The e-commerce industry is blooming and everyone is busy sending out shipments. Due to high demand, the logistics of getting orders to customers have become more complicated.
In the light of this fierce competition, customers have grown more impatient. They want to see their order delivered to their doorstep, the sooner the better. In fact, 77% of customers say they have abandoned a purchase just because of unsatisfactory shipping options.
This clearly indicates that whoever promises fast and cheap delivery as well as provides an enjoyable shipping experience, wins their favour. And whoever can’t keep up, belongs to the past.
Even with the greatest effort, no one can meet customers’ demands by themselves. The infrastructure behind e-logistics is immense and understanding how all the puzzle pieces work takes time.
In this article, we will cover how e-commerce logistics work and the significance it has to your business from a customer expectation perspective. As properly coordinated logistics are the key to success, we will also take a look at how to streamline the e-commerce supply chain in order to optimize operations at each step.
What exactly is e-commerce logistics?
Contrary to popular belief among the public, e-commerce logistics doesn’t solely mean a shipment being sent out from a business to a customer.
The journey from moving inventory from the manufacturer to customers’ desired location involves multiple processes, such as:
- Inventory management
- Warehousing and storage
- Order fulfillment (picking, packing, and shipping orders)
- Transport service, etc.
Each step comes with its own complications. The key is effective communication and execution between all parties in your supply chain to avoid keeping customers waiting and manage to deliver on time.
Customers expectations on shipping
About five years ago, it wouldn’t have mattered for customers if their shipment took a week or longer to be delivered. What has changed?
There are two distinguishable factors that have made the shift in customer expectations. One of them is Amazon Prime’s two-day shipping and the following effort from all around the world to keep up with them.
The other is unquestionably the global pandemic that has triggered the shift from brick and mortar stores to online.
Let’s take a look at what areas to consider for fulfilling customer expectations and ensure you will be up to date with the latest demands.
The cost of shipping is still one of the top considerations for e-commerce customers. In fact, free shipping supersedes fast shipping. Consumers are willing to wait 3-7 days for their order to arrive if the shipping comes with no cost.
But of course, there’s no such thing as a free lunch or in this case, free shipping. In the end, somebody has to pay for getting products from one place to another. So how to proceed by offering customers what they want without breaking the bank?
You would think that adding a shipping cost of $2.99 wouldn’t really make much difference to a customer. However, Clutch’s research shows that 77% of consumers are likely to order a product that comes with free shipping, but if the shipping cost is up to just $2.99 only 43% of customers will consider buying it.
The key here is to play on simple psychology and think about how to present the price of a product to your customers. If you show the total price of the product as $15 with inclusive shipping, the price will already be clear in the customer’s mind.
Yet, if the customer has picked the same product for $10 and proceeds to checkout only to find that the total price with shipping is $15, it triggers negative emotions and may lead to cart abandonment.
The second criteria after the price for deciding to order a product is speed. Delivery times can be stressful for customers for multiple reasons such as a special day coming up or simply wishing to receive a similar experience as going to brick and mortar stores.
Without being able to receive their desired products fast, they are likely to turn to a competitor capable of a fast delivery, which is believed to usually take up to 2 days.
For giants like Amazon, Target, and Walmart the norm is already offering same-day delivery. How is it even possible for smaller businesses to keep up with such a pace?
Whereas not everyone can offer same-day delivery, there’s no need to panic as some factors will diminish the need for fast delivery:
- Your product is unique. Customers are willing to wait for one-of-a-kind or not easily attainable items.
- Customers can save money like mentioned above.
- You have gained the customer’s trust and they simply want to purchase from a brand they trust.
Having some of these points covered, you can start thinking about expanding your business abroad.
3. Return policy
Returns in e-commerce business are unavoidable. Sooner or later someone will be returning your products for one of the following reasons:
- Damaged product
- Wrong item
- The product differs from what was described online
- The size or colour does not match expectations
Sometimes customers will even order multiple similar products knowing that they will return some of them. According to Walker Sand’s research, free returns or exchanges is the second aspect with 54% that makes consumers want to shop online.
This means that returns are definitely a new normal every business needs to adapt to and one of the central factors of customer experience. This is why it is crucial to make your return policy easy to find and stay transparent.
67% of shoppers will check out the return policy before making a purchase online. Two things that people will be looking for in your return policy are a hassle-free “no questions asked” approach and an easy-to-print return label.
But not to worry, returns do not automatically mean a loss of profit. A study by the University of Texas has found that a streamlined e-commerce returns process can actually boost profits.
Track your returns and use it as a learning opportunity as well as take the advantage to build trust between you and your customers by staying empathetic and positive throughout the return process.
4. Environmental aspect
In recent years there has been a switch and shoppers are not anymore only focused on which products can make their lives easier for cheap prices. There’s a wider concern for sustainability and up to 72% of consumers are actively buying more environmentally friendly products.
How can companies show their customers that they too want to go greener and achieve sustainability?
- Recyclable and efficient packaging. Make sure you package your product in the most eco-friendly way and reasonable way – no need to use large packaging for small items. By decreasing the amount of packaging you use, you can reduce some of your shipment costs.
- Upload your product manuals and guides online. Instead of printing everything on paper and including it in the shipment, make documents available online. This will reduce some shipping costs as well as ensure that the information is always accessible.
- Offer greener shipping and delivery methods. If the order is not urgent, there are shoppers who will be happy to wait longer or get their parcel up from a pickup locker.
- Don’t let returned goods be destroyed. Try to come up with an alternative for returned products than just throwing them into the landfill.
E-commerce supply chain and its management
Customers expect a smooth delivery process and they will not take into consideration nor care about the factors merchants have to face when dealing with logistics. E-commerce companies have to figure out a flawless supply chain and deliver quality products to customers while ensuring an exceptional experience.
The supply chain is the one thing that will take your business forward. As the global supply chains are getting more complex, a data-driven approach to supply chain management becomes critical to operating effectively and efficiently.
A coherent data collection and analysing by no means is the only driving force moving your business onward. Focus is also needed for:
- Building good vendor and supplier relationships
- Reducing operating costs (e.g. through inventory optimization)
- Integrating up to date supply chain technologies and automation
- Securing the right e-commerce logistic company partners
Building and maintaining relationships
Like in every aspect of life, a good relationship is a fundamental element of success. And the journey of building great relationships starts with finding the right people and interlining your goals – the quality of products, sustainability, etc.
The most common way when you are just getting started and looking for the right vendor is to check out industry events, read industry magazines, browse online directories and keep an eye on your competitors’ suppliers as well.
Once you have found the right supplier and secured an agreement, make sure to check in frequently. Engaging in an open and direct conversation will build trust and lead to more relaxed communication even in stressful times.
Overseeing costs and reducing them
Understanding the demand for your products at a current period of time is crucial to decrease some supply chain costs. For this, it is suggested to devise a Stock Keeping Unit (SKU) system to keep everything under control.
With a well-organised SKU system, you will have a clear understanding of the popularity of various products and their variants. Differ your products through the ABC analysis:
- A-items are the top-sellers. These are the products with the highest consumption value and require the most attention through inventory control and sales forecasts. Make sure these items are of priority for regular reorders to avoid stock-outs.
- B-items are somewhere in-between. Keep a close eye on your B-items as they can easily shift either way so you need to be fast to make sure you are not over-, or under-stocking.
- C-items are the least popular, therefore of low consumption value. Due to the low demand, there is no need for stocking too many of these items. Consider having one of every item in stock and reordering only when there is demand.
Once you have a clear understanding of what your best-sellers are, the next step is to optimize your inventory to reduce costs. The key here is to have the right amount of stock to minimize the costs needed for rental space such as warehouse storing rent, insurance payments, and loss of inventory due to damaging of goods, administrative errors, or theft.
Reducing the amount of manual work needed for repetitive tasks will boost the efficiency of the whole e-logistics process. Every e-commerce business can implement shipping automation to increase the quality of their services.
- Using automation in inventory management. With the right system, you can track all your inventory in real-time through all sale channels and stay organised. Furthermore, the processes of assigning items to specific orders, performing inventory checks, purchasing products that are low in stock can all be automated.
- Allowing shoppers to follow their orders in real-time. Integrating an order tracking app to your webpage will significantly boost your customer experience. Being able to see and receive order status updates will give customers peace of mind and build trust with your brand.
- Applying automated shipping criteria. One example of such shipping criteria automation is dividing packages considering their weight. For instance, if something weighs more than a certain amount, automatically assign the shipment to a specific carrier.
Outsourcing e-logistics partners
Outsourcing logistic partners can save time and money as you will be partnering up with a company that has worked out an efficient plan for delivery. Ecommerce companies might at first consider using a 3rd party logistic provider (3PL) as an additional burden, but in reality, they will be managing storage, transport, and handling on your behalf.
While last year with the global pandemic taking shape and e-commerce gaining even more popularity, many logistic companies collapsed under pressure and the demand. Yet the four leading logistics companies (DHL, UPS, USPS.com, FedEx) survived and thrived having their combined revenue of $307.31 billion.
This is a clear indicator that partnering up with a 3PL company comes with many benefits:
- Exclusive access to carriers network. Whether you are shipping locally or overseas, logistics companies will know the best possible carrier for your inventory.
- Access to technology and software. As a small business, it might be costly to invest in transportation management systems. Luckily, 3PL companies have figured it out and many of them offer data from their operations that will let you analyse and optimise your logistics to meet customer demands.
- Help with risk management. From the second your inventory is with a 3PL company, they will take care of things such as safekeeping of your products, carrier contracts, safety regulations and insurance.
- Valuable time to focus on meeting other aspects of your business – customer needs, customer support, etc. Instead of constantly trying to keep up with all the supply chain changes, rely on companies who are constantly innovating to be more efficient in the area.
Your e-commerce business relies a lot on an effective and smooth supply chain. Your customers expect you to be on top of your game in each step of your supply chain even if they themselves are not aware of what it takes.
What matters for customers is the cost-effectiveness and convenience their orders are delivered to them. So make sure you start planning the journey of shipments at an early stage to ensure fulfilling customer expectations and gaining their loyalty.