Online Retailing 
and the 
Shipping Function
this unit was created in November 2004 , from scratch,  by students Omar Adil and Natasha Chagpar
some formatting changes wwere made 2006 Oct 30
Omar Adil and Natasha Chagpar
who were in MGTD06 Sept - Dec 2004 at the University of Toronto.
Thanks Omar and Natasha, you did a good job, TR
. This Unit used in the courses
MRK 410
CCT 322
to the Unit
The shipping function is important whether products are sold at physical retail stores or by online retailing, as this function is a key component of Place (one of the four “P’s” of marketing).  Many online companies concentrate on having a comprehensive website, getting people to visit their website and finally having them purchase products online, but overlook the fact that once a product is purchased, it is their responsibility to have the product shipped to the customer.  This is something that physical retail stores do not have to worry about (unless the item is large and needs to be delivered).  In order to successfully ship a product, many factors such as tracking services, customs inspections and product fulfillment must be considered.  In addition, an online company is not done when they have delivered the product to the customer, the company needs a process for customers to be able to return or exchange a product if it is broken, defective, needs warranty service or they just don’t want it anymore.  This process can get very expensive, yet it is a critical aspect of being successful in E-commerce.  As stated in the “Things to be Convincing” unit, an effective shipping policy can make or break a company’s E-commerce business. 
Omar Adil and Natasha Chagpar

Top Ways to Improve an Online Retailer’s

Shipping Process

A Summary of the major points in this unit

  o Make sure that the online retailer knows its delivery capabilities so as to not over promise to customers.

  o Make it the online retailer’s priority to have products shipped on time, especially products that are gifts or purchased during gift giving seasons.

  o Have the online retailer help provide customers with peace of mind regarding the shipment of their orders through such things as shipment tracking services and a section on their website detailing shipping procedures.

  o When shipping across borders, know the rules, packaging restrictions and customs requirements so packages are not unnecessarily taxed, delayed or confiscated at borders.

  o Online retailers must be careful to properly package products so as to ensure that products reach consumers in good order, thereby achieving product fulfillment.

Omar Adil and Natasha Chagpar

Top Ways to Improve an Online Retailer’s

Return and Exchange Process

A Summary of the major points in this unit

  o Have a return or exchange policy in place.

  o Online retailers should be generous with time allotted for returns thereby accommodating customers.

  o Try and provide customers with physical locations they can visit to return products.

  o In case of returns, reimburse customers for the cost of the product as well as all shipping and handling costs.

Omar Adil and Natasha Chagpar
Importance of Shipping  The shipping function is important to all retailers, but specifically online retailers for unlike traditional brick and mortar merchants, customers do not come to them to physically pick up products.  Therefore, without an efficient shipping process, online retailers cannot get their products to customers.  Lack of an efficient shipping process yields dissatisfied customers! 
Omar Adil and Natasha Chagpar
Marketing Mix The marketing mix or “4 P’s of marketing” (as it is often referred to) includes product, price, promotion and place.  Place is where the importance of shipping fits into the equation, for place includes the logistics associated with the shipping function.  Since pure plays* do not have retail store outlets, they do not have to be concerned with distributing products to retail stores.  Instead, they have the arguably greater challenge of arranging for products to be delivered to customers.  Most pure plays outsource the shipping function thereby relying on other companies to fulfill the critical function of delivering products to their customers.  For success in today’s competitive market place, it is critical that online retailers excel on all 4 P’s, therefore making the shipping process important since it is an integral part of the fourth P - Place. 
Omar Adil and Natasha Chagpar
From an E-commerce Perspective One of the main reasons people do not shop online is due to the hassle that comes from having a product shipped.  This hassle includes the added cost to the overall transaction from shipping costs, the worry of the product coming in time and in good order (for example, not broken or damaged), that the product fits the online description and that someone will be available to sign and receive the product when delivered. 

Therefore, shipping has implications on whether a consumer will shop online and hence implications on e-commerce.  E-tailers that are sensitive to and take an interest in online consumer concerns with shipping issues will be more prosperous than those who don’t.  E-tailers should look at the shipping function as a way to attract and retain more consumers. 
Omar Adil and Natasha Chagpar

example of an e-commerce shipping-calculator and shopping-cart solution Paid Inc. Launches Shipping Calculator and Shopping-Cart Solutions 

article by Ina Steiner in 
November 23, 2004 
Complete story: was at 

Summary/Important Facts: 

Online consumers are not happy when they have to pay for shipping, but are even more dissatisfied if they are overcharged for this service or don’t know how much the shipping charges will be in advance.  This article discusses Paid Inc., a company that saw an opportunity in the market to help retailers calculate shipping costs.  With the services offered by Paid Inc., consumers can know the actual cost they will pay for an item including all applicable shipping charges. 

example of an e-commerce shipping-calculator and shopping-cart solution

Competitive Environment: 

Another point that pushes the importance of shipping is related to the competitive environment.  Online retailers not only compete for consumers against one another, but also against traditional brick and mortar retailers.  Furthermore, a consumer who is willing to buy online may also be willing to shop using catalogues and TV shopping channels.  It follows that online retailers are vulnerable to many different forms of retailers, therefore competing in an intensely competitive market.  This means that online retailers have to have every aspect of their business in top condition to compete effectively.  One of the aspects of their business is to get their products to customers and this function needs to be smooth and reliable to eliminate any weaknesses that will reduce their competitiveness in the market place. 
Omar Adil and Natasha Chagpar
Customer Shopping Habits When examining the online “shopping” habits of consumers, a great deal of variation can be seen.  In order for further discussion of consumer shopping habits to be relevant, the term “shopping” has to be defined.  Shopping is an experience made up of five stages: need recognition, information search, evaluation of alternatives, purchase decision and post-purchase behaviour.  In marketing, these five stages are known as the Buyer Decision Process. 

Of the five stages of shopping, this unit will be focusing on consumers’ purchase decisions.  Whether a consumer chooses to complete their purchase online or in a brick and mortar store is contingent upon many factors including their level of technical acceptance, the complexity of the product being purchased, their views on online payment security and the price of the product. 

In addition to the factors mentioned above, there are general factors that deter all consumers from purchasing online, regardless of their individual differences.  These issues deal with: 

(i) Delivery / Distribution 
(ii) Product fulfillment 
(iii) Returns 

Online retailers are beginning to understand the significance of shipping in the purchasing process for online consumers.  Some E-tailers have been proactive in this area and have included free shipping with purchases over a certain amount or have a section on their website dedicated to how their shipping process works.  These E-tailers have helped to reduce their consumers’ fears with shopping online and have profited from taking these proactive steps to reduce the hassles that come with having a product shipped. 
Omar Adil and Natasha Chagpar

Delivery / Distribution: Due to the negative media attention online shopping has received in the past on such issues as inventory shortages and failure to meet delivery deadlines, it is imperative that online retailers only make promises they can keep.  This will enable online retailers to gain the trust of potential online consumers in a meaningful way.  Under promise and over deliver! 

Providing accurate and realistic projections of delivery time to online consumers is critical.  If an online retailer cannot deliver a product in the time frame a consumer wants, the retailer should be honest.  Although the retailer will likely lose that particular sale, the consumer may be willing to return in the future for further purchase considerations (especially if the online retailer has unique and/or well-priced products).  On the other hand, if the online retailer were to promise delivery within the customer’s preferred time range and not deliver, the retailer will have a very disgruntled customer to deal with.  Not only will this consumer likely demand a refund, he/she will likely never return to that online retailer again and will be very “trigger-happy” in terms of spreading negative word-of-mouth about that online retailer who failed them. 

Timely delivery that is within a customer’s preferred time period is an especially important issue for special occasions (for example: gift-giving occasions/seasons). 
Omar Adil and Natasha Chagpar

Gift Giving Gift giving is normally done on special occasions.  As such, delivery time is usually a very sensitive issue.  Most consumers want the gift they purchased delivered on the day of the special occasion.  Due to the logistical considerations needed for such precise timing, and the associated expense to the consumer of such exact delivery, most consumers are willing to settle for delivery a few days before, or on the day of the special occasion.  Outside of this time range, delivery is normally considered unacceptable. 

Amazon has been particularly sensitive to consumers’ need for on time delivery, especially during the holiday season.  In particular, they have a notice on their website during the Christmas gift giving season stating that an order needs to be placed by date x in order for the gift to arrive in time for Christmas day.  This extra effort on Amazon’s part makes its delivery process more sophisticated than other online competitors and builds consumer confidence in their ability to deliver on time. In addition, Amazon as well as many online retailers, allow consumers to input different billing and shipping addresses to ease the gift giving process. 
Omar Adil and Natasha Chagpar

Tracking Services Tracking services that enable consumers to track their online purchases while in transit provides many consumers with peace of mind.  The ability to track his/her package offers a customer a huge degree of predictability since he/she can see where their product is, and how long until it arrives.  Therefore, tracking services eliminate much of the uneasiness that stems from the ambiguity of not knowing where one’s package is.  Often courier companies work with online companies to provide this information to the consumer and upon purchase of an online item a tracking code is given to a consumer to go online and view the status of their purchase. 

For example, has a section on their website where a customer can go and track their orders.  To do this, they must first access their account and then pick the “Track Packages” option: 

Once a customer has accessed their account, he/she has the following options available under the tracking purchases section:  
Omar Adil and Natasha Chagpar

Custom’s Inspections When online retailers conduct business across borders, it is important that they complete all necessary customs documentation correctly, so as to ensure the smooth passage of packages through customs.  Completion of such custom’s documentation is the responsibility of the online retailer, not the purchaser or the shipping company outsourced to ship and deliver the package.  As a service to customers (for example: online retailers), most shipping companies dedicate a section on their website to customs issues and provide links to customs documentation.  A good example of this is illustrated on Purolator’s website: 

Furthermore, the online retailer should make the purchaser aware of any potential issues or charges that may materialize at customs such as customs fees on high-value products.  Failing to forewarn purchasers of such issues will decrease the likelihood of repeat business and increase the likelihood of negative word-of-mouth. 

Therefore, a thorough delivery/distribution policy can be leveraged as a key selling point for many online retailers.  In order to maintain customer satisfaction, it is critical to get products to consumers on time and that means knowing your delivery capabilities and the rules and procedures to get items delivered within and across borders. 
Omar Adil and Natasha Chagpar

Product Fulfillment
  o Packaging
  o Packaging for Perishable and Fragile Products
Product fulfillment is when the product delivered to the consumer is in line with the original description provided by the online retailer.  Shipping/distribution plays a role in product fulfillment because if a perfectly good product is damaged when being shipped, then the consumer receives a product that is different from what was described and what they anticipated.

Omar Adil and Natasha Chagpar

Packaging Basics The packaging of an order is important to help protect a product so that it arrives in the form that was described by the online retailer and thus giving the consumer product fulfillment.  If an online order is improperly packaged and damaged during transit, the inconvenience of not being able to use the product, returning the product to the online retailer and waiting for a replacement will yield an annoyed and irate customer.  Such a customer is less likely to provide the online retailer with repeat business.  Since customer lifetime value (CLV) (the sales resulting from the repeat business of satisfied customers) is critical to the success of any business, it is important that online retailers properly package their products.

Courier companies will tell online retailers the highest level of “abuse” their packages will experience while in transit from point A to point B.  For example, UPS states that packages must be able to withstand a 5’ (5 foot) drop from one conveyor belt to another.  Therefore, online retailers should package products to withstand such shipping harshness.  

Omar Adil and Natasha Chagpar

A good example of packaging guidelines and size limitations can be viewed on UPS’ website:

- insurance considerations
Although most courier companies offer insurance for items valued at a hundred dollar or less, free of charge, for items valued over a hundred dollars, additional insurance can be purchased.  Such insurance entitles the shipper to reimbursement if the product is lost or damaged during shipment.  However, such insurance is only valid if the person accepting the package on behalf of the courier company initials the bill of lading• slip, which indicates that this person, in his/her expertise, feels that the product is well packaged.  If an online retailer uses UPS, for example, it is the online retailer’s responsibility to convince the UPS employee that the product is packaged well enough to withstand a 5’ drop without being damaged. 

Clearly, the insurance process can be time consuming and expensive, adding indirectly to the consumer’s cost of the product and thus many online retailers do not insure their products.  

Omar Adil and Natasha Chagpar

A good example of how to make a claim for a product damaged in transit can be viewed on Purolator’s website:

for Perishable and Fragile Products
. Many things shipped from websites are necessarily small and fragile because that makes good "economic sense" to only ship things which are light and weigh less - so your shipping costs are low.

However many small light things, like DVDs, are vulnerable to being damaged when the container they are in is dumped into larger containers mixing in other shipments for the local "truck" part of the final journey to the customer's house or office. 


Perishables can be food or plant items that are subject to decay or spoilage in a short period of time.  In order to minimize time spent in transit, such products must be shipped by air.  Air shipments between almost all U.S. and Canadian cities are overnight; where as the number of days needed for the less expensive ground transit alternative varies based on shipping and receiving points.  The additional expense associated with air transit reduces E-tailer margins and makes it difficult for them to compete with brick and mortar retailers.  Furthermore, there are many more custom restrictions on the distribution of food and plant like products, which affects their ability to cross borders.  

Omar Adil and Natasha Chagpar

UPS’ website has some US regulations for these items:


Fragile Products

Fragile products require 
(i) more packaging and/or 
(ii) better quality packaging materials to protect against breakage, which increases shipping costs. 

The increased shipping costs reduce margins for E-tailers.  Furthermore, major courier companies will insure certain products unusually “susceptible to damage” for no more than a hundred dollars, even if the item is worth more than a hundred dollars.  In the event of breakage of such items, E-tailers will be reimbursed for only a hundred dollars and must absorb all incremental costs and send the annoyed and increasingly impatient customer a new product.  

The following excerpt from the FedEx website provides a good example of products unusually “susceptible to damage”:   

Packages (including freight shipments) containing all or part of the following items are limited to a maximum declared value of $100:
Film, photographic images, including photographic negatives, photographic chromes, photographic slides.
Any commodity that by its inherent nature is particularly susceptible to damage, or the market value of which is particularly variable or difficult to ascertain.
Glassware, including, but not limited to, signs, mirrors, ceramics, porcelains, china, crystal, glass, framed glass, flat panel display screens (all types), plasma screens, and any other commodity with similarly fragile qualities.
Precious metals, including, but not limited to, gold and silver bullion or dust, precipitates or platinum (except as an integral part of electronic machinery).

. The way an online order is packaged is very important to the form that the final product will be in upon arriving at its final destination.  The proper packaging of an online order saves online retailers money by not having to reship a new product in the future if the original one breaks in transit.  In addition, by properly packaging orders the online retailer keeps consumers satisfied and reduces post-purchase cognitive dissonance.

Omar Adil and Natasha Chagpar

Returns and Exchanges of Online Products A critical consideration for online retailers is to have a return policy that minimizes location restrictions.  Most online retailers with a bricks and mortar presence offer customers who purchased a product online with two return options: (i) return to one of the retailer’s physical stores, or (ii) return via mail or courier.  For (i) to be effective, the retailer must have many retail stores setup so that customers in various geographic regions can conveniently return products to such retail stores.  A potential problem with (ii) is that the industry standard in online retailing is that consumers burden the courier costs associated with returning products, (this issue will be discussed further in later sections). 

For a retailer with an online presence and many brick and mortar locations, location restrictions are not an issue.  Customers can easily take products purchased online to the nearest retail outlet of that retailer and return or exchange at their own will. Therefore, making their return and exchange policy similar to traditional retail stores.  For example, Best Buy customers can return products purchased online to any Best Buy location in Canada: 

Omar Adil and Natasha Chagpar

? Returns and Exchanges for Pure Plays:

When purchasing from an online retailer with a bricks and mortar presence, a consumer has peace of mind in knowing that he/she can return or exchange purchased products at any of the retailer’s physical locations.

It follows that many online consumers are reluctant to buy from pure play retailers because they are worried about how they will return or exchange an ordered item to a retailer who has no physical stores to visit.  Interestingly, American pure play companies such as Dell have found a rather sound solution to their lack of a bricks and mortar presence by outsourcing returns to courier companies such as Purolator.

Purolator, for example, has hundreds of outlets setup across Canada and returns to Dell can be made at any one of these Purolator locations.  Now, through courier companies like Purolator, pure play customers do have physical locations to visit for returns.  However, for obvious reasons consumers cannot exchange their products at these Purolator outlets, for they do not hold pure play retailer inventories.

Outsourcing to a company like Purolator also offers pure play customers many other value added services.  For example, if it is inconvenient for a customer to visit a Purolator retail store, Purolator will pick up the product for return from the customer’s house/office and have it shipped to Dell.  All the customer has to do is fill out a bill of lading, which can be done online from Purolator’s website.  The bill of lading looks like:

If the customer has any questions about shipping a Dell product back to Dell (for example if they need assistance in completing the bill of lading), the Dell customer can contact Purolator’s call center via a toll-free number and get any assistance they need.

In addition, the customer may not know how exactly to package the Dell product so that it can withstand the delivery process, or “withstand a 5’ drop”, and thus Dell will even courier to the customer’s house/office an empty box that meets shipping specifications.  Then, all the customer does is put the Dell product in the box, and either drop the box to a Purolator retail store or call Purolator’s toll free number and have Purolator pick it up from their house/office.


Drop-shipping – A Great Way Of Making Money Online

Nowshade Kabir | Contributing Writer | 2004-11-08

Using the Internet to sell products and services to ever increasing number of net users is a good way to start your own business. If you are not taking advantage of this great opportunity you are just missing the boat! Consider this: e-commerce, contrary to popular believe, is thriving and increasing at a double-digit growth rate. According to Jupiter Research, Online sales during this holiday season in United States are expected to reach $21.6 billion, a 19 percent increase over the same period last year. Jupiter also predicts in the report that 86 million U.S. residents will make holiday purchases online this year compared to 73 million last year, which is an 18 percent increase.

No doubt that this is the right time to get into online business. Building a website for selling products or services is no longer that difficult. You can make your own website by using available sophisticated but easy-to-learn-and-use programs like Macromedia Dreamweaver, Microsoft Frontpage, Adobe Go live, etc. There also exist various online web store builders similar to, which allow you to create powerful web stores using simple editors and numerous templates. You can also setup a store with E-bay and sell products through it. Finally, you can hire professional web designers to develop your website. So, the important question is not how to get online, but what to sell on the Internet?

In one of my articles - What to sell on the Internet? ( - I wrote about selling information products. Although this is an interesting concept, you might think that this is not your cup of tea; and you still prefer to work with some tangible products. In ideal scenario, probably, you want to sell a product of your choice but don't want to carry your own stock and don't want to handle the shipping. Is there a way of doing this? Yes, there is! It's called "Drop-shipping".

What is drop-shipping?

When a manufacturer, wholesaler, distributor or importer, after receiving an order from their retailers, individually pack and deliver the product to the customer of the retailer with retailers address as shipper, this selling technique is called drop-shipping.

 Complete Story:

Summary/Important Facts:

This article is important to understand the future of shipping and online retailers.  It describes a new forum of shipping known as “drop-shipping” and explains its benefits.
? Shipping Cost Burdens:

In the online retailing industry, there are industry standards detailing whom (for example: retailer or consumer) burdens shipping costs under different circumstances.  Since Dell adheres to industry standards, it serves as a good example and will be used to illustrate shipping cost burdens under differing circumstances.

a. Online Retailer Makes the Mistake:

If Dell has made a mistake and a consumer receives a defective or incorrect product, he/she must contact Dell.  After this, the customer will contact Purolator who will return the product to Dell and, concurrent to all this, Dell will ship out the right product to the consumer.

Dell will pick up the tab for both (a) the shipping costs for the returned product and (b) the shipping costs for the new product, leaving the consumer with no financial distress with this process.  Purolator can bill Dell directly because Dell has an account setup with Purolator.  Setting up an account with Purolator is as easy as calling their toll free number and any business, big or small, can setup an account free of charge.  Once an account is setup, an online retailer can offer customers the convenience of free shipping if they chose to.

b. Consumer Makes the Mistake:

If, however, a customer chooses to return a Dell product within 30 days for reasons other than a mistake of Dell, then Dell will refund the cost of the equipment minus shipping and handling charges.  In other words:

    Customer       =    Cost of     -      Cost to Dell of Originally      -    Cost to Consumer of
Reimbursement                   Product        Shipping Product to Consumer     Returning Product to Dell

c. Warranty Repair:

For products being returned to Dell for repair under warranty, consumers must pay the shipping charges required to ship products back to Dell.  However, Dell will return these products to consumers free of charge, once repaired.  Dell’s warranty policy is provided in the link below:

Advantages of the Present Shipping Cost Burden Structure:

If Dell’s return policy was that upon return, a customer would be reimbursed for all costs including the cost of the product and all shipping costs, Dell would become vulnerable to consumer return policy abuse.  A consumer may, for example, purchase and use a product and just before Dell’s 30 day return period expires, he/she may return the product for full reimbursement.

On the other hand, Dell’s present return policy of full reimbursement minus shipping and handling costs deters people from “scamming” Dell and protects Dell from the ill effects of such scams.  Their return policy helps to attract only genuinely interested consumers to make purchases.  Therefore, Dell’s present return policy, (which is also the industry standard return policy in online retailing), will help filter out “scammers” and will channel more serious consumers to Dell.  Below is a screen shot of Dell’s return policy:

Disadvantages of the Present Shipping Cost Burden Structure:

The cost of shipping varies depending on the weight/size of the package and the location to where the item is being returned (for example the particular province or state).  This return cost adds to the consumers overall cost of purchasing the product and may reduce their likelihood to buy from that online retailer.  Therefore, online retailers should consider paying the return shipping costs thereby not deterring customers from purchasing the product online in the first place.

 An online retailer who is willing to burden the shipping costs when consumers are returning products illustrates to customers that the E-tailer is willing to stand by and has faith in its products.

? Potential Business Opportunity?

An online retailer with a bricks and mortar presence such as Best Buy offers any Best Buy consumer the convenience of (i) returning products via mail/courier, or (ii) returning or exchanging products to physical Best Buy locations.

By definition, pure plays such as Dell lack physical locations.  However, pure plays such as Dell still offer consumers the convenience of (a) returning products via mail/courier, or (b) returning products to physical locations via Purolator outlets.

The first disadvantage for a pure play is that whether the consumer chooses option (a) or (b), he or she burdens shipping charges whereas a consumer of an online retailer with a bricks and mortar presence faces zero shipping costs under option (ii).  Of course, to avoid such shipping costs in the case of returns, a retailer with a bricks and mortar presence becomes more favourable.

The second disadvantage for a pure play is that courier companies do not maintain an inventory of their products, hence, exchanges cannot be made.  As a result, consumers must bear the inconvenience and cost of returning a product to an online retailer, and then having to go back online and purchase what they otherwise would have exchanged for.

There is, however, “silver lining” in what seems like a cloudy sky for pure plays.  Pure plays such as Dell save huge amounts of money from not incurring the costs associate with having retail outlets.  By passing these savings on to customers via lower prices, pure plays become more competitive.

The remedy to the two above-mentioned disadvantages of pure plays is not in the costly creation of a new business entity, but rather in the amending of current return policies.  Presently, pure play return policies tend to be unforgiving which leads to less customer trial and reduced competitiveness.  To overcome this weakness, pure plays such as Dell may consider passing on a fraction of the associated savings from not having brick and mortar stores in the form of paying for all courier services costs to encourage trail and give consumers more flexibility.

? Consumer Psychology and Pure Plays:

Although most pure play retailers offer sound return policies, consumers often experience great psychological distress buying from a pure play.  This is often the case because as humans, we like to employ all five senses in the purchasing process, particularly the sense of touch.  When buying online the lack of being able to actually see and touch the product is a substantial drawback.  Therefore, people cannot fully decide if they like a product until the have seen and touched it.  This is where online retailers run a large disadvantage, in that people can only experience their products after being purchased.  If a consumer is dissatisfies with a product purchased from a brick and mortar store, they can easily return it to the physical store for a refund or exchange and there is clear accountability.  When it comes to pure plays, there is no physical store the consumer can walk into for a refund or exchange and the consumer has not seen the product before buying it, therefore many consumers have a fear of being “tricked” and getting stuck with a product that they don’t want.

For online retailers to be successful they need to have an accommodating return policy that helps people get over their fears of buying online.  Online retailers need more flexible return policies than traditional retailers because with traditional retailers, customers have the benefit of “what you see is what you get”, and this is not so with E-tailers.  In markets like Canada buying online is still emerging and E-tailers need to be sensitive of consumers’ fears and restrictions.  Although Dell chooses to use their return policy to weed out non-serious consumers, smaller pure play retailers cannot have the same strategy as that my cause them to not have any business at all.

Therefore, the ability for consumers to easily return and exchange the products they buy online is a critical aspect of online retailing.  The procedures for returning items differs with the type of online retailer, but nevertheless the costs involved in this process should be absorbed by the retailer to keep customers satisfied, reduce their costs and make them more willing to make online purchases in the first place.  An effective and efficient return and exchange policy and procedures are another way to convince consumers to shop with an online retailer.  The best way to get people to shop online is to help them make worry free purchases and this comes with effective return policies and once again helps to reduce post-purchase cognitive dissonance, by eliminating the feeling that the consumer is stuck with the product if they do not like it anymore.
As stated is the “E-Commerce Statistics” unit, Canadians go online more then Americans, but Americans are buying more products online (9% of Canadian households have made a purchase over the Internet versus 23% of Americans).  Since such a large proportion of the Canadian population is online, there is a lucrative opportunity in trying to sell more to Canadians. 

One reason Canadians do not buy online as much as Americans is that the largest number of sites from which to buy are U.S. based, which is a disincentive to Canadian shoppers who have to consider the exchange rate disadvantage and additional shipping costs and hassles.  In addition, many U.S. E-tailers don’t ship to Canada, or the shipping costs are high and often involve a slow shipping process. Therefore, an opportunity existed in which American E-tailers could try and further penetrate the Canadian market and a company known as Borderfree acted on this opportunity in 1999. 


companies involved
Borderfree is just one example of a company that saw an opportunity to improve cross border online transactions (specifically American / Canadian E-Commerce relations) and saw a problem with the integration of American websites with the Canadian market and distribution issues of products between American E-tailers and the Canadian people.  Borderfree is a web service company that provides technological solutions to assist with transactions across national borders.  Their technological solutions include landed cost calculations, order management, data management and fraud and returns management.  In addition, they collect international shipments through a hub facility and prepare them for shipment and customs clearance before shipping them internationally.  They have partnerships with major shipping companies and obtain favorable shipping rates.  Borderfree is owned by Canada Post and a group of institutional and venture capital investors. 

Omar and Natasha


companies involved

Story of Borderfree

Borderfree recognized that there are high costs to internationalizing a website, but also that there are high costs in companies doing business with international customers.  Setting up a website is becoming increasingly easier and with this ease comes easier access to international markets.  What E-commerce merchants forgot was that it may be easy to set up a website and sell products, but it is not easy to distribute products beyond borders.  Within the distribution of products beyond borders comes: duties, taxes, timing, restrictions and the need to develop partnerships with local logistic service providers.  Borderfree also noticed that Canada and other countries lacked the volume that the US has in online purchasing mostly because American E-tailers do not ship internationally as this is beyond their means.  Interestingly, many consumers were reluctant to buy from foreign E-tailers as they didn’t know the landed cost of how much they were actually going to pay for a product by the time it was at their door.  Borderfree works to help online companies enter foreign markets.  They not only provide technology that helps to calculate the shipping costs and manage inventory, but help American companies ship to Canada with via Canada Post for favourable shipping rates.  Although challenging, shipping to foreign markets is possible and once a proper process is in place, it can be very profitable. 

Omar and Natasha


Conclusion to the Unit
For an online retailer to be successful, it has to have the complete package (for example optimal performance on all 4 P’s).  Thus far, the P that seems to have been overlooked by many online retailers is the last P in the marketing mix - Place.  To have the complete package, an online retailer has to have an efficient shipping process that gets products to consumers on time and in their intended form.  In addition, this process has to be reversible, in that if a consumer needs to return or exchange a product, this can be done easily without many penalties.  For online retailers, success on the fourth P is often the factor that converts website visitors into website customers. 

Omar Adil and Natasha Chagpar