The core of most retail is getting a physical product from one location (your inventory) to another (your customer). For stores, shipping a product after it has been ordered consists of a number of standard steps:
- Picking the product from its stock location
- Packing the product in a protective material
- Offering the package to a transport company
- (Optionally) handling returns
All of the preceding steps, especially handling returns, consist of many different details and substeps. For instance, for returns, a couple of substeps are inspecting a product to see if it can get added back to stock, boxing the product properly again, refunding a customer after the return is received, and so on.
You can decide how many of these steps you want your company to perform. There are many warehouses that offer e-fulfillment services, meaning that all you do is arrange for stock to come in and after that the warehouse handles everything including picking, packing, shipping, and handling returns. This is a model used by many stores as the store can keep focusing on advertising, website improvements, and customer service while not having to deal with all the complexities of logistics.
The most extreme case of this, called "dropshipping", does not even require you to purchase stock. Steps 1 through 4 will all be handled by another company (called the dropshipper) and the only thing you do is send your orders to them. You only pay for products that are actually ordered and have no inventory risk. While this sounds good, the biggest disadvantages of dropshipping are that the margins on orders become very thin, and managing your product catalog and shipping prices becomes complex when you are sourcing your products from multiple dropshippers. For a more detailed discussion on dropshipping, an excellent guide can be found at http://ecommerce.shopify.com/guides/dropshipping.
Regardless of how you choose to handle picking, packing, shipping, and returns, you will need a way to communicate and charge the proper shipping costs to your customers. Besides keeping your products' stock levels, this is the only logistics-related thing the Magento Community Edition facilitates by default. Below you will find how to utilize Magento's shipping methods as well as pointers on what to do if you need other kinds of shipping price calculations.