E-Commerce Logistics: 6 Pain Points You Need to Know as a Start-up
Congratulations! Finally, your e-commerce start-up has taken some bite of the market niche. That recent viral post you shared may have catapulted your product to a swarm of hungry raving fanatics. Sweet success indeed!
But alas, as soon as the number of orders increased, you noticed the cost of pulling your product from the supplier's warehouse to your customer's doorstep has somehow also eaten up most of your hard-earned profit. You also encounter complaints recently from customers like broken items, misdeliveries, and stockouts. This is certainly not good for the business.
All because, somehow, you've not considered the complexity of logistics used in facilitating online orders. Sad.
So what is e-commerce logistics?
E-commerce logistics is the process of managing the inventory and delivery of items sold online. This includes keeping track of stock levels, organizing warehousing and distribution, and ensuring that orders are delivered to customers on time. Retailers need to have a good e-commerce logistics system in place in order to run their business smoothly and efficiently.
It covers the fulfillment process involved in e-commerce businesses, which includes inventory management, warehouse management, delivery, and returns.
A good e-commerce logistics system will help retailers streamline their operations, minimize overhead costs, and improve customer satisfaction.
What is needed to excel at e-commerce logistics?
Customer service in logistics is about meeting demand in terms of time, dependability, communication, and ease. Customers' expectations in e-commerce logistics are high, and logistics services are an integral component of what a brand has to offer in this highly competitive e-business landscape.
The better the service level, however, the higher the logistics expenses. This is a balancing act every supply chain practitioner or business owner must tread carefully.
In order to excel at e-commerce logistics, a few key things are needed.
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First, a good warehouse management system is key to keeping track of inventory and knowing when to ship orders.
Second, a well-functioning fulfillment center is necessary in order to get products out quickly and efficiently.
Lastly, having a good handle on the supply chain and shipping costs is important in order to keep expenses low.
By having these things in place, e-commerce businesses can run smoothly and efficiently while providing customers with the products they need.
And as you're planning for the expansion of your online business, here are 6 pain points that need to be addressed to take your e-commerce logistics to the next level.
1. Demand Planning - Always Elusive, Always Mysterious
Typically, retailers frame their inventory forecasts on historical data. You may not have that luxury as a startup.
According to a report that was published by CNBC, the total value of estimated loss for retail businesses due to stockouts amounted to a staggering $634.1 billion.
Product stock-outs are a major area of concern for businesses, as well as for customers who are interested in purchasing the product.
E-commerce retailers live in constant anxiety over the possibility of running out of stock because frequent occurrences of this problem can damage their brand reputation and cause customers to turn their attention to their rivals.
The fact that you are out of stock of your product often indicates that it is performing well in the market; however, you are still missing out on potential sales because of this.
A good inventory management system would ensure that you never run out of merchandise and always have at least the required amount of stock packed and ready to ship.
So, how do you calculate how much inventory you'll require? There are a number of techniques you can employ until you develop your own sales planning.
One thing to keep an eye on is your data on site traffic and the trends in social sharing. If your social media efforts begin to pay off, demand may increase, and you'll want to be prepared. Consider seasonal trends and holiday-related purchases also, as these are the times when people splurge their savings.
Stock up to support your promotional efforts, such as discount codes and free shipping thresholds. Scalable warehouse space allows you to plan for rising demand without committing to long-term leases.
It is essential to have a demand projection and to anticipate sales in advance of holiday seasons or other festive times of the year. If you follow these guidelines, running out of stock shouldn't even be an option for you.
2. Expensive Shipping Rate To Customers and The Irony of Free Shipping
The most important aspect of an e-commerce website's analytics is the cart conversion rate. This is the percentage of people who make a purchase rather than just browse the website. Usually, when a consumer reaches the final stage of the purchasing process, they cancel the transaction due to high shipping rates and fees.
It is critical to be upfront about shipping costs from the start of the buyer's journey so that they are not surprised when it comes time to check out. Customers nowadays expect free shipping because they see it on large shopping platforms like Amazon and Alibaba.
If that is not an option for your company, be upfront about the cost of shipping. Also, always try to offer free shipping on orders that exceed a certain price threshold.
The introduction of free shipping has been both a boon and a bane for businesses that deal in e-commerce. It wasn't too long ago that a delivery time of 10 days was considered to be standard. The number of days it took to deliver packages then dropped to about six in 2014. By 2016, this time frame had been reduced to three days.
At this point, it typically takes between one and two days, with some Amazon shipments arriving the next day.
Many people make purchases online because they believe they won't have to pay for shipping, but in reality, the customer is the only one who doesn't have to pay for it.
In order to cut costs while still providing the level of service that customers anticipate, the shipper needs to exercise maximum self-control.
Your customers now anticipate a delivery time of two to three days, but they do not wish to pay extra for this service. When it comes to marketing, using strategies such as minimum order sizes or promotional offers can help drive orders that qualify for free shipping. If your supply chain is managed with discipline, you may be able to reduce costs, turning free shipping into a competitive advantage rather than a financial burden.
Integrating your sales channels with a fulfillment partner who understands that you may be selling across multiple channels and require support and insight into best practices and customer-friendly shipping rates is one way to reduce delivery times, reduce shipping costs, and simplify inventory management.
According to a recent study that was published in Inc. magazine, seventy-three percent of online shoppers stated that unrestricted access to free shipping was "critical" to their purchase decision.
According to Fortune magazine, Amazon has more than 100 million subscribers to its Prime service around the world; therefore, consumers obviously place a high value on free and rapid shipping.
3. Visibility & Coordination Between Third-Party Logistics - Has It Been A Guessing Game, Yet?
Have you ever ordered a product online, and waited patiently for a few days, only to see that the product you received is not what you had ordered in the first place? Well, if that was frustrating for you, the same applies to your customers.
It becomes more difficult to see the big picture as your e-commerce logistics requirements grow. Companies experiencing rapid growth may add logistics capacity on the fly, strapping on pieces to handle and manages temporarily a surge in orders of new products.
These units, however, may not communicate and coordinate well, leaving your organization with an incomplete picture of its inventory and sales performance. It can be challenging to see your entire inventory situation and have that reflected in quantity counts on both your internal systems and your website.
Customers want to know if an item is available before proceeding to the checkout process. It's a delicate balancing act to keep enough inventory on hand while not having excess inventory hogging cash and shelf space.
The answers vary depending on your industry, and the best solution is always a moving target. Cooperate with logistics providers who can assist you in developing the systems and operational discipline needed to make your inventory work for you.
Customers are more likely to make a purchase when they know they have easy return options and more shipping customization options. However, due to a lack of real-time visibility of their inventory and other key performance indicators (KPI), 84% of e-commerce sellers are unable to provide these services to their customers.
Your company will benefit in a variety of ways from having more extensive analytical capabilities, and you will be able to manage this e-commerce pain point more effectively as a result.
On the other hand, for people who aren't very comfortable with technology, using analytical software can be extremely challenging. You are in luck because there are businesses that can make an intuitive dashboard for your website that displays all of the information you need to know to circumvent this problematic area of e-commerce.
Order management is something that every online business needs to invest in. You may be able to ship products more quickly than your competitors, but if they do not receive the correct order, your speed advantage will be null and void.
After an order has been placed, you can choose to send an email or send a text message to the customer in order to confirm the order.
Because of this, the number of orders that are placed incorrectly on your online storefront would drop by a sizeable amount.
You are required to take responsibility, demonstrate empathy, and initiate the return pick-up as soon as possible, even in the event that the wrong item was shipped.
4. Last Mile Delivery: Are we there yet?
Last-mile service is the final step of the delivery process as the product is handed down to your customer's doorstep. This service cost is significant as a percentage of total shipping costs, accounting for 53% overall.
Customers are less willing to pay a delivery fee as "free shipping" becomes more common, forcing retailers and logistics partners to bear the cost.
As a result, it has become the first area under which they look to implement new technologies and drive process improvements.
The final delivery step to the consumer may be via a shipping carrier such as FedEx. UPS, the U.S. Postal Service, or another carrier. For a B2B delivery, the last mile could occur via an LTL carrier.
What's concerning at this stage is that 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.
In addition to being a key to customer satisfaction, last-mile delivery is both the most expensive and time-consuming part of the shipping process.
To optimize the last-mile delivery service solution, consider the following:
- Use route planning to minimize the delivery frequency.
- Reduce service time and labor costs with auto-dispatching software.
- Proof of delivery must be secured from the delivery personnel.
- Use reporting to increase accountability of the third-party logistics providers.
- Monitor and improve the customer experience base on their feedbacks.
5. Reverse Logistics and Product Returns. Who Told Them They Can Come Back?
Returns management, also known as reverse logistics, may be the most difficult aspect for an e-commerce business. According to Transport Topics, the average return rate in a physical brick-and-mortar store is 8 to 9 percent, while e-commerce can range from 24 to 36%.
Returns, according to experts, should be treated as a reverse purchase, with the same care and oversight that goes into managing the original purchase.
Your return policies encourage buyers because they know they won't be stuck with products that don't meet their needs.
However, your company must be aware of the costs and logistics implications of those returns. Do you cover the cost of return shipping? Is there a restocking fee? Do you resell the items or sell them to a wholesaler?
One key to managing returns is to keep them separate from the new product supply chain. Set up separate locations, even if it's just a small section of your warehouse, and assign personnel to manage the reverse logistics supply chain. Your 3PL's commercial mini-warehouse locations provide low-cost, flexible space for handling returns separate from outbound products.
To alleviate this, many e-commerce sites have chosen to make returns more flexible and simple. This practice has quickly become nearly standard in the industry.
Integrating reverse logistics as an additional in-house operation is not an exception.
Furthermore, after receiving this type of goods, quality control and location management procedures must be established.
Determine the reason for the return and devise ways to operate in accordance with it: for example, if the customer requests that the size of the product he or she purchased be changed, the driver's trip can be used to deliver the correct one, and collect the package for return. However, returns occur as a result of order preparation errors.
As a result, it is also critical to collect as much information as possible in order to determine why returns occurred in the first place and to try to prevent them in the future.
6. Avoiding Negative Customer Experience in E-commerce Business
It is impossible to live in the modern world, which is driven by social media, and not be influenced by the thoughts and reviews of other people. We are continuously inundated with information about a wide variety of goods and services, whether it is in the form of a blog post, a TikTok video, an Instagram post, or a YouTube video.
More than two hours a day are spent on social media by users on average all around the world. People living in Asia and the Pacific are among the most engaged users of social media in the world, logging in an average of more than 10 hours each day.
Because of this, providing a good experience for customers and making effective use of social media are two of the most effective strategies for marketing a business without spending any money.
Shopping online is more about the satisfaction of your clients than it is about the success of your company or any later profit and loss statements. When most business owners are trying to balance sales and marketing, it seems that providing a great and personalized experience for customers takes a back place.
According to the findings of a recent survey, 68% of consumers believe that a friendly representative was one of the primary contributors to recent great service experiences they have had.
Customers want to believe that they can trust you, and they expect their problems to be addressed in a timely and polite manner. When things don't go the way they intended, individuals are also much more inclined to publish complaints online in an effort to vent their frustration.
Customers are likely to turn to social media in order to obtain your attention if they are unable to reach you easily or if the promises made on your website are not kept.
When something goes wrong with a customer's order or there is a delay in mailing it, most of the time they will not be dissatisfied as long as the issue is resolved as soon as possible.
When it takes the client a significant amount of time and effort to get these issues fixed, the consumer will begin to have unfavorable thoughts against the company. Once people have the impression that their role as a customer is not being honored, they will feel compelled to talk about their experiences and to caution others.
Make sure that your customer service is of the highest possible caliber in order to prevent the pitfalls associated with e-commerce pain points such as receiving unfavorable feedbacks about your company and discouraging future clients from utilizing your website.
Some services/actions to consider:
- 24/7 support
- Direct messaging with customer service representatives
- Having a phone number listed on your site
- Discount codes or other perks
- Responding to all reviews and messages on social media
Conclusion
The growth of the e-commerce sector has a direct impact on businesses that offer services including supply chain management, logistics, and warehousing. Online retailers are increasingly turning to third-party logistics providers in order to ensure that orders are accurately processed on time and without errors.
If you want to scale out your online business venture, the first thing you need to do is identify the pain points that customers have with your online store and figure out how to fix them. It is important to keep in mind that the pain points experienced by customers in e-commerce demand continuous attention.
You should perform routine monitoring of both your website and brand in order to guarantee that every aspect of the customer's experience is as uncomplicated and user-friendly as is humanly possible. If you execute things in this way, you'll have more satisfied customers and fewer cart abandonments.
