep in touch. Some stores offer VIP programs and reward customers who have purchased a certain amount of product over a set period of time with free shipping. At the other end of the spectrum, you might be inclined to offer free shipping to new customers so that you can lock in loyalty (and that first sale) with a terrific first impression.

Flat-rate shipping: When it comes to shipping, simplicity can be a beautiful thing. Shipping rates that are calculated live can be problematic for savvy shoppers who look around for product prices as well as shipping costs, causing them to cast a wandering eye right over to your competitors. Flat-rate shipping isn’t as heavily scrutinized, since buyers know in advance that shipping will cost a certain amount no matter what. After all, $4.99 sounds like a deal, and with such cheap shipping, a shopper might throw more into their cart. The flat-rate route ensures up-front awareness for your business, too, meaning you can increase the product prices to absorb the cost, or pass some of your internal expenses on to the customer.

Shipping costs are the most common cause of online shopping cart abandonment

~ UPS Pressroom

Enabling more flexibility

Fulfillment and delivery aren’t one-size-fits-all solutions. Outsourcing fulfillment offers the flexibility to determine a shipping strategy (and there are a lot of them!) that actually fits your business. Even better, it allows you to adjust your practices seasonally or as your business grows.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 10

Third-party logistics solutions can combine the best aspects of direct shipping, drop shipping, and outsourced fulfillment. Ultimately, it’s about delivering the best possible shipping experience, no matter the method.

Why It MattersAt the end of the day, shipping has become as critical to your business as the goods and services you provide. The immediacy and care with which you deliver products is more important than ever for building customer satisfaction, which means that fulfillment is now intimately tied with your brand’s image and ability to generate loyalty.

It’s possible that you’re not quite where you want or need to be with fulfillment and shipping, and the prospect of change might seem daunting. It’s natural, then, that you might be wondering: Is it worth it? Is it necessary?

After all, your priorities are the same – keeping customers happy and expanding your company’s potential in a cost-effective way – so the idea of changing your shipping practices might be hard to digest.

Different ways to ship:

Direct shipping: At the end of the day, direct shipping comes down to one word: You. You handle sales, you buy and hold inventory, you ship orders to customers, you navigate follow-up, and you take care everything in between. It’s a lot to manage, but some companies view it as a necessary evil because it allows them to maintain control over every aspect of their business. The consequence, however, is that it is often an impediment to growth.

Drop shipping: Drop shipping can be a terrific option if you don’t want to deal with the headache of stocking inventory and shipping product. Though it decreases your inventory costs, this approach does have tradeoffs: It can sometimes turn into a strenuous enterprise for retailers, who are also responsible for delivering a positive customer experience. Drop shipping can pinch margins and require investment in other areas, such as hiring employees to handle customer requests.

Hybrid shipping methods: You can dip your toe into a combination of direct and drop shipping by outsourcing part of your fulfillment to a third-party provider. Start out by purchasing a set amount of inventory, perhaps of your best-selling product, and negotiate a bulk discount from your manufacturer. You can palletize the product and send it to a fulfillment provider, which will handle the shipping under your brand’s umbrella so that you can reap the marketing benefits of a seamless shipping experience. You might also consider taking advantage of the 3PL’s massive economies of scale – its warehouses can store your goods closer to buyers; you can provide a range of carrier options (and delivery speeds); and you can leverage nimble technology systems that will allow you to sell globally without much extra legwork or cost.

Reminder: Shipping methods are not one-size-fits-all, so research to determine the method or combination of methods that best serves your business.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 11

While it’s true that the goals haven’t changed, the means by which to achieve them are shifting. And it’s because the way customers buy is changing, too.

Thanks to technology, the world is flat. Shoppers can compare prices across a crowded marketplace with the click of a button and they want their products delivered to their door just as quickly. Likewise, successful companies no longer look at just one demographic when targeting customers. Instead, they focus internationally and engage with customers on multiple channels – in stores, online, through advertisements, and just about everywhere in between.

Doing things the way they’ve always been done puts you at risk of failing your buyers and falling behind the competition. More than ever, it’s essential to deliver consistent, reliable service – it’s something that will keep customers coming back, and it’s how word spreads that your brand is a great one.

But it all harkens back to the ideas we’ve been discussing all along. Like your core business, shipping can be a profit center. Optimizing it simply maximizes your returns.

We get it: Change is hard – no matter a company’s size. But it’s possible to make big changes easier by leaving picking, packing, and shipping to the experts, while you buckle in and work out future business plans.

ConclusionIt is clear that the world of ecommerce is changing. On the one hand, these developments can expand your horizons – literally – by enabling your business to reach markets both near and abroad more easily. On the other hand, it might seem like there isn’t an easily identifiable strategy to keep far-flung customers clamoring for more.

It all comes together with shipping. As covered in this guide, shipping can actually be a profit center, allowing you to reach more customers, land larger sales, increase conversions, and much more.

Smart shippers know that it isn’t only about closing that first deal – the focus should be on building strong relationships. You need to deliver the kind of experience that creates repeat customers and builds a good brand reputation. An optimized fulfillment process can make that possible. After all, when you get shipping right, it frees up time for you to focus on the very things you do best: Growing your business.

It is worth it to keep customers happy with a terrific shipping program. It pays for itself.

1-888-SHIPWIRE 435 Indio Way | Sunnyvale, CA 94085 Page 12

About Shipwire, Inc.Shipwire provides cloud-based logistics, shipping software and ecommerce

order fulfillment services from warehouses around the world for companies of

all sizes. Shipwire’s industry-leading logistics platform helps you grow sales,

expand into new markets, and delight customers by eliminating the hassles of

shipping and storage. Instantly connect your online store or marketplace with

our warehouses in the U.S., Canada, UK, Asia, and Australia, and let Shipwire

optimally pick, pack, and ship orders to your customers faster, and for less.

Visit www.shipwire.com/why-shipwire to learn more about order fulfillment.

Please contact us for more information

Contact sales: sales@shipwire.com or 1-888-SHIPWIRE

Connect with us on Twitter: @shipwire

Subscribe to our blog: http://www.shipwire.com/blog