Guest Post: 5 Common Mistakes Made When Choosing an E-Commerce Logistics Provider
Logistics are often the biggest competitive advantage or biggest pain point for e-commerce companies. With e-commerce giants like Amazon offering 2-day and sometimes 1-day delivery, customers have come to expect a high level of service when it comes to shipping and delivery.
This puts a lot of pressure on e-commerce companies, who now have to find ways to provide fast and efficient delivery while keeping costs low. A common way e-commerce companies improve their shipping operations is by outsourcing to a logistics provider. The e-commerce logistics market is estimated at over $70 billion annually and there are numerous providers to choose from. Although this is a cost-effective way to scale your e-commerce operations, many companies fall into common traps when choosing a logistics provider. These traps often result in e-commerce companies paying too much, receiving poor service, or both.
1) Poor communication channels
The single largest mistake e-commerce companies make when choosing a logistics provider is overlooking communication issues. Communication is the backbone of e-commerce and when things go wrong, it is the first place that e-commerce companies feel the pain. An e-commerce company should look for a logistics provider that offers clear and concise communication channels. This could be in the form of notifying customers about the tracking of their orders, communications with your shipping team, etc. Without this, e-commerce companies will constantly be in the dark about their shipments and will not be able to take proactive steps to fix any issues that arise.
Before choosing your logistics provider, go over their communication channels and how they would handle common issues in your business. Some questions you should keep in mind include:
How quickly does the provider respond when a customer has a complaint?
What is their preferred method of communication (email, text, call, etc.)?
What is their average shipping time?
Do they have a customer service team available 24/7?
How do they handle peak order times such as holidays and sales?
These kinds of questions will give you more insight into how this provider would help your e-commerce business rather than hinder it. The better the provider communicates with your team throughout this process, the better their communication channels will probably be. It's best to do a trial period and test how this provider would handle any issues before committing to any long-term contracts.
2) Lack of analytics and visibility
One way to actually improve communication while saving your team time is to have access to your analytics and complete visibility in your logistics operations. You can dramatically reduce the amount of times you submit support tickets or call your logistics provider by simply having access to your data. This includes being able to track your packages in transit, knowing which stage of the fulfillment process each order is in, and data on how to improve your operations. The entire purpose of choosing a logistics provider is to leverage their data and fulfillment network.
Analytics and visibility is key to scaling your e-commerce operations because it allows you to make data-driven decisions and use marketing automation tools. There should be no guesswork in your logistics. Everything should be trackable because this will allow you to iterate and make improvements in your process. Using data to improve your logistics can be tedious, but it has real-world impact that affects how fast your customers get their orders and their overall satisfaction. Make sure your logistics provider has some way where you can access your data and that they provide you with valuable insights.
3) Using generic providers
Using generic providers is often a mistake that e-commerce companies make because it takes a lot of effort to find and assess many e-commerce logistics providers. Generic providers can be one of the most costly mistakes you can make, especially if you need specialized logistics. An e-commerce company selling electronics can get away with working with most logistics providers, but a company working in an industry like baby products or pharmaceuticals needs to thoroughly vet their provider.
Companies that sell sensitive products or higher-ticket products in general often need tailored logistics that help them comply with regulations and delight their customers. Some common needs that specialized companies have for their logistics include:
Temperature-controlled storage: Companies with products like food, baby products and pharmaceuticals may need to store their products in a temperature-controlled environment. This is to ensure that the quality of the product is maintained and that it does not go bad.
Compliance procedures and certifications: Your company may have to adhere to a variety of compliance protocols along with your logistics provider. Make sure to ask your logistics provider if they are compliant with any state, national or international regulations before working with them.
Supply-chain advanced security: Some e-commerce companies have federal contracts and they can only work with companies that pass a variety of security and cybersecurity protocols. It's vital you ask a prospective logistics partner if they have these because it puts your business and customers at risk. Some providers may even create custom apps to suit your specific needs.
The vast majority of generic logistics providers are not able to give personalized service or even work with e-commerce companies in many of these cases. It's vital to thoroughly vet and interview as many providers as possible to find the best fit. It's a lot of upfront work, but it can avoid many long-term difficulties in the future.
4) Lack of international fulfillment
If you have an e-commerce business of any scale, you're going to have customers all over the world. This means that you'll need to find a logistics provider that can handle international shipping. Many e-commerce companies make the mistake of overlooking how well a logistics partner can fulfill international orders. It's very important to read the fine print and see if there are any countries or areas that your provider doesn't ship to. With companies like Amazon and Walmart in the space, customer expectations are at all-time highs. If you allow an international customer to shop from your site, they expect that order to be fulfilled in a timely manner.
If you sell to many countries, your best bet will be choosing a provider that has some scale and already ships to many countries. This will typically be larger brands, but there are some great mid-tier providers that can handle international e-commerce shipping. In addition to the ability to ship to many countries, you should also vet your provider for their ability to ship quickly. Depending on where your customers are, their expected delivery date can vary greatly. If customers are getting shipments months after their order, it's probably best to avoid selling to those locations.
International fulfillment often requires additional documentation like a commercial invoice, so it's important that you ask your prospective logistics provider if they can handle this. The best way to figure out if a provider can handle your international needs is to look at your invoice history. Check which international countries you are shipping to most often, what their needs are, etc. This will give you a good idea of what your e-commerce business needs from a logistics standpoint. Once you have that, ask the different providers if they can fulfill your requests and choose the provider with the most expertise in the markets you are selling to.
5) Poor reverse logistics
There's nothing more damaging to your e-commerce brand than frustrated customers. It's much better to lose a few dollars on a transaction than get negative word of mouth from your customers. A lot of frustration that customers have with e-commerce companies can be chalked up to poor return logistics. Make sure your e-commerce logistics provider can handle returns quickly and efficiently. This means having a dedicated team to process returns and a system in place to track them. Without this, it's very easy to start accumulating a lot of negative reviews and negative word of mouth.
When you work with an e-commerce logistics provider, you lose a lot of control over your shipping and returns. All you can do is set up a process and then hope that your provider follows through. This is why it's vital to test out the return process prior to integrating the logistics provider across your entire company. You can do this by trying out different providers and testing the return process for yourself. This will help you gain insight into things like:
How fast do items get returned?
How many steps does it take for a customer to request a return from start to finish?
What is the provider's process for tracking returns?
What are the shipping costs associated with returns?
Does the provider support international returns?
These factors in the return process will help you get an accurate idea of how well the e-commerce logistics provider can actually meet your needs. Do this process for a few providers and see who provides the best service for you and your customers. The mistakes mentioned in this post are some of the most common ways e-commerce operations are derailed when choosing a new provider. To learn more about how you can streamline and improve your logistics operations, check out this blog post here.
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