Reimagining the crucial last mile of the e-commerce journey (Part 2 of 4)

This is my second post in the four-part series to guide small businesses in going online. The number one question which I receive is related to shipping and logistics. How do I ship efficiently and economically? This is something that I have struggled with and I am still working on it. I do not believe anyone has perfected this for small businesses. We hear about the big box stores offering free shipping or rates that are incredibly low. When you try to use a major shipping company, your rates for a medium-sized box are $15. It makes one pause and say to themselves, how can I compete?

I tried shipping a box within Toronto and my cost was just over $14. Now, that same box to Ottawa was $17 and to Vancouver was $22. How is this possible, shouldn’t it be a lot cheaper for local delivery?

Another issue I faced was with box volume and weight. Your product may be bulky, but most carriers calculate shipping based on total weight which is usually calculated at checkout based on the individual item weight that you inputted when adding your product to the e-commerce platform. There is usually a threshold based on total weight and when it is exceeded a cost for a second box is calculated. For example, Canada Post will auto-calculate a second shipping label when the combined weight of the products exceeds 66 lbs./30 kgs.

Let me give you an example. Let us say that your shipping sauces and have a medium-sized box and each bottle of sauce weighs 1 kg. Now let us assume that I purchase 20 bottles through your online store. You may only be able to pack 12 bottles in a box. So, the logical thing to do here is to ship 2 boxes, a medium box with 12 and a second box with 8 (you may decide to use a smaller box for the 8 bottles). When the customer checks out, the shipping price is based on the total weight which would be 20 kgs (1 kg bottle x 20 bottles) and it assumes one box. However, you are shipping two boxes, not one (12 bottles and 8 bottles). Let us also assume the customer paid $20 for shipping at checkout based on the total weight for 20 bottles. Even though the combined weight is 20 kgs which was paid for, a second shipping label for the 8 bottles must be purchased. You now must purchase a second label at $16 for the second box. If this sounds complex and confusing, it is because it is complex and confusing!

You may already have low margins and asking a customer to pay double would probably cancel the order. How do you solve this problem?

I want to provide sound and technical advice so my examples will be based on working with the Shopify platform. The reason for this is simply because I have personally used and built on their platform. It is also a Canadian company and has a large ecosystem of third-party developers. There are many different e-commerce platforms out there which I am sure will work well and have similar solutions to the shipping/logistics issues but for my examples, I will base it on Shopify.

There are two issues which need addressing:

1.      Last Mile Local Shipping

2.      The Multiple Boxing Issue

The Last Mile Local Shipping: There is no real solution here yet. The exponential growth in online commerce has also incentivized many start-ups to try and tackle the last mile solution for small businesses. Here is the big issue, most of you may not have the volume to negotiate a rate with a vendor. Therefore, you get stuck with higher rates. I know several businesses that are facing this issue. I found several start-ups through simple google searches that are trying to service this growing market. I have tried a few of them and most of them were fantastic. They would pick-up the packages, integrate with the Shopify portal, provide notifications to the customer and delivery the product at half the rate of a major carrier. They also offer a second box discount which ranges in price from $1.75 to $4 depending on the vendor and the cost of the first box. In addition, your supporting other local businesses which is important. You do not have to go with a big carrier, but smaller ones can fill in this gap. Here are some things to consider:

-         Will your packages be insured (I believe most carriers insure your shipments at $100)? If your product is expensive then make sure you purchase additional insurance.

-         Ask if there is a pick-up fee.

-         Ask if there is a minimum number of parcels that must be ready for shipping before they pick up. I as recently as last week dealt with a situation where a shipping company decide that it was a good idea to send me an email on a Friday evening saying that to deal with peak demand, they will only pick up a minimum amount of 6 boxes. This is unfair and puts small businesses in a bad position as there was no grace period to find alternatives and businesses may only have 2 packages for shipping.

-         Have multiple carriers. I cannot emphasize this enough. I and other SMBs when shipping a package have been told that a delivery to certain postal codes will not be made because of COVID-19 outbreaks. What! How are they supposed to get their products if your shipping company is not willing to even deliver a package to the address?!

I want to acknowledge that this is not easy and will require time to get used to shipping when you’re a traditional ‘bricks and mortar’ business. In the beginning, I found this to be the most frustrating element. I even decided to help drop off packages for friends and family while we figured this out.

Before you begin a business relationship with a carrier, you may need to negotiate and sign agreements especially with smaller carriers. It may not be as simple as sign-up online and start shipping. There may be a vetting process and restrictions.

If you have the capacity, you can also dedicate a few hours to do the delivery yourself. The way you could do this efficiently is to enable the “Local Delivery” function on your e-commerce platform settings and create a radius that you know you can manage (do not be over-ambitious but realistic). You can also include FSA codes for areas that you want to service. This is the first three letters/number of the postal code. For example, if the postal code is M5V 3L9 then insert M5V*. This will include all the postal codes that start with M5V. You may want to just enable all the postal codes within 5 kms of your place of business and all the FSA codes that you will drive by when your leaving your place of business to go home. This will alert the customer at check-out that local delivery is available. You can offer those orders at a reduced shipping cost or do it for free (you are headed there any which ways). Remember, if you are using your personal vehicle for business purposes, you may need to inform your insurance company. If you are unsure what the FSA codes are then visit this website Canada Zip Codes (worldpostalcode.com) and track and record the FSA codes for each neighbourhood you will be driving through and input those codes within your “Local Delivery” area. There is also a free “local delivery” app from Shopify which will nicely integrate with your pending orders and make your life a lot easier. If you go this route, then make sure you take a picture of the box and notify the user that their package has been delivered (automated function in the free delivery app).

*Note to Policy/Lawmakers: I applaud your work to cut red-tape, lower commission fees and provide funding to SMBs. However, I genuinely believe that if governments were to subsidize last-mile delivery start-ups that focus on small-businesses then this will have a great net positive impact on SMBs. Based on cart abandonment data that I have seen, high shipping rates at checkouts causes the customer to not proceed with the transaction. I suspect that they will either then go to the store (if local) or move to a online store that provides free shipping which is usually a big box retailer. Subsidizing last-mile delivery is not a novel concept. The town of Innisfil partnered with a ride-sharing company to supplement their public transit system. If there were partnerships and subsidies for last-mile carriers, it would put people to work, support local businesses and reduce our carbon footprint due to enhanced coordination. The technology allows us to do this, we just need a boost from governments.

The Multiple Boxing Issue: So how are we going to solve this issue of multiple boxing when the simple integration with carriers through the platform does not allow for such granularity at checkout. I started to research what big companies were doing. I asked how they knew what box to use, how to pack multiple items with different shapes/dimensions/volume and more importantly, how could I use this technology. The answer is 4D shipping. There are third-party apps that will auto-calculate how many boxes it will take and provide multiple carrier pricing to your customer at checkout. Here is how it works:

1.      Add your products to the platform as you normally would. Ensure that you include the net weight of the finished item.

2.      Enable a third-party app that enables 4D shipping. Now I try not to recommend particular companies and apps as there are many available and I cannot test all of them. However, I am making an exception here because I know as a small business owner, it will be helpful if I provide the company that I used that has 4D shipping modules built-in. The one I used is called eShipper (A Canadian company).

3.      Open the app and link your product list from your e-store. Once loaded, go through each item and add in the length, width and height. I did this the old school way with a measuring tape. If you have a bottle or odd size, then just assume it is in a small box and place the measurements accordingly. If you have many items, then there is an export function to a .csv file. Once you have typed in the dimensions of the items, upload a .csv file back into the portal. Remember that if you are using this method, then make sure that you convert the original .csv file into a .xlsx file through the “save-as” function and then before uploading, convert back to a .csv file.

4.      Next input the shipping box measurements and the maximum weight it can hold. For example, the box dimension is a 14.5 x 11 x 9-inch box that holds up 40 lbs. and the box weighs 1 lb. You can input multiple boxes here.

5.      Test out the system by doing a few sample purchases. If you have any questions, then most apps will have ‘How-to’ integration guides, videos and support staff.

Hopefully now you will not be caught with paying for shipping for a second or third box as this will be auto-calculated. I also found Canada-wide shipping was cheaper and offers the customer multiple options at checkout such as “regular shipping”, “expedited shipping”, “next-day”, etc. The shipping is not only auto-calculated but you are provided detailed information on how to pack the boxes for to reduce costs.

A final note: remember that if you are planning on shipping outside of your province, you may need to register your business in each province. If you are going to send your product outside of Canada, then you may be subject to duties, taxes and pre-registration. This will also depend on if you are a B2B or B2C company. I recommend reaching out to your shipping carriers and/or Export Development Canada for assistance.

I apologize for the long post; my goal is to provide you with the best information and make it simple. I do not want to be high-level and say use 4D shipping but instead, help guide you through implementing it within your business. My next post will be on syncing your online and in-store inventory systems. As always, please reach out if you have any questions. Also please provide your thoughts and recommendations for last-mile shipping and 4D shipping companies/apps/startups.