Manage your Dropship and Multi-Vendor Marketplace Shipping

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Francisco

Mar 9th, 2021

Setting up shipping when you have multiple vendors shipping orders can be complicated. The fact that your customers can order from many different vendors can lead to high shipping costs on a single order. Of course, you shouldn’t charge your customers too much for shipping, as this may deter them from committing to the purchase.

Equally, it's important to ensure that your shipping costs are dealt with in a viable fashion and don't undermine your margins. The solution? You need to understand the concept of blending shipping rates and have a strategy for managing them. Thankfully, this can be managed via Onport. We can help you navigate the tight rope that are marketplace shipping costs and how to implement them in such a way that you stay profitable and your customers still perceive your marketplace to be good value.

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Understanding multi-vendor marketplace shipping

By default, Shopify always assumes a single origin for each shipment. Marketplace shipping costs are calculated on the basis that the order is being picked, packed and shipped from a single location (e.g. your warehouse or shipped via a vendor). However, this model only really applies in the best-case scenario. In many cases, orders can be far more complex. So, what do you do when the shipping involved in an order is more complicated?

When you’re operating a multi-vendor marketplace or dropship store, you’ll likely be shipping products from several vendors, within the same order. Due to this, your vendor shipping costs can soon mount up. What you don’t want is a huge shipping bill that eats into your profit margin. Managing this badly could even leave your store making a loss - Here's an example...

A customer buys items from five vendors featured in your store. You charge the customer a flat rate of $10 to ship the whole order. Your vendors ship the items, each invoicing you $10 shipping. You've just lost $40, potentially making a loss on the order.

The merchant and vendor origins are other potential problems when it comes to marketplace shipping. What if a customer in the US places an order for items from a US vendor and a Canadian vendor? Their order will involve both a domestic and international shipment, and that’s not something Shopify can manage for you, straight out of the box. What you need to find a solution that understands the pain-points that can arise within a shipping marketplace but one which seeks to eliminate them entirely. With Onport, though, you can manage such orders with ease. Here’s our two-step process for getting started.

Step 1: Paying vendors for shipping

If your vendors are shipping direct to your customers, you need to figure out how to cover the shipping costs involved. Most won’t ship for free. To deal with this problem, you have two options:

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Option A - You supply vendors with shipping labels

With Onport, vendors print shipping labels from a dropship portal from our discounted USPS account or by integrating your own carrier. If you supply the shipping labels to the vendor, there’s no need to pay vendors to cover shipping costs. This is great for small vendors who can take advantage of discounted rates.

Option B - Vendors invoice you for marketplace shipping

If you don’t want to supply vendors with labels (e.g. maybe they want to use their current shipping app and carrier), the alternative is to have the vendor ship the item. In this case, you need to pay the vendor to cover those shipping costs.

Whether you have one or 1,000 dropship vendors, with Onport you can fine-tune your marketplace shipping rates for each vendor in the order, even if those vendors have different pricing structures or will be shipping from different countries. You can set live carrier rates from USPS, FedEx or other carriers based on the weights, location of the customer and location of the vendor.

You can then set up tiered weight-based or value-based shipping (e.g $10 up to a $50 spend, free over $50). Shipping zones can be set up across different regions, making managing vendors from various countries easy and straightforward.

Once you’ve set up your rates, Onport can then automatically invoice shipping charges and payout the fees to vendors’ Stripe, Paypal or bank accounts. This is a great way to automate the mundane, error-prone process of reconciling and paying your vendors for handling shipping costs on their end.

Swift and on-time payment of shipping fees owed to your vendors will help to keep your relationship with them amicable and avoid any form of conflict. A good, frictionless relationship with your vendors can be just as important as keeping your end customers happy.

Step 2: Charging customers for shipping

Once you’ve got your vendor rates all set up you can begin to automate the process of paying them. The next step is figuring out how to charge the customer for shipping. This can be a delicate process as a marketplace shipping policy that is too complex or too expensive may deter customers from going to checkout. It is for this reason that you must devise a strategy that makes the transaction as straight forward and as transparent as possible.

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Option A: Blend the Vendor Rates at Checkout

After you’ve set the shipping rate for each vendor, their rates can be merged together at the checkout, based on what your customer orders. Your customers can then review the shipping totals before completing their transaction which is great because the customer now knows what the end price for the order will be.

Recharging vendor rates means you can rest assured that you’ll always 100% break even on shipping. You can even charge an additional fixed, or percentage based, fee on top of each shipment to alleviate any transaction costs. If you’re planning to do this, we recommend setting up a page in Shopify which details the shipping costs for each vendor, so there are no surprises when the customer gets to the checkout and they are aware at all times of the costs involved in their order.

Option B: Setup Your Own Simplified Structure

Blending vendor shipping rates at checkout does have an obvious drawback. As the number of vendor shipments in an order increases, so does the shipping cost to the customer and consequently, the risk of cart abandonment.

Being upfront and clearly setting out shipping charges on product and information pages is crucial. Nobody likes hidden charges and they can seriously damage your standing among your customers. However, if you operate with a sufficient markup or commission rate, you might prefer to apply a single shipping cost, regardless of the number of vendor shipments in the order. For example:

Charge $10 per shipments, regardless of the number of vendor shipments. Charge nothing! Offer free shipping or free shipping over certain order values. On some orders you may make a profit, others a loss. But it’s your customer experience that benefits here, and that’s key to growing a scalable marketplace. Consider this approach as an investment. Happy customers become repeat customers and that is the key takeaway here.

We strongly recommend using Onport's payment and shipping report to monitor potential losses on shipping. You’ll be able to ensure your shipping bill doesn't eat into your overall profit, and you can keep a watchful eye on which shipments absorb the highest expenses. That way, you can tweak your pricing as you go, and manage potential exceptions for large or costly shipments. You can read more on this topic with our blog article on shipping strategies.

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Ready to automate your marketplace shipping?

Step 1: Decide how to pay your vendors for shipping. Either provide shipping labels for them or compile a list of shipping profiles from your vendors. Consider whether their charges are based on weight, carrier type or country of origin. Step 2: Decide whether you’d prefer to charge your customers your vendors full shipping rates when they check out or provide your own shipping structure. Step 3: Book a call with Onport. Here at Onport, we’ve set up thousands of vendor shipping profiles, taking the stress and time out of managing our customers’ marketplace shipping services. Is it time to automate your marketplace shipping? Give us a call.

A good strategy for returns is also highly recommended, all too often, companies may only focus on getting the order to the customer and don’t pay attention to their returns. When the inevitable day comes and an order has to be sent back, the customer may find themselves having to navigate through different costs and shipping rates.

This is a major cause of annoyance to customers so it is vital that you or your vendors have a strategy in place to deal with such a situation. Thankfully, Onport makes the entire process simple and pain-free, you can read more about this here.

A key feature of Onport is that our shipping rates feature isn't limited to dropship or marketplace vendors. With Onport, if you ship from your own warehouses, you can specify your own shipping rates and have these blended with those of your vendors at checkout. With Onport, you can ensure that your shipping rates work for your business, your vendors and your customers.

Transform Your Marketplace Shipping with Onport

Onport is a multi-vendor marketplace platform. Onport empowers product marketplaces to streamline and automate not just their shipping operations but also, their inventory management, order routing and payment workflows. Designed to scale as required, Onport’s marketplace infrastructure is designed to be a reliable partner for growth.

With Onport, our customers can scale with confidence, streamline their daily operations as well as create truly unique marketplaces. Onport is trusted by brands such as Bombinate, Overcube, and Naduvi as well as over 200+ other companies.

Navigate your business with Onport, a multi-vendor marketplace solution to scale your operations.

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