E-Commerce Logistics: 7 Things You Need to Know as a StartupBy Steve Syverson Read Time: 9 min.
For any e-commerce startup business, properly coordinated logistics are the key to success. Discover the top seven things you should know when planning the future of your online brand.
Your e-commerce startup has defied the odds. You've grown it from an idea on the back of an envelope into a full-fledged company with real customers and real revenue. However, your success could lead to your downfall if you're spending too much on logistics or not shipping products the way customers expect.
Perhaps you're selling unique sustainably sourced apparel, non-toxic pet toys, or eco-friendly home decor. Regardless of the product mix, your company may be ready to outgrow your current e-commerce logistics situation. Your dream come true could turn into a logistics nightmare. After all, you may be an expert in your niche, but logistics is a science all its own.
One of the advantages of a digital native vertical brand startup is your company isn't saddled with legacy systems and procedures. You can incorporate best practices from the beginning rather than rediscover them along the way. You can integrate technology and analytics from the ground up that will help you control costs and deliver on your brand promise.
A wise person once said “you'd better learn how to manage your inventory before it manages you”. After all, inventory on a shelf or rack represents your investment in the business. Tracking that inventory is critical for your cash flow and opens the way for more complex analysis that will guide your strategic thinking.
Managing logistics in e-commerce is critical — it's essentially the core of your company. Depending on what stage you're in, it may be time to partner with third parties to store your products and fulfill your services.
As you're planning for the future of your business, here are some things you need to consider to take your e-commerce logistics to the next level.
Retailers typically base their inventory forecasts on historical data. As a startup, you may not have that luxury. So how do you know how much inventory you'll need? There are a few techniques to use until you build your own sales history.
First, monitor site traffic and social sharing. If your social media efforts start to pay off, demand could spike, and you'll want to be ready. Look at seasonal trends such as changes in the weather and holiday-driven purchases. If spring comes early, outdoor items and apparel could see unanticipated demand.
Of course, stock up to support your promotional efforts such as discount codes and free shipping thresholds. Scalable warehouse space can help you plan for increasing demand without investing in long-term leases.
As your e-commerce logistics needs grow, it becomes more difficult to see the big picture. Companies that experience rapid growth may add logistics capacity in an ad hoc fashion, bolting on pieces to deal with a surge in orders or new products. Perhaps you've expanded to use several warehouses, drop shippers or other logistics tactics.
However, those pieces may not communicate very well, leaving the organization with an incomplete picture of their inventory and sales performance. It can be difficult to see your entire inventory situation and have that reflected in quantity counts on your internal systems as well as on your website.
Shoppers want to be able to see if an item is available before they go through the checkout process. It's a balancing act to keep enough stock on hand but not have excess inventory tying up cash and shelf space. The answers are different depending on your market space, and the best solution is always a moving target. Work with logistics providers who can help you develop the systems and operational discipline to make your inventory work for you.
In a recent study, 73 percent of online shoppers said unconditional free shipping was "critical" to their purchase decision, according to Inc. magazine. Amazon boasts more than 100 million Prime subscribers worldwide, Fortune magazine reported, so free and fast shipping is obviously vital to consumers.
The advent of free shipping is both a curse and a blessing for e-commerce sellers. It wasn't too long ago that 10-day delivery time was standard. Then in 2014 delivery times fell to about six days. By 2016, it had shrunk to three days. Now it's closer to two days, and overnight for some Amazon shipments.
The thought of no-cost shipping spurs many online purchases, but of course, the shipping is only free to the consumer. The shipper must be as disciplined as possible to reduce cost while providing the service customers expect.
Your customers now expect two to three days for delivery, but don't want to pay for it. Marketing techniques like minimum order sizes or promotional offers can help drive orders with free-shipping offers. Discipline in your supply chain can reduce costs to make free shipping a competitive advantage rather than a financial drain.
Last-mile service typically represents up to 28 percent of the total shipping costs, according to a study from the University of Delaware.
Keep in mind the last mile may be a lot longer than an actual mile — we're talking about the final delivery step to the consumer. That may be via UPS, FedEx, or the U.S. Postal Service or another carrier. For a B2B delivery, the last mile could occur via an LTL carrier.
Consumers may judge their entire interaction with your company based on the delivery experience. A sustainable last-mile strategy must satisfy consumer expectations while balancing costs and resource requirements. For instance, app-based last mile logistics providers may allow smaller players to compete with Amazon for tight delivery windows.
Reflecting the increasing competition, e-commerce companies are beginning to focus on the last yard service -, the next level of granularity. The last yard represents the customer receiving a package and moving to the end user. Think of shippers stocking customers' refrigerators with fresh produce or delivering parcels to package lockers. In a recent study more than 70 percent of shippers and third party logistics providers (3PLs) recognized the need for "last-yard" services, Supply Chain Dive reported.
Also known as reverse logistics, managing returns may be the most challenging aspect for e-commerce sellers. The average return rate at a brick-and-mortar store is 8 to 9 percent, and for e-commerce can reach 24 to 36 percent, according to Transport Topics.
Experts say to handle returns properly, a retailer should consider a return as a reverse purchase with all the same care and oversight that goes into managing the original purchase.
Your return policies help incentive buyers who can purchase with confidence that they won't be stuck with products that don't suit their needs. However, your enterprise must have a clear understanding of the costs and logistics implications to those returns. Do you pay for return shipping? Do you charge a restocking fee? Do you resell the items or liquidate them through a wholesaler?
One key to managing returns is to keep them separate from the forward-moving supply chain of new products. Create separate locations, even a small section of your warehouse, and assign staff to manage the reverse logistics supply chain. Commercial mini- warehouse locations operated by Warehouse Anywhere allow for low-cost, flexible space to handle returns separate from outbound products.
The latest trend in e-commerce is moving the product closer to the customer. Rather than fulfilling orders from a few regional million-square-foot distribution centers, companies are using smaller facilities closer to population centers. The smaller facilities are more responsive to customer orders and can reduce delivery times.
This strategy shortens the last mile to the customer. These facilities could be mini-warehouses or dedicated fulfillment centers. Some brick-and-mortar stores are converting retail locations into shipping centers, devoting some or all of the footprint to fulfillment. Warehouse Anywhere operates flexible warehouse space in over 10,000 locations nationwide, allowing you to place inventory exactly where you need it.
The distributed inventory strategy enables shippers to offer same day or overnight fulfillment in major cities, allowing them to compete with Amazon on shipping time. Reducing shipping distances will in turn reduce costs and improve service. Regionalized inventory opens up the possibility of using regional carriers, metro area couriers and other delivery options that aren't possible over longer distances.
Fast-growing e-commerce shippers are outsourcing some or all of their logistics functions to a third-party logistics provider or 3PL. A 3PL can manage inbound shipments of product, stock and track inventory and handle all aspects of fulfillment. Your company can concentrate on its core competencies and outsource logistics operations.
Functioning as a 3PL, Warehouse Anywhere can handle warehousing, fulfillment and transportation relationships and ensure the customer experience meets your brand standards. Look for a 3PL that provides data on sales and inventory management to support strategic decision-making. Also, a 3PL has long-term relationships with carriers so shippers typically receive better rates than they could negotiate on their own. The 3PL will have relationships with specialized and niche carriers for regional and parcel services.
A 3PL serves as a strategic partner to help e-retailers compete with some of the digital giants in post-click fulfillment.
The lines between online and physical retailer are blurring as e-tailers open stores and retailers add more e-commerce capabilities. No matter where your startup is on that spectrum, the e-commerce supply chain is essential for your company's future. Understanding and leveraging these trends will ensure that you have the strategy and relationships to support your mission.
To find out more about how Warehouse Anywhere can support your e-commerce strategy, contact us today!