Who Covers the Cost of Shipping?

The party bearing the burden for shipping costs depends on the marketplace.

Here are some common shipping cost strategies:

  • The marketplace will send out shipping labels to vendors through shipping partners (like ShipStation) and cover the cost of shipping themselves.
  • The vendor pays for shipping upfront and the marketplace reimburses them when they are paid their commissions.
  • The vendor is responsible for covering the cost of shipping.
  • The customer is responsible for all shipping costs — in a marketplace, this can become convoluted because of the number of shipments that need to be made in one order.
  • The customer pays a flat fee for shipping. In this scenario, the marketplace operator must decide a rate that will cover the cost of net shipping. Some orders they may lose money on shipping, and others they will gain.
Free Shipping

Most marketplace operators are thinking about this as they develop their shipping strategy.

Here are some things to consider:

  • Make sure you can afford the delivery charges before offering anything for free.
  • In other words, are your shipping policies outcompeting other marketplaces in your verticals? Knowing your competitive space plays a vital role in your marketplace and can make or break your business.
Shipping Providers

Your decision on shipping providers will impact cost, delivery effectiveness, and reach. Well-known carriers like FedEx, DHL, UPS, and USPS frequently offer special deals and delivery options for businesses of different sizes and locations.

Here are some examples:

  • FedEx: FedEx provides special discounts when businesses open a free FedEx account, such as 30% discounts on FedEx Express® services and 15% discounts on FedEx Ground® shipping and FedEx Home Delivery® services.‍
  • DHL: DHL prioritizes reliability and reach. Businesses using DHL can provide customers with accurate transit times and fast door-to-door delivery services to over 220 countries and territories.‍
  • UPS: UPS allows businesses to manage orders from multiple vendors (Amazon, eBay, etc.) in a single dashboard. they also offer weekend pickup and delivery services and customize UPS tracking pages to match their brands.‍
  • USPS offers convenient and cost-effective solutions to businesses of all sizes. These include a central digital platform to manage large volume shipping, online postage purchasing and label printing, and bulk mail discounts.
Tracking

Many marketplaces have vendors ship products themselves which means the tracking number needs to be provided back to the marketplace from the vendor. There are multi-vendor marketplace platforms that enable marketplace vendors to integrate with their shipping providers that will automatically provide tracking numbers to the marketplace. Sellers should update the delivery status (shipped, in transit, unable to deliver, etc.).

Tracking statistics allow you to identify low performers and find opportunities to improve your delivery services.

Customer Service

Marketplaces should provide customer care at every stage of the shipping process. This involves informing clients of the status of their orders and satisfactorily addressing any issues or grievances they have.

Decide how much of this you want to offload onto your sellers. Ultimately, your customers are buying from the marketplace — not from the vendors themselves. Offloading to sellers reduces your workload, but you also give up some control.  Finding the right balance for your marketplace takes careful consideration and testing.

Many things can, and will, go wrong when an item is shipped:

  • The package may be lost or damaged
  • A delivery vehicle may experience mechanical difficulties
  • The package may encounter delays due to weather or other unforeseen circumstances

Creating efficient feedback and support channels helps to resolve these issues quickly.