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How we manage the challenges of ecommerce logistics

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This is particularly true for digital logistics: a scalable distribution capability is needed to offer a consistently high quality shipping and delivery experience to customers at competitive prices.

The first step to a successful digital logistics infrastructure is mastering internal efficiency. Picking and packing procedures need to be flawless; operational departments need to keep a close eye on workflows, capitalising on technological advancements to reduce labour – or concentrate it in the areas that deliver the most value.

A genuine “moment” at Lenstore was when we automated parcel weighing (our management system now has a database of the weight of products and packaging so no manual weighing is needed at the end of the day, our distribution centre team simply have to drop orders into Royal Mail sacks, seal them and place them in the lorry). This created additional capacity, enhancing the business’s ability to respond to the increased order volumes that stem from organic growth.

More challenges arise as many digital businesses have a dependency on third parties. Manufacturers control their shipping times, and send out their products via third party couriers; Royal Mail delivers packed orders to our customer.

The best piece of advice I can give to fellow e-commerce entrepreneurs is rather simple: take responsibility for the full supply chain when speaking to customers. It’s easy to take the credit for shipping orders on time, and blame delivery delays on postal mishaps; however, reading customer reviews taught me that consumers don’t always see it this way. It’s your business they put their trust in, and it’s you they will hold accountable.

While Royal Mail is the provider of choice for many online businesses, it’s good practice to have a plan B on hand: weather conditions and strikes may disrupt postal services, but your orders still need to get out on time.

Nationwide couriers such as DHL, DPD and City Link are the most popular alternatives to Royal Mail. Some retailers (including Argos) use Shutl to offer same day delivery, however, it is worth noting that having direct relationships with couriers gives you more control over pricing than working through an intermediary such as Shutl. It is thus worth incorporating this into your procurement criteria when selecting a courier service.

I’m not surprised to find that 50 per cent of respondents to the 2013 Econsultancy Multichannel Retail survey abandoned a purchase due to unsatisfactory delivery options: any business used to relying exclusively on standard delivery now faces the competition of click and collect, same day and next day delivery propositions.

The lowest cost “standard” delivery option may well prove the most popular (the popularity of cheaper but slower delivery among Amazon’s customers is one example), but giving customers a range of options is important. If you can’t give customers what they need, they will go off and buy from someone who can.

Interestingly enough, 24 per cent of survey respondents indicated collection as their go-to delivery option. I reckon that the uptake is even higher for large businesses with an extensive nationwide presence. The ability to collect from a selected location, and receive deliveries more quickly while saving on shipping fees, is the quintessence of the convenience that customers demand from e-commerce retailers.

John Lewis, registering a 60 per cent increase of click and collect sales in 2013, is an interesting benchmark. With such competition, the need for a compelling offer of flexible delivery options is more pressing than ever, and this urgency will increase as more and more businesses enter the clicks and bricks arena.

The hardest challenge to tackle, however, is one on which they have no command: the individual, entirely personal perception that customers have of shipping fees.

A 2011 UPS survey shows that shipping and handling fees are the number one dealbreaker for online purchases: if the amount exceeds their idea of “cheap”, customers won’t hesitate to abandon their basket. Shopping around for the most compelling offers is their prerogative; safeguarding profitability while remaining competitive is the digital entrepreneur’s job.

The balance is hard to strike. It is tough to recover 100 per cent of our shipping costs in the form of shipping fees to customers, this is true for many ecommerce retailers. My advice is not to be tempted to waive shipping fees (most customers accept that this is a real cost) like many of your price led competitors but do value the quality of the logistics and delivery service that you offer customers.

The trade off between profit and customer acquisition is acute in this business problem but if you are managing to recover 60+ per cent of your shipping costs and maintaining acceptable drop off rates when it comes to shipping options selection in your conversion funnel, I think you are doing quite well.

The consensus of ecommerce experts is that shipping costs are best presented upfront. Informing customers very early in the checkout process minimises checkout abandon rates: the later you reveal shipping fees, the more customers will feel burdened with hidden, unexpected costs.

As very often happens in the e-commerce world, the lazy question that most of us ask is “how do Amazon do it?”: Amazon shipping fees appear right next to the product price on product pages.

This may work best for Amazon given its expansive product range and fragmented base of merchants but remember to test, test and test the optimal location in the conversion funnel on your website for your customers. It’s a tough problem to get right but that’s real business.

I know that logistics is not an often talked about topic but hopefully this view from the real digital economy shows that excellent customer service is much more than just a helpful call centre. It’s every business decision, and every step of the ecommerce logistics process.

Mitesh Patel is a co-founder of Lenstore

Related: How to beat Amazon in the ecommerce leagues

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