E-Commerce Logistics Strategies: Everything You Need to Know

E-commerce logistics strategies

Author: Georgi Mamajanyan

In the past year, while the world has been adapting to the ongoing pandemic, a lot of people have taken to starting an e-commerce store either as a full time business or as a side venture. If you are one of those people and you have turned your passion into a business idea, and are now looking to refine your logistics management, you have come to the right place. Streamlined logistics is essential for any e-commerce business.

The only problem is the increasing freight, labour, and product costs. In addition to that, the constant changes in rules and regulations regarding shipping and taxation on businesses takes a further toll on small companies that are already short on resources. 

This is not even the biggest problem for e-commerce business owners. The biggest challenge is to meet customer expectations. Data proves that most carts are abandoned due to high shipping costs and delayed deliveries. Take a look at Amazon – their business comes from their Prime feature which offers 1-2 days for delivery. Realistically speaking, most e-commerce companies do not  have the network, warehouses and resources like the e-commerce giant.

However, there are other ways in which you can find the middle ground between raising your profit margins and providing customer satisfaction. It is important that you find your sweet spot.

Conversions are likely to suffer if logistics aren’t properly streamlined, your e-commerce store do not offer decent online payment options, or your Shopify store is slow to load, and your SMS marketing strategy is on point, if you are generating the best Instagram Hashtags are appropriate for the business and many other factors. But today we will take a look at the major challenges faced when streamlining logistics for e-commerce businesses.  

You can employ different strategies for your e-commerce store. Here is a detailed summary of the advantages and disadvantages of the most prevalent strategies so that you can make informed decisions. According to reports, an average e-commerce company spends between 20-40% of their revenue on just logistics, covering storage costs, order packing costs, picking up and shipping costs and returns. Customers today have high expectations for e-commerce stores and do not want to pay extra for shipping or returns. 

Let’s see what are your viable options as an e-commerce business owner or manager to increase conversions. Here are a few strategies you should keep in mind while going forward with your logistics plan: 

  1. Fulfillment
  2. Dropshipping
  3. Customized Logistics System
  4. Outsourcing to a reputed carrier service

Let’s take a look at each of them in detail:

Fulfillment

Fulfillment or e-fulfillment is a form of outsourcing your logistics services. There are e-fulfillment companies that take care of storage, inventory management, order processing, picking up and dropping and includes returns, if applicable. E-fulfillment companies have their own logistics softwares to fulfill orders and experts in quality control. Many large e-commerce businesses today use this option  to focus on the growth of their business and marketing efforts instead of logistics and inventory management to further expand their business.

Advantages

    1. You own the inventory and hence gain higher profit margins per sale. 
    2. You have a better overview of your inventory and you have control over your sales process because your e-fulfillment company is just doing the logistics part for you as per your instructions and you are paying for it. Here are some ways to increase your online sales, in case you are struggling with it. 
    3. You save warehousing charges.
    4. It is a lucrative earning model, depending on the size of your business. 

Disadvantages

      1. Fulfillment partners come at a cost. A cost which your business might not be able to incur successfully at the beginning, even if you break even with this expense in the long term. 
      2. You own the inventory and therefore the financial risk that comes with it.
      3. You have no control over the logistics process which is being followed. A disgruntled customer due to a lack on the part of the logistics team could make you lose a loyal customer. 

Dropshipping

Dropshipping has been gaining popularity amongst the e-commerce industry. It is simply a concept where you don’t stock products yourself but your website lists products available with seller/s who will take care of all the logistics for you. It is similar to the concept of reselling and up-selling of products. Many companies have made a fortune  through dropshipping. 

Advantages

  1. You don’t have to stock products and you save on warehousing charges. 
  2. You save money on buying and save yourself from the financial burden of storage and safekeeping
  3. You are not responsible for any inventory related process
  4. Your business involve low risks
  5. Your business is highly scalable as a dropshipper because you can add as many product ranges and product lines as you want. 

Disadvantages

  1. Profit margins are smaller
  2. You will have to minutely oversee your ROI as a dropshipper because you are only reselling and in turn making only a percentage of the profit rather than the complete profit which includes the original seller’s profit. 
  3. The competition is HUGE. 
  4. You have no control over the delivery and the customer experience. 

Customized Logistics System

Many e-commerce companies prefer to manage their logistics in-house  to maintain control of their business, delivery and customer experience. Let’s not forget the higher profit margins that come with this strategy. Logistics management for e-commerce businesses is complicated and it would be best to consult an expert if you are just starting out in this industry. If you are looking for an expert , here’s a guide to help you.

Advantages

  1. You have complete control over every aspect of your business
  2. Your profit margins are much higher
  3. You can control the customer experience which will make a huge difference to your e-commerce business

Disadvantages

  1. You have to take care of the logistics along with every other aspect and it might go haywire if you aren’t careful
  2. Softwares might cost you a lot more than you can justify
  3. You own the inventory and you bear the cost of the warehouse and the financial risks that come with it. 

Outsourcing to a reputed carrier service

FedEx, DHL, DTDC, USPS are some of the many options if you are looking to outsource to a reputed carrier service. The workaround for this is similar to having an in-house logistics team. Instead of having to manage the logistics systems on your own, you have a team of experts that can elevate your customers’ experience with a better deal and efficient delivery. But The downside to that is that a huge part of your profit margins will be contributed to the carrier. For safety, you might want to be onboard with various carrier services because you don’t want to put all your eggs in one basket. And we all know that user acquisition strategy and implementation is no joke. It is advisable to have contracts with a couple of carriers. Here are some options that might help you choose your carrier better: 

    1. Speed of delivery
    2. Option to track the consignment
    3. Option to select the delivery timings
    4. Option to have drop and pick up service at service points
    5. The network of the carrier
    6. The rates charged by the courier and how much is it of your profit margin per sale. 

E-commerce is a game changer for a lot of people and it is extremely important to choose the best option in order to get the most out of your efforts. Needless to say that it totally depends on your product line and the category you operate in but I hope the above options give you some clarity about how you can go about the logistics. 

About the author

Georgi Mamajanyan

Georgi is a result driven SEO specialist with passion for automation and neuromarketing. With the help of Off-site SEO custom scripts we make sure we get the best for our clients.

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