What are the biggest challenges to successful e-commerce fulfilment? Well, there are many and we can’t do justice to them in a single article so we’ve picked out three that are going to be presenting real issues to the e-commerce sector through the rest of this year and well into 2023. First on our list, the perennial challenge of finding the right location.
Location for your fulfilment centre
Simply put, the nearer your fulfilment centres are to the customers, the shorter the distance purchases have to travel, the cheaper and quicker your logistics and the happier your customers will be. Sounds simple doesn’t it? But for e-commerce that simple equation becomes quadratic – there are many more things to solve! First, should you opt for one big fulfilment centre on the former Amazon model or go for multiple fulfilment locations? Then should you choose pick and pack specialism (eg one fulfilment centre for electronics, another for garments etc) or work geographically? Third, how important is location if your marketplace is entirely ecommerce and therefore your customer base is global?
- Let’s unpick the problems to solve the challenge. First, the UK is experiencing several logistics challenges at present: post-Brexit, post-COVID, supply chain issues resulting from the Ukraine war etc. This means that centralising your e-commerce fulfilment in one mega-warehouse can be risky … staffing problems could derail your activity, and re-routing products to avoid problems can be easier if you have a selection of warehouses you can re-route to, making you a more nimble organisation.
- Second, the question of specialisation in fulfilment is an increasingly complex one. Pick and pack has become a focus of many time and motion studies to explore how much efficiency gain there is from having ‘expert’ pickers and limited product ranges in dedicated warehouse spaces; sometimes called ‘shopify’ picking. The answer seems to be that it makes limited difference – what’s more significant is the way that automation and computerised stock control can help keep warehouse stock up to date to ensure fulfilment is possible, whether centralised or multi-unit.
- Finally, most e-commerce organisations havea global customer base which means that unless they have in-house expertise, they need a fulfilment parter that can handle international shipping in a cost effective fashion. A third-party logistics provider (3PL) allows organisations to out-source their logistics provision – which can range from something as simple as handing over international shipping to a specialist, all the way up to outsourcing the entire management of both procurement and fulfilment.
Handling fulfilment returns
In 2019, before the COVID surge, 7.4% of parcels delivered in the UK were damaged on arrival, and a further 12% did not arrive at all. That’s millions of pounds of lost and damaged goods and an incalculable amount of repetitional harm. Add in the personnel cost of managing returns and refunds and companies are looking at a major cost centre with no upside. Let’s break down all the potential revenue drains that result from orders damaged in transit:
- Handling returns of damaged and faulty items
- Replacing or repairing the item, or re-routing it to be recycled or disposed of
- Offering and processing a refund and/or discount on next order
- Managing (in other words funding) processes such as additional customer services, tracking orders through internal audit to discover the problem, insurance claims, seeking redress fromlogistics providers
- Dealing with reputation damage problems such as complaints on social media or negative reviews on third party sites like TrustPilot
- Losing customers.
There will always been accidents, problems and unforeseen circumstances. However, there is much an organisation can do to avoid or limit problems, for example:
Preventive Packaging
Wrapping items individually within larger order boxes, using cushioned boxes, ensuring desiccant is used where moisture is potentially damaging and so on can go a long way to reducing the risk of damage in transit.
3PL expertise
However much you know about your products, a 3PL provider probably knows more about packaging. E-commerce fulfilment centres exist and they can often make a huge difference to the way goods are handled, packaged and delivered.
Insurance
It sounds obvious, but it can be overlooked. The majority of freight forwarding companies offer insurance against damage in transit. For some warehouse users, this can appear uneconomic because the order value is low and insurance definitely adds to the costs. However, a longer perspective can be useful: tracking damage over a six month period can help assess more clearly whether (and where) insurance might be a valid investment. One of the benefits here is that usually, if you take out the insurance, it’s the insurance company that takes on a lot of the administration, rather than your team.
Salvage and resale
There are ways to earn back some income from certain kinds of damaged goods – your organisation, or another retailer, can sell ‘used’ items at a cheaper price. This is easiest for companies that have bricks and mortar outlets, because they can simply stick those goods on a sale shelf. For purely e-commerce sites this can be more complicated, first because customers are less likely to return goods, second because they lack outlets to retail damaged goods through and third because although there are retailers who ware willing to buy damaged goods at a discount or to take them on a sale or return basis, there is still a significant loss of income and can be other costs such as packing and transporting damaged goods to the required location.
Inadequate customer service for your Ecommerce goods
A 5% increase in customer retention can produce up to a 20% increase in profits. It’s such an overlooked statistic but it’s one of the biggest challenges for e-commerce organisations. Paypal refunds are generally requested because ecommerce customers haven’t been able to get hold of the company they purchased from – it’s a stunning indictment of the way e-commerce often operates. One recent study estimates that globally, organisations could be losing as much as $62 billion as a direct result of inadequate customer service. Sometimes eCommerce companies feel this isn’t an issue for them, as they are so invisible to customers that brand loyalty is impossible to obtain. Oddly, that’s not true – while customers don’t have positive brand loyalty to e-retailers, they do have negative brand response to people who let them down. In other words, they might not remember if you’re good, but they always remember if you’re bad!
Solutions here are a natural outgrowth of the e-commerce marketplace. It isn’t essential to have personnel waiting by the phone, but chat-bots are usually well within the reach of an ecommerce organisation and at the very least a robust and well-written FAQ page on your website can give customers both confidence and answers. Solving problems before they arise is a key feature of good customer service, so learning to be predictive rather than reactive is vital to success in e-commerce.