How To Handle Marketplace Shipping

If you run a marketplace, your shipping practices need to be state-of-the-art. Customers want fast shipping and delivery updates. If you don't satisfy customer expectations, you risk losing sales — or even vendors.

Shipping for a multi-vendor marketplace is far more challenging than it is for any other ecommerce business. Serving multiple vendors means you have a lot of shipping problems to solve, and efficiency is a tall ask. 

This guide will cover everything you need to know about shipping for a multi-vendor marketplace — providers, tracking, "free" shipping, fulfillment, and more.

Elements of Marketplace Shipping

A multi-vendor marketplace selling products can't function without shipping and delivery. Below are some of the basics to consider.

Order Management

Order Management enables a marketplace to control every facet of order fulfillment, such as:

• Order placed: How and where is an order placed?
• Order received: The fulfillment center receives notice of the order and begins packing for delivery.
• Order ships: The order is shipped to the customer and assigned a tracking number that is shared with the marketplace
• Delivery monitoring: Was the package dropped off? Did the customer receive it? Was it on time? What were the friction points?
• Service availability: Geographical coverage; same-day delivery; weekend delivery

The shipping procedure starts when a vendor receives a customer’s order and enters it into an order management system (OMS). Ensuring you are using a multi-vendor OMS is vital as a marketplace operator.

Fulfillment

Fulfillment is the process of packaging, labeling, and shipping items after receiving an order. 

There are a variety of ways marketplace operators can handle fulfillment.

Take Amazon: Their fulfillment program (Fulfillment by Amazon or FBA) charges sellers extra to store, process, and deliver their goods. This is a good option if your marketplace already has a storage infrastructure.

Vendors can also ship directly to their customers. If this is true of your marketplace, you can still exercise some control over the process, such as requiring the use of branded packaging.

As a marketplace operator, you can include specific requirements about delivery practices in your merchant contracts. At the very least, determine who's ultimately responsible for shipping: the vendors or a fulfillment service.

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 acentral 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.

Returns

Simple yet robust policies and return procedures encourage brand loyalty.  

Return policies are particularly important now that many customers value the buying experience at least as much as the product they're purchasing and are familiar with “try-and-buy” services.

• 66% of customers review return policies before buying
• 81% of customers will hit the "buy now" button only if the vendor offers free returns

For a multi-vendor marketplace, the returns process is a bit more difficult than that of a traditional ecommerce store. Typically, the marketplace is the one handling customer service, but they are not the ones that owns or shipped the item. The marketplace must know which warehouse the customer needs to return the item to in order for it to return to the correct marketplace vendor.

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.

Designing and Testing Your Marketplace Shipping Strategy

Once you have a handle on the basics of the many moving parts of marketplace shipping, it’s time to develop and test your delivery strategy. See what works and what doesn't — and then iterate on success.

You may still be thinking...

What About Free Shipping?

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

Here are some things to consider:

• Verify your numbers. Make sure you can afford the delivery charges before offering anything for free.
• Know how your competitors manage shipping services. 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.

For example, you may consider free shipping when a customer spends more than a certain amount. You might also try a strategy similar to Amazon Prime, where buyers can pay a subscription for free shipping

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.

Consider Users in Your Shipping Strategy

If a marketplace wants to thrive, it should focus on customer satisfaction first. Shipping is a major contributor to customer success.

Prioritize rate, delivery time, order process, and a transparent, smooth transaction. These factors help create an exceptional experience that's key to keeping customers.

Create a delivery plan that benefits you and your clients — one that both satisfies clients and grows your revenue. 

Whether you offer marketplace fulfillment services or have your vendors handle fulfillment, your marketplace vendors should also have a robust and seamless shipping experience. A marketplace needs to attract buyers and sellers, so client success for marketplaces looks at both sides of that coin.

Enabling integrations with popular shipping providers like ShipStation, ShipBob, Shippo, and others lets sellers keep you in the loop on your delivery statuses.

• ShipStation lets you import orders from 100+ providers, create customized emails and packing slips, and instantly update customers with tracking information
• ShipBob serves over 7,000 brands. They offer automated fulfillment with timeliness and accuracy ratings exceeding 99%
• Shippo finds the most affordable shipping rates from over 85 carriers. They work with over 100,000 brands and complete 100 million+ shipments each year

You'll need a marketplace operating system to keep your marketplace integrations — including your shipping partners and practices — in good working order.

A marketplace operating system can automate many tasks associated with running a marketplace. This frees up your time, allowing you to focus on other aspects of developing your marketplace.

🔵 How to handle shipping is just one of the decisions you need to make when launching a marketplace. Download this checklist to learn more about the 10 key decisions you need to make. 🔵