Logistics or e-logistics are becoming more important in eCommerce as online shopping grows. As a result, knowing how to manage logistics in eCommerce will help your business immensely.
Even if you choose to work with an eCommerce logistics service, understanding how logistics works in eCommerce and the eCommerce logistics process will help you figure out what to look for in your supply chain.
What is eCommerce Logistics?
eCommerce logistics is any process an eCommerce brand uses to complete an order, from getting it out of the door until it reaches the customer. This generally includes any processes related to packing, shipping, delivering, and possibly returning an order.
Components of eCommerce Logistics
To better understand eCommerce retail logistics, you need to understand its components. Each part of the online store logistics and delivery services you use is essential. Though your size and order traffic may change how these components look in your company's supply chain.
Order fulfillment includes every part of the e-retail logistics process from storage until the item ships. This could involve storing and packing an order and giving the package to a carrier.
In this part of the process, you can determine what packaging and packing materials you use and pick the carrier shipping the order. Your choices will affect the customer's unboxing experience, so consider how you can improve that. Maybe you choose one carrier over another because it has a faster service. Or perhaps you can get custom packaging to make your delivery stand out.
Whatever decisions you make, use the order fulfillment process to connect with your customer and improve customer satisfaction.
Whether you have a warehouse or you keep your products in your home, you need inventory management to keep things under control. Effective inventory management helps you keep track of your product supply levels and ship orders faster.
If you sell shoes, clothes, or other items available in different colors or sizes, this component of online shopping logistics will be especially important for you.
While newer and smaller eCommerce businesses won't need extra storage, larger operations need to make sure they always know how much inventory they have. This is so they aren't keeping customers waiting for their orders. If you're choosing a warehouse, think about how much stock you'll need and where you want the warehouse to be.
For the location, try to find a place that cuts down the time it takes merchandise to go from a fulfillment center to a transportation hub. Saving as much time as possible in transit will help when trying to catch tight delivery windows.
Order Packing and Shipping
There's more to packing an order than just ensuring the correct items are in the right box. Whoever packs the box should know how to protect fragile items, which items need specific packaging materials, and if any extra items are included. If your package needs you to kit something, they will have to know which items go together.
You or your warehouse management system will usually decide how to ship the package, though you may give the customer the option to pick a particular method.
If you're getting enough orders, you could consider partnering with a shipping service like UPS, USPS, or FedEx to track items based on the fulfillment numbers. You can share this tracking number with your customer, so they know when their package will reach them and about any potential shipping issues.
Returns and Reverse Logistics
Online shoppers returning items expect refunds to be quick and simple. The returns process is an important part of your brand's post-purchase experience. Customers may warn others away from you if they have a negative experience, but a good one could make them feel more comfortable shopping with you again.
This makes it very important to set up your reverse logistics well. If return packages go missing or refunds get delayed, this can turn your customer off your brand. Losing the product also means that you cannot put it back up for sale if it's in good condition.
eCommerce Logistics Models
Depending on how you want to store and sell your products in your store, there are three different logistics models you may use. Understanding these models will help you figure out which is best for you.
Private Warehouse Model
This is the oldest model, in which you store your products in a warehouse. This can be an effective option for e-stores with a narrow, manageable product range or enough resources to rent space and hire workers.
With a private warehouse, you have full control over your stock and can respond quickly if there is a complaint or return request. If you want to personalize orders or packaging, this control will be a big help too. You also have the fewest go-betweens to deal with, so you have far more control over delays and complications. If you sell locally, you can also give buyers the option to pick up their orders themselves.
But having control over your stock also means you're responsible for it, which can take much time and energy. It's also a significant upfront investment, and your scalability can only expand up to the size of the warehouse. You should keep in mind that high rent can bankrupt your store if you fall through tough times.
Outsourcing your order fulfillment means having an eCommerce logistics partner manage your stock. In this case, the online logistics business will store your inventory in their warehouse and send items out from there when an order comes in.
By outsourcing your order fulfillment, you don't have to employ warehouse employees or rent warehouse space. Your delivery costs will also generally decrease if you get more orders.
However, you will have less control over the items you sell, and you still need to buy your inventory beforehand. This increases your risk of mistakes and damages from warehouse workers, and it takes longer to respond to return requests and complaints. Every delivery your provider makes will also likely have a fee, and you may need a minimum number of orders for providers to work with you.
Dropshipping is a newer model in eCommerce, in which you outsource all the physical aspects of your online store. You won't have any contact with your product, but this can be a flexible option that helps you expand your product range or start your company from scratch.
You have no upfront investment, like storage or fulfillment costs, and your business can scale easily. You also never have to worry about getting rid of unsold stock. With a different company handling your logistics, you will also get more time to focus on branding and marketing your store.
Unfortunately, you will have no control over the items you sell which can lead to slow returns and complaints. Moreover, since dropshipping is newer, it exists for a limited number of products, and the market for these products is highly competitive. If you don't have a strong, unique selling point, you may have a hard time finding customers.
Remember that you don't have to pick just one logistics model for your business. You could merge two or all three models to best fit your company's needs. For example, you could store items you regularly sell in a private warehouse and outsource fulfillment for heavy and unwieldy objects. If you offer software products, like access keys, you could digitally dropship them to free yourself up.
Is Logistics Part of eCommerce?
Though they have some crossover, the difference between logistics and eCommerce is that logistics is only one part of eCommerce. Logistics focuses on the specific processes that get the product from you or your warehouse to the customer. eCommerce covers this and the steps involved in getting the product in front of the customer. But, when implemented well, your logistics can help with that too.
Logistics at Different Scales
Depending on the size of your eCommerce operation, the logistics and fulfillment for your e-business need not be very complicated or sophisticated. For example, the logistics for eCommerce startups can cost you no more than your package's boxes and the shipping. Here is how it may look depending on the size of the business and the pros and cons associated with each.
If you run your business out of your home, your logistics is likely just packing each buyer's order and mailing it to them. This is an excellent option for newer and smaller businesses with infrequent orders because it has a very low overhead. You don't need to rent space or hire anyone, and many buyers will understand if they have to cover the cost of shipping.
That said, this will not scale too far. You can only store as much of your product as you're willing and able to keep in your home, and you alone are responsible for fulfilling the order. With more frequent orders or a wider variety of products, it will become difficult to manage logistics without investing in people and storage space.
If you have a storefront location, you will likely similarly fulfill eCommerce orders as you would for a home office — pack and ship the product to the buyer. But having a brick-and-mortar location will ease some challenges that a home office space has.
For one, you have more storage space. Your retail location may have a storage room where you can keep products, or your online store may include items you have on display. You also may have other staff who can package and ship products as a part of their responsibilities. All this makes it easier to manage higher-order traffic.
However, this still means that nobody is entirely focusing on eCommerce. Logistics processes will likely improve slowly, if at all because everyone has other responsibilities to attend to. You will also probably be the only one on duty to handle anything after regular working hours, which can be taxing since people like their problems and requests addressed quickly.
For larger operations, it's no longer feasible to just add eCommerce logistics to your or an employee's responsibilities. These businesses might hire an employee or a team dedicated to online business logistics or outsource an eCommerce logistics solutions team.
With people specifically focusing on logistics, all the logistics processes are faster, from packaging to packing to shipping the order. Your company will also have a quicker response time for returns and other customer-facing tasks.
You can also keep better track of warehouse inventory and shipments with a team. If your supply of a particular product is running low, you'll have more advance notice to replenish it. You may also have more freedom to experiment with ways to enhance the unboxing experience.
Hiring people just to manage your logistics for an online business will have a cost, though. This isn't a viable option if your eCommerce business doesn't make enough revenue to afford them.
How To Start Logistics for eCommerce
If you haven't established your online store logistics for your supply chain yet, you may be feeling lost on how to start. Here are some things you should consider when starting:
If you have a larger operation, you will need to consider how many sales you think you can make and how much space you will need to ensure you have enough supply.
The location of your warehouse could be important, too, especially if it's private. It should be easy to access to address customer orders and return requests quickly.
Your packaging can be a strong marketing tool, especially in a competitive market. If you want a low-cost way to find design ideas for your packaging, take a look on Instagram and YouTube for unboxing videos of your competitors' products. Take note of the aspects the consumers liked and disliked, and see how you can improve them.
But keep in mind the pricing and safety of your packaging. Bulky or heavy packaging can raise your shipment costs, so don't get too extravagant. You should also consider the sizes of packing materials your products will need and whether any need bubble mailers or padding to keep the product safe.
If you want to reduce the unit cost from your packaging supplier, you can calculate how much you'll be able to store and buy in bulk.
The shipping options you offer your customers can raise your conversion rates by reducing cart abandonment. Someone has to pay for the shipment, so don't pick an option that has too high a cost.
Free shipping is becoming a more popular option. If you want to offer it, remember that someone will still have to pay the price at some point. You could increase the cost of your product to cover it, take it out of your profit margin, or find a combination of the two approaches that gives you reasonable margins while keeping prices affordable.
Another option is to charge real-time carrier rates. If you choose to do this, you have to set up your webpage so that the customer can type in their postal code and see the pricing options available. They can then decide for themselves which shipping option they prefer.
The final and most common option companies use is flat-rate shipping. As long as you're not heavily undercharging or overcharging your customers, this is a great choice when your products fit a similar price and size range, like if you sell clothes.
Most couriers' websites will feature a shipping calculator, so you can compare their prices and figure out which one makes the most sense for you.
Tracking and Insurance
While selecting your courier service, you should check if insurance is included or if you need to add it. It's generally not too expensive to add tracking and insurance, and the value is easily worth the price. You also may need to show proof of delivery or a tracking number to be considered for Seller Protection insurance.
If you ship to other countries, you will need to include a customs document in the packaging. You can find this online or from your local post office. In it, you will outline what's in the package, its cost and if it's a gift or a personal purchase. Try to make it as clear as possible to avoid delays at customs. You should also let customers know that potential customs delays and surcharges are beyond your control.
This eCommerce logistics process breakdown from Forbes outlines some challenges to consider. When thinking about ways to improve your logistics, keep these in mind:
Companies that focus strongly on environmental and social issues get a higher brand reputation with younger generations. If you have sustainable logistics solutions for eCommerce, people may even be willing to pay a little more to accommodate your part in helping the environment.
If you're able to reuse and reclaim materials, this is also a way you can keep your prices lower by reducing the amount you need. This helps improve your agility in allocating resources, putting you in the best position possible to take advantage of opportunities to gain more market share.
One option to improve your eCommerce supply chain strategy is to set up advanced enterprise resource planning software. These programs can automatically detect inventory levels below a certain amount and place orders with vendors and suppliers to replenish stock immediately. This software standardizes the process and manages inventory in real-time, giving you extra insight into customers' purchasing trends.
Every aspect related to the role of logistics in eCommerce can improve with some new technology. Adopting newer technologies and developments can help you gain an edge against competitors who are slower to adjust.
For example, companies now offer print-per-order services, which only fully produce an item when a customer orders it. These services save you a lot of money, eliminating the need for a warehouse and the upfront cost of making your product. But, since they produce each item when an order comes in, you can also entice the customer with more options for customization, like different colors for a shirt.
Keep an eye out for opportunities to grow and expand your logistics, and consider how these developments can help you stand out and add value to your customers.
Since the eCommerce market is so competitive, doing as much as possible with as low a cost as possible is even more important than you think. Take a look at developing technology and consider its role in logistics in eCommerce.
For example, artificial intelligence can have several uses. You could set up the software to predict an online purchase based on customers' browsing and product interest data so that you can streamline your warehousing. Or you could use deep learning to understand a customer's browsing habits and determine which products are best to recommend.
Drones and other autonomous machines could help you eliminate inefficiencies in order fulfillment, speeding up the process and increasing productivity overall. As you further streamline your fulfillment process, you will be able to increase your output with a smaller human workforce.
Which Logistics Solution is Best for eCommerce?
At Rakuten Super Logistics, we are third-party logistics providers that can help you make sure your eCommerce logistics are working well while giving you time to expand your business. Our national fulfillment network goes beyond the box to provide you with the scalability, flexibility, and cost savings to boost your business.
Request a quote from Rakuten Super Logistics to see how we can help you grow.