If you want to run a profitable ecommerce business, you have to master logistics. Stumbling in this area will have a negative impact on customer satisfaction and your bottom line.
These are the five ecommerce logistics mistakes we see most often. Avoid them to minimize errors and maximize profits.
1. No Plan for Reverse Logistics
Returns. No ecommerce retailer wants them. But customers expect to have options if the order they receive doesn’t meet expectations, whether that’s due to damage, defects, or dissatisfaction.
If you’re selling products online you’re going to get returns. And if you don’t have a solid plan in place to manage returns, your bottom line will suffer.
- Costs – If you don’t have a plan for what to do with returned items, you’ll quickly find costs will skyrocket. You’re going to have returned goods piling up. That means more storage space, which means more storage fees. There’s also the question about what to do with the returns. If you don’t have a system to fix and resell them, you’ll have extra disposal fees.
- Customer satisfaction – If you try to limit returns by implementing strict return policies, customers will shop elsewhere. They want options, especially when it comes to purchasing something sight-unseen. Your competitors with more lenient return policies will happily welcome these customers to shop with them. You lose out on sales and profit.
The good news is that you can put strategies in place to help your reverse logistics system run smoothly and avoid these common pitfalls.
- Study the data – When you can identify common return triggers, you can eliminate their root causes. For example, if you sell apparel and get consistently high returns for a specific item, maybe there’s something inaccurate with the product images, description, or size chart. Ensure these are all spot on to avoid customer disappointment.
- Repair, refurbish, resell – If the products you sell are fixable after a return, put a program in place to do that. Then add a refurbished items option on your site. This reduces your disposal costs and allows you to still make a profit on that return. Follow the lead of giants like Amazon and Apple, both of which offer programs like this.
- Automate and optimize – Replace manual processes with tools and workflows that make returns faster for the customer and processing easier for you. Customer service is just one area you can automate to avoid common ecommerce mistakes. You can add tools like chatbots to augment live customer service and streamline common tasks, like return authorizations and printable shipping labels. Again, just look to Amazon as an excellent example of return automation in action.
2. Poor Inventory Management
Having the right amount of inventory on hand at any given moment is an art as much as a science. You’re constantly trying to have just enough of every product to avoid being out of stock, while not ending up with a lot of unsold inventory.
Too much unsold stock results in higher overhead and storage fees. Too little stock means you’re losing out on sales and profit.
Good inventory management doesn’t happen by chance, and spreadsheets will only take you so far. To be successful in ecommerce, you need to automate as many of your inventory-related processes as possible.
- Inventory tracking systems – You need to know what you have on your warehouse shelves at any given moment. Barcodes and SKUs eliminate manual inventory management. Inventory tracking software, like Zoho Inventory, incorporates this technology and helps you manage the process from start to finish.
- Order management – Your inventory system should provide real-time information, based on sales and return data. One way is by using order fulfillment and management software. This directly ties your inventory and sales systems together to get orders out the door accurately and fast.
- Data analytics – A big part of accurate inventory management is predicting future demand. Traditionally this was based on historical information. But there is a lot more data available that will help you identify customer behavior. Predictive analytics uses both historical and real-time data to help identify trends. Leverage the power of data visualization tools to bring it all together in easily understandable dashboards and reports. Integrate your real-time inventory data to make more educated buying decisions.
3. Subpar Shipping Experience
There are two parts to the shipping equation for ecommerce retailers. One is customer-facing and the other happens behind the scenes.
Customers want options. They want to get their orders in a reasonable time at the lowest possible price. With the proliferation of free shipping across the ecommerce landscape, they sometimes won’t even buy something if they have to pay shipping fees to get it.
There’s one exception—when a customer wants something asap. Then they’re willing to bite the bullet and pay for shipping.
This means you have to accommodate as many different shipping expectations as possible. Oh, and you also must provide tracking information for every order.
Customers have other expectations, too. They want their items to arrive in pristine condition. They do not want a package that was beat up or damaged along the way.
As an ecommerce retailer, you have a lot to do. You have to to ensure you can meet all these customer expectations while simultaneously not letting shipping costs eat away at your bottom line.
Some of it is straightforward. Ensure every customer stays updated on order processing by providing automatic updates and tracking information as soon as it is available. You can use order management software to make this easier.
Choose packaging that meets the needs of the products you sell. Mailing out tea towels requires far different packaging than an expensive piece of fragile electronics. You don’t need to go overboard, but don’t scrimp here, either. Poorly packaged goods are a virtual guarantee that your reverse logistics will soon be put into play.
You also must offer multiple shipping options on your ecommerce site. Free shipping plus multiple tiers of paid shipping depending on speed of receipt.
To make this as cost-effective as possible for your business, you need to nurture relationships with your shipping carrier(s). This is how you can start to negotiate the best rates with them.
While you won’t be able to negotiate much when you’re just starting out, as your ecommerce business scales, so does your negotiating power.
4. Not Integrating Logistics With Your Other Systems
You can’t manage a successful ecommerce business if you’re tracking everything with pencil and paper. You need to automate as much as possible, including logistics.
But that isn’t enough. You have to have a 360 degree view of operations. You can’t get that if your data is in silos. Connected data from all your different software and tools gives you a unified view of what is happening in real-time.
- Automate data collection – This helps reduce errors and eliminates out-of-date information from becoming part of your analysis.
- Integrate your software/tools – You want your logistics software, inventory management tools, and CRM system to seamlessly integrate so all the data can be compiled into a single, easy-to-understand dashboard
All this means that everything has to play nice together. Seamless integrations are essential. Before you land on an app or software solution, be sure it will integrate with the rest of your ecommerce tech stack.
When all your data lives together in one place, you are better able to make sound business decisions. You can more easily forecast demand, manage inventory, and optimize logistics.
5. Not Outsourcing When You Scale
When your ecommerce business was first starting out, fulfilling orders and managing returns was probably not hard to manage. You may have even done it from your kitchen table.
But there comes a point in every successful ecommerce journey when growth outpaces your ability to successfully manage fulfillment. When this time comes, you have two choices—expand your fulfillment operations or outsource it all.
It takes a lot of money to build or expand fulfillment operations. This is a bricks-and-mortar endeavor that commits you to physical assets. It also takes time, and while building is going on you still have a fulfillment problem.
If you plan to become a direct competitor of Amazon, then maybe this is the way to go. But most ecommerce businesses don’t have growth plans quite that grand.
For nearly all other growing ecommerce businesses, outsourcing fulfillment services to a third-party makes more sense. When you do, all the logistics of storing inventory, picking, packing, shipping, and managing returns is handled somewhere else by a team of professionals.
This frees you up from the obligation of maintaining physical fulfillment centers or staff. It also lets you focus on growing your ecommerce business, doing necessary marketing and advertising, boosting site traffic, and other things to help grow your bottom line.
