For many sellers, the shipping and fulfillment process starts in-house. Unfortunately, it’s time-consuming picking, packing, and shipping products and it’s only getting worse.
In 2020, there was a 44% ecommerce industry growth that pushed in-house sellers to their breaking points as they struggled to manage all of their new orders.
Does this sound like you? If so, now is the perfect time to evaluate your shipping and fulfillment processes and see where you can make improvements.
First, ask yourself these questions:
- What is your shipping currently costing your business?
- How often are mistakes happening?
- How are you storing your merchandise?
- How loyal are your customers?
Then, look at your shipping costs, fulfillment accuracy, warehousing, and customer satisfaction.
Shipping cost varies across the board for online business owners. These values are determined by the weight of your product, customer location, and volume of orders.
Your business’s overall shipping cost is also determined by the shipping options you offer customers. Most online business owners want to provide their customers with free shipping. If you’re not making up for your lost cost elsewhere, free shipping could actually be more expensive for your business.
The basic rule of thumb for understanding if you’re overpaying for shipping is to see how much you’re spending versus how much revenue you’re earning. If it costs you $15 to send an item valued at $10, you’re overpaying.
To improve this, you could increase the shipping cost for your customer, increase the overall cost of your item, or require your customers to meet a threshold before getting discounted shipping rates. Although all three are viable options, your customers may be more open to the latter.
It’s important to also look at how much you are charging your customers in relation to how far your products have to travel. The further your merchandise has to travel, the more expensive your costs could be.
Inventory that travels across the country may not be able to use local carriers, but will instead be shipped by bigger brand names like FedEx and UPS. If your inventory is closer to your customers, you’ll likely spend less on shipping and can offer options like free shipping.
After evaluating your process, it’s important to come up with a plan to combat these high shipping costs. Whether that’s changing the costs of items, reducing packaging, or working with a new partner altogether, it’s critical that you find a method that works best for your business.
A big step in improving your logistics is deciding how your products will be fulfilled. For many start-up retailers, dropshipping and in-house fulfillment are ideal options.
Unfortunately, those are not sustainable long-term. As we saw during the pandemic, these strategies leave room for product delays and inaccuracy with processing orders. The best way to understand if your current systems are working is to look at how many mistakes are happening and how long is it taking to get your inventory to customers.
Dropshipping is reliant on the manufacturer to do the heavy lifting. When supply chain issues arise, your customers may not receive their orders for months! If you have a large customer base, you may want to consider another delivery option.
Self-fulfillment can put you in the same predicament. The more orders that come in, the harder it is to keep up. No customer ever wants to receive the wrong order, but this mishap is common when in-house methods can’t fall short. You want to aim for a 99% accuracy rate for all of your orders. Anything less will send your customers packing.
Depending on the size of your business, building an efficient fulfillment system may require some additional help. Whether a bigger workforce or a partnership with a professional shipping company is required, it’s important to find a method that eliminates potential logistics mishaps.
Consumers have high expectations for accurate orders. Even just one mistake could prevent them from becoming a return customer.
The most cost-effective shipping happens when your product is in the same city as your customer and you’re producing a large number of packages. This cuts down on your transit time, and also allows you to obtain shipping carrier discounts. You can easily achieve 1-2 day shipping options and keep up with bigger businesses in your industry.
How long does it take for your orders to be delivered to customers? If you’re still using in-house methods, you may not be able to achieve these quick turnaround times. Instead, your out-of-state customers may be waiting weeks to get their orders because your inventory is only located in your city.
It may be more ideal to work with a shipping partner that operates multiple warehouses. That way you can achieve the discounts you want while being closer to all of your customers.
By partnering with a 3PL, you’ll also have more space for your growing inventory. You’ll no longer have to worry about outgrowing your home storage because most 3PLs have multiple warehouses. They have the capacity to grow with your business no matter how much inventory you have.
How happy are your customers with your shipping and fulfillment? A great place to find out the answer to this question is through your reviews. Customer feedback is an honest evaluation of how well your business is running. Multiple complaints or negative feedback is a good indication that your current systems are not working.
If your customers are complaining about the time it takes to receive their orders, your shipping and communication are a problem. Perhaps you’re only limited to one carrier. Maybe your customers are halfway across the United States and you promised 1-day shipping.
Although using multiple carriers can help decrease transit time, it’s crucial that you provide your customers with accurate shipping times. Consider the time it takes to get a product from your facility to a customer’s door. The more accurately you can predict this, the happier your customers will be.
Evaluating Fulfillment For a Better Ecommerce Business
Customer demand is not expected to slow anytime soon. Your business needs to be ready. This year, ecommerce is expected to grow by at least 13% as customers rely more on online stores.
It’s important to be confident in your shipping and fulfillment no matter how many orders you process daily. Not only will it cut your overhead, but it will also help improve your customer loyalty.
About the Author – Rob Tillman is the VP of Operations at Rakuten Super Logistics. He brings to the team over 20 years of experience in logistics, with a focus on distribution and ecommerce fulfillment.