Feb 19, 2019 | Blog, Warehouse Management Software
The ecommerce fulfillment experts at ShipHero on the top trends for 2019
The e-commerce industry has experienced unprecedented growth over the past decade and it shows no signs of slowing down. Research shows that e-commerce could account for $4.88 trillion in global retail revenue in 2021. But what factors are driving this change?
Today we’re going to be taking a look at the 2019 e-commerce trends that account for this massive growth and how you can utilize them for the benefit of your own business.
Let’s dig in…
1. Customer service is becoming more automated.
An e-commerce business can live or die by its customer service strategy, and advancing technology continues to provide new ways to engage with and meet the needs of your customers. Chatbots, for example, are a new trend that enhance the customer experience with minimal cost when compared to traditional customer service teams.
If you’re unfamiliar, chatbots are live chat services that run via an algorithm. Think of it as a “if the customer says X, the chatbot says Y”. Statistics show that the majority of consumers find the greatest benefit of chatbots to be 24-service. While these automated chat services are still in their infancy, they still give e-commerce businesses the ability to scale certain aspects of their customer service department.
If you’re interested in integrating a chatbot into your store, there are hundreds of different services and chatbot use strategies, based on your e-commerce platform, to fit your needs.
2. Direct-to-Consumer models are on the rise.
Consumers want to receive their orders quickly, correctly, and at the best price possible. A tactic many e-commerce companies are starting to use is direct-to-consumer sales. This model eliminates middlemen such as wholesalers and retailers while building a closer relationship with the customer.
Studies show that 52% of consumers will go directly to a businesses website in order to purchase their products. Why? Much of the reason comes down to the relationship that businesses are able to create selling direct. All channels — from marketing to shipping — are consistent under the umbrella of the brand itself. Businesses in all industries are taking notice of the direct-to-consumer rise. Tesla cut out car dealers in order to sell direct to their customers, Nike is predicted to grow their direct sales to $16 billion in 2020 and, remarkably, 61% of wine sales in 2017 came from direct-to-consumer sales.
To succeed in direct-to-consumer sales you need a top-notch ecommerce fulfillment partner. ShipHero can help.
3. Voice-enabled technology will become the new battleground for e-commerce.
According to new research, over 35 million Americans used a voice-activated device at least once a month in 2017 – this number represents a nearly 130% increase over 2016. Smart home assistants and voice recognition systems are on the rise for various aspects of home automation, and 2019 will see a rise in the use of these systems for e-commerce. E-commerce giant Amazon is betting heavily on it. According to an Amazon press release, customers use of Alexa for shopping more than tripled this year compared to last year. The reasoning behind its growth is simple — consumers are looking to technology as a way of gaining back their time. Rather than having to click around in search of an item you’re out of, you can simply request it from Alexa in seconds. The algorithm will scour your past purchases to make a relevant product suggestion and after you confirm, the order is placed.
4. Analytics will continue to advance.
Integrated technology and analytics platforms such as Google Analytics provide e-commerce businesses with valuable data about the performance of their customer base, sales, and products. However, current analytics is almost exclusively used to show what has happened in the past and not what could happen in the future. The relatively new field of Predictive Analytics provides e-commerce businesses with a deeper understanding of customer habits and preferences by analyzing past data and using it to help increase conversion rates. The best current representation of predictive analytics in action would be the rise in product recommendation sections on e-commerce sites. These products are not random. More often than not, they are unique to the visitor based on viewing habits, past purchases, and more. As technology advances further, machine learning will allow for even greater predictability and e-commerce personalization.
5. Amazon will continue to dominate the e-commerce market.
Over the years, Amazon has become an e-commerce powerhouse. In 2018 they dominated the industry with record profits and often hover around the most valuable company in the world. In 2019, it is likely that Amazon will continue to dominate the market, which leaves smaller companies with just one option – to find new ways to remain competitive.
The goal is not to compete directly with Amazon but find ways to integrate it into your e-commerce model by using their marketplace for your own products or fill in the gaps that Amazon has. One of the best ways you can do this is by building a remarkable brand on your own platform. Amazon, while widely used, doesn’t have the ability to offer a fully cohesive brand because they sell products from other vendors. Think of it as the difference between your local grocery store and Trader Joe’s — which has a greater brand appeal? By selling your products direct, as mentioned above, you have the ability to create a more consistent brand experience, which allows for a stronger relationship between your business and the customer.
6. The middleman will slowly disappear.
Each year, the supply chain for e-commerce businesses grow shorter. This no better visualized than in the meteoric rise of B2B marketplace, Alibaba. Today, all you need is an idea and some cash (or credit) to turn it into a reality. Don’t have access to investment capital? You can still bring your idea to market with sites like Kickstarter and Indiegogo. The middlemen and third-party distribution channels, are starting to fade away as the need for their services becomes obsolete.
7. Mobile payment platforms will become the norm.
Though there are still situations where cash is king, e-commerce platforms will always rely on digital payment platforms. However, the type of digital payment will begin to shift. As mobile traffic accounts for nearly half of global web traffic, it is estimated that global mobile payment revenue will rise from $450 billion in 2015 to over $1 trillion in 2019.
As an e-commerce business, review your analytics to see where your traffic and conversions are coming from. Are you seeing an upward trend in mobile visits? Consider implementing Apple Pay and Android Pay to allow for seamless payment. Remember this: Consumers are more likely to convert when there are less steps to completing a purchase.
8. Subscription services will continue to expand.
Over the past few years, subscription boxes like Dollar Shave Club have become extremely popular. While this realm of e-commerce began with the intention of delivering highly used consumer goods (e.g. meal delivery boxes) they have expanded to include almost every industry imaginable — from coffee to clothing. From 2014 to 2017, the subscription box market has grown by an incredible 890%. This growth is due to two factors. First, businesses are looking for every way possible to increase customer lifetime value by turning products into services. Second, customers are looking to receive highly-used products on a regular basis without having to put extra effort or thought into the purchase.
9. Social media will continue to drive sales.
In recent years, social media has become the number one channel for e-commerce businesses to grow and develop their brand. This, in turn, has led to an increase in sales. According to data from BigCommerce, online stores that have a social presence have 32% more sales on average than stores that don’t. Why is this? It comes down to the ability to build a relatable brand that stays top of mind. Also consider that organic social costs are relatively minor in the world of digital marketing and yet they play the biggest factor in building a relationship with customers.
10. Shoppable posts will become more common.
Social media platforms like Instagram already provide excellent opportunities for brands to convert followers to customers, and we’ll continue to see this as a major trend for 2019. Research shows that 80% of Instagram users already follow at least one business and 60% use Instagram to find new products. Furthermore, 75% of those who use the platform to find new products end up engaging further with the brands they discover. To put this trend to work for your business, upload your product catalog to Facebook. This will allow you to “tag” posts with products that will lead followers (Facebook and Instagram) back to the page on your site where they can make a purchase.
11. Augmented reality will change the way customers shop.
One of the downsides of shopping online versus in a brick-and-mortar store is that you can’t physically try the product before you buy. One way online retailers have started to bypass this hurdle is by incorporating mixed reality technologies into their e-commerce platform. For example, IKEA’s Place app makes it possible for customers to catch an augmented reality-powered glimpse into what the products would look like in their own homes. Though AR and VR technology isn’t a perfect fit for every e-commerce industry, it could help some retailers stand out from their competitors. To best analyze whether your business could benefit from augmented reality, ask yourself the following questions…
- Is there a need to see the product in a certain environment?
- Is there a benefit to the customer seeing or comparing different variations of the product in person?
- Are there details of the product that need to be thoroughly examined prior to purchase?
If you answered “yes” to any of these questions, consider integrating augmented reality into the future of your e-commerce store. With e-commerce giants like Shopify investing in it for their customers, it’s becoming easier than ever to integrate into your own site.
12. International e-commerce will continue to expand eastward.
According to recent research, nearly 4 billion individuals (just over half the world’s population) can now be classified as “middle class”. Of that number, almost 9 in 10 of the next billion middle-class consumers will be Asian. With more money comes more purchasing power. Though expanding into international markets has its fair share of challenges, it does present a gigantic opportunity for some companies.
If you’re considering expanding into international markets, understand how you can properly serve this newly evolving Asian middle class. To put this opportunity into perspective, consider that research shows the middle class markets in China will account for $14.1 trillion and India will account for $12.3 trillion in 2030.
Final Thoughts
In the end, a successful e-commerce business is one that provides a valuable product or service and creates an overall satisfying customer experience (from interacting with the brand to using the product). Don’t feel compelled to utilize all of these trends in the coming year. Rather, review these trends and start to think about the current state of your own business to understand what areas of your supply chain or marketing strategy provide the most potential for growth.
Feb 12, 2019 | Blog, Warehouse Management Software
From ShipHero – The Top Pick Among Warehouse Management Software Companies
In the vastly competitive world of e-commerce, it can be a challenge to stand apart from the crowd. With limitless options available at their fingertips, consumers are always looking for the lowest price and the greatest value. As a business owner, you must walk the fine line between offering competitive prices and still keeping your head above water in terms of margins.
When it comes to grabbing the attention of consumers and converting them into paying customers, it is sometimes the little things that matter most. While most business owners understand the importance of branding, marketing, and advertising when it comes to improving sales, many underestimate the true value of offering free shipping.
You may be surprised to learn that high shipping costs are attributed to an astounding 55% of abandoned carts. So, the answer is clear — offer free shipping, and the sales will come, right? Well, it’s not that simple.
Keep reading to learn more about the pros and cons of offering free shipping and how to effectively make it work for your business without going bankrupt.
What’s So Great About Free Shipping?
One of the greatest benefits of shopping online is that it is incredibly easy to compare prices. Amazon, Jet, and even Google want to show you the highest rated products, at the lowest prices, with the least expensive (or free) shipping options. With so much competition out there, e-commerce stores need to find ways to convert visitors into paying customers and to keep those customers coming back.
That’s where free shipping comes in.
Free shipping is a huge benefit for customers, and it is often the deciding factor between one site and another. Though shipping is free for the customer, however, they are not free for the merchant, and those costs can add up quickly. That’s why you see so many websites offering free shipping for a minimum spending amount – the sale of those add-on items helps the company recoup the costs associated with shipping the order.
To give you an idea of just how powerful offering free shipping can be, consider recent research that showed 58% of shoppers will add additional items to their cart in order to qualify for free shipping at a set dollar amount. Not only that but shoppers will also spend 9.4 percent more when they need to meet a free-shipping minimum. So, while you may still be eating the cost of shipping yourself, by using free shipping strategically, you’re able to generate more revenue from it.
The Psychology Behind Free Shipping
The question any e-commerce business owner wants to know is, “Does free shipping really work?” The benefits for the customer are obvious, but how do you actually make it work for your business without dipping into your margins too much? The first step in answering this question is learning about the psychology behind free shipping.
First and foremost, it must be mentioned that free shipping is rapidly becoming the norm. Consumers are less likely to think of it as an option and more likely to think of it as a staple. Everyone from giant online retailers like Zappos and Wayfair to department stores and small businesses have begun to offer free shipping. For many of those companies, free shipping is only available for customers who meet a spending minimum but, for others, all orders ship free.
What’s the psychology behind the free shipping strategy? It all comes down to the consumers perceived value of shipping. Prior to purchasing, a customer determines the overall value of their purchase by performing quick subconscious math, weighing the costs and benefits associated with buying the product. If shipping ends up being too expensive for an item that we could just as easily get at a nearby store, the math doesn’t add up and the cart is abandoned.
Another reason why free shipping is so powerful has less to do with the shipping part and more to do with free part. According to Dan Ariely, Professor of Psychology and Behavioral Economics at Duke University, people change their behavioral patterns when something free comes along. In his book, “Predictably Irrational”, Ariely gives us a real-world example of the power of free in action. When Amazon introduced free shipping on some of its European sites, the number of orders increased dramatically. However, not in France. That is because instead of being reduced to zero, the shipping price in France was reduced to only 1 franc (about 10¢ USD). Yet this minor cost was enough to prevent a jump in sales.
How Free Shipping Is Typically Used
Though free shipping is everywhere, companies use this tactic in various ways. Here are some of the different free shipping techniques you’ll typically see in action:
- Free shipping on all orders – no qualifications or restrictions.
- Free shipping for members or subscribers only.
- Free shipping on orders that meet a minimum threshold.
- Free shipping on qualifying items.
- Free shipping to a brick-and-mortar store for pickup.
- Free shipping for buying during a certain window.
Every e-commerce store is different, so the free shipping policy you select will be unique to your company. You’ll need to find the right strategy that keeps your customers happy, that drives sales, and that helps you recoup the costs for offering the program.
What Are the Benefits for Your Company?
Though the idea behind free shipping is sound, it isn’t fool-proof. There will certainly be times when the customer simply isn’t interested in adding more items to their cart to qualify for the discount. There are also cases where the additional revenue from those add-ons doesn’t actually cover the cost of shipping. Additionally, and most importantly, free shipping may fail to work if the consumer isn’t in the right phase of the buying cycle.
The buying cycle begins when the consumer becomes aware of a need that must be filled. Next, the consumer considers ways (products) to meet that need and starts to assess the pros and cons of different options. Eventually, the consumer settles on a particular product and makes the purchase. Free shipping comes into play during the final stage of this process – the purchase. If the consumer isn’t ready to make a purchase, the lure of free shipping may not be enough to close the sale.
On the other hand, when free shipping DOES work, it provides several benefits. Here is a quick summary of the potential benefits free shipping has to offer for e-commerce business:
- Increase in sales – We’ve already covered the fact that offering free shipping increases sales, but how exactly does it do it? For one thing, offering free shipping leads to a reduction in cart abandonment – it helps push potential customers over the edge to close the sale. It can also set your company apart from the competition and increase perceived value.
- Increase in ARPU – Average revenue per user (ARPU) is heavily affected by free shipping policies, especially when you set a minimum spending threshold. In a way, free shipping is an upsell technique you can use to increase the size of an average customer’s order.
- Increase in loyalty – Offering free shipping makes your customers happy, and a happy customer is more likely to come back. When you offer free shipping as part of a loyalty or membership program, it helps to increase repeat sales. Just take a look at what Amazon Prime has done to increase loyalty in the Amazon marketplace.
Free shipping is a tool e-commerce businesses can use to increase conversion rates and keep customers coming back, but it is not a perfect system. Keep reading to understand how to make it work for your shop.
How to Make Free Shipping Work for You
If implemented properly, free shipping could make a big difference for your business. You’ll need to design a free shipping policy that suits your business and ensures that you recoup the costs of shipping on most orders.
Here are some simple steps to follow when designing a free shipping policy for your business:
- Calculate how much you need to sell to recoup the cost of shipping. Spend some time running the numbers to see whether you can make up the money you lose by covering the cost of shipping yourself. This will help you determine whether you can offer free shipping for all orders or if you need to add some stipulations such as a minimum purchase.
- Decide on a minimum purchase threshold. If you run the numbers and see that you could be losing too much money by offering free shipping on all purchases, consider adding a minimum spending threshold. By requiring customers to spend a hypothetical $50 or $100 to qualify for free shipping, you can guarantee that your profit margin on those orders will be higher and consistent.
- Use free shipping as an incentive during short-term campaigns. If it simply isn’t feasible for your site to offer free shipping all the time, you can still use it as a promotional tool for short-term marketing campaigns. Seasonal sales and new product releases are excellent opportunities to drive sales and adding free shipping as a bonus can boost sales even further.
- Consider offering free shipping on certain items. If your business sells a wide variety of products, the profit margins are going to be different for different goods. You can choose to offer free shipping only on items where the profit margins line up or on items you want to sell more of.
- Offer free shipping as a benefit for membership, subscriptions, and loyalty programs. Membership and subscription programs are a great way to get repeat business, but you need to offer your subscribers benefits – free shipping is a good one.
- Limit free shipping offers to returned items. If you’re not in a position to offer free shipping on all of your orders, offering it for returns is still a step in the right direction. It gives your customers peace of mind knowing that if they are unhappy with the product, it won’t cost them anything to return it.
- Use free shipping as a loss leader. The definition of a loss leader is a product sold at a loss to attract customers. However, it can also be applied to free shipping. For example, if you owned a subscription based e-commerce business, you may find that offering free shipping on the first order may increase conversions. Whereas you can make up the cost of shipping due to the higher average lifetime value of the customers (since they’re recurring orders).
Any of these free shipping strategies might work for your business, but you’ll have to take the time to choose the right one. To give you an idea what these strategies look like in action, here are some statistics from companies that have successfully implementing a free shipping strategy:
- According to research published by CNBC, offering free shipping on returns (a policy offered by Zappos) boosted sales by 357%.
- Red Door saw a 90% increase in sales after establishing a minimum purchase threshold – free shipping on orders over 75%.
- Research from Marketing Land revealed that 9 out of 10 customers were more likely to do their shopping online when offered free shipping. Of those, about 30% made weekly purchases.
- According to David Bell of Wharton University of Pennsylvania, customers find a free shipping offer with an average savings of $6.99 to be more appealing than a product discount worth $10.
As you can see, there are many ways to work free shipping into your business plan. It may take some work to find the right tactic, but it is definitely worth implementing.
Simple Tips for Implementing a Free Shipping Strategy
Now that you have a better understanding of the psychology behind free shipping and the benefits of offering it to your customers, you may be wondering where to start. Here are some simple tips to help you implement a free shipping strategy for your online business:
- Calculate your free shipping threshold. This number should be close enough to what your average customer typically spends but enough to cover your costs. To determine this number, look at data from your last 6 to 12 months of sales to find the sweet spot between setting your spending threshold too high and setting it too low.
- See what your competitors are offering. Though the most important thing is to make sure you’re not losing money, you also want to see what your competitors are doing because you want to give potential customers a reason to choose you over them.
- Do a test run before committing to a free shipping strategy. You don’t have to commit to any free shipping tactic right away – you can run a promotion for two to four weeks to test out your free shipping policy and then evaluate the data to see what works best given your unique e-commerce scenario.
- Don’t forget about returns. Returns are a necessary evil in the world of e-commerce, and it is your challenge to find the balance between keeping your customers happy and keeping your business alive. Think about the options such as free returns, customer-financed returns, or a flat rate for customer returns.
- Once you settle on a free shipping policy communicate it clearly. Customers want to know exactly what they’re getting when they make a purchase. Think of it less like a policy and more like a marketing tactic. Make sure everyone that lands on your site is well aware that you offer free shipping.
- Work the cost into your product prices. If you really want to offer free shipping but you can’t afford to eat the costs yourself, you might be able to work the cost (or at least some of it) into your product pricing. Just make sure you don’t go so high that you lose out to your competition.
Though including free shipping on your e-commerce store has the potential to increase sales and customer loyalty, it might not be right for your business at this time. If your profit margins are already low, for example, adding free shipping to the mix may cut your profits even more or negate them entirely.
The Bottom Line
Free shipping is an excellent marketing tool that has led to incredible benefits for many e-commerce businesses. Before you tack on a free shipping policy for your own business, however, you need to weigh the pros and cons – you also need to think practically about whether it will work and how to implement a free shipping policy.
When considering a free shipping policy, there are three questions you need to answer:
- Are your margins high enough to cover the costs?
- Will you still be making a profit once all costs are covered?
- How do you plan to use free shipping as a marketing tool?
Answering these questions will help set you on the right path toward determining whether free shipping could be a beneficial tool for your company. If you decide that it is, take the time to choose the best policy and follow the tips you’ve received here to start implementing your policy.
Need great software to run your warehouse? ShipHero is a leader among warehouse management software companies. See what we can do for you here.
Jan 17, 2019 | Best Practices, Blog, Warehouse Management Software
The world of ecommerce is a fickle one. At times, it seems completely random which sites survive, and which do not. In reality, however, it is the sites that plan ahead and take steps to keep up with the growth of their business that are the most likely to succeed.
The primary goal of any business is to grow, though there are certainly smaller goals you want to meet along the way. In the very beginning, for example, your first goal might be to break even – to start seeing positive cash flow after covering startup costs. From there, you want to see steady growth on a month-to-month basis and over the course of the year.
Ecommerce sales totaled $1.3 trillion in 2014 and are expected to grow by nearly 250% to a total of $4.5 trillion by 2021. If you hope to capture a slice of that pie for yourself, you need to set a strong foundation, build momentum, and prepare for future challenges. In this article, we’ll go into depth about the best ways to scale your ecommerce business both efficiently and effectively.
Start Strong with a Firm Foundation
Though most ecommerce businesses start out small, you should always be thinking and planning ahead. With each business decision you make, ask yourself, “Is this strategy scalable?” This is particularly important when it comes to things like choosing your inventory and with creating and implementing a digital marketing strategy.
Here are some other tips to follow in the early days of your ecommerce business to ensure that you have a solid foundation on which to build:
- Set goals for 1, 3, 5, and 10 years. As your shop grows, you’ll find yourself making decisions that will impact the future of your business – having specific goals set at different intervals can act as a guide to help you make the decision that is best for your business.
- Determine how you will measure your company’s progress. Annual revenue is a good measure of sales, but it doesn’t reflect profit or progress. Take the time to identify your Key Performance Indicators (KPIs) so you can track your business’s progress month-over-month and evaluate how different growth strategies pan out.
- Write a solid business plan. You’ll need a business plan in order to guide the success of the business within the first year. This plan is not only key for starting any new business but also projecting what hurdles you’ll have to overcome in the future as well as keeping you accountable.
- Run the numbers before you commit. Before you start buying or manufacturing inventory, you need to know that your sales will be enough to cover your costs. Create a cash flow spreadsheet and run the numbers to see how much revenue you can expect, what your monthly fixed costs will be, how much you’ll be spending on inventory, etc.
- Identify your target audience and build your brand. Gather information about your demographic and develop your brand to appeal to that audience. Having a strong brand identity will help guide you in future endeavors such as implementing a digital marketing strategy and choosing where to expand in the future.
- Build a strong website. Your website is going to be the mode that drives your sales, but it is also a tool for driving traffic. In addition to creating your sales pages and landing pages for any outbound marketing, you’ll also need content to help drive search engine traffic (inbound marketing).
First Steps to Build and Retain Momentum
Building your initial website can end up being easier than you might think. Particularly with the multitude of tools at your fingertips, such as Shopify. What is not so easy is turning that website into a successful, profitable, and scalable business. Though annual worldwide ecommerce sales are in the trillions, many new shops close their doors within the first few years. In order to scale your business for long-term growth, you’ll need to start out by taking certain steps to build and retain momentum. Here are 3 things you need to do:
1. Create a Strong Digital Marketing Campaign
Your website is the infrastructure for your online business, but you’ll never make any sales if no one sees your page. A strong digital marketing campaign is the key to building your online presence, driving traffic to your site, and converting visitors into paying customers. Here are some simple online marketing tips to get you started:
- Do some keyword research. Before you start marketing, you need to do some research to identify the strongest keywords to reach your target audience. Ubersuggest is a great free tool that can help guide your research.
- Create an automated email campaign. Not only is email one of the easiest ways to communicate with customers, it also provides ecommerce businesses with the highest return on investment. According to a study by Campaign Monitor, for every dollar spent on email marketing $44 is made in return.
- Personalize it. The internet is continually becoming a dynamic place where it reacts to our actions. For example, the ads you see on your social feeds from websites you just visited. Make your ecommerce store a personal experience for customers and they’ll be more likely to convert. This can be as simple as adding a “click to chat” bubble on the homepage or as advanced as sending them a reminder email when they leave something in their shopping cart.
- Implement a loyalty program. Depending on what industry you’re in, acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Consider implementing a loyalty program to keep your customers engaged and give them a reason to shop with you again.
- Optimize your site for mobile devices. You may not be surprised to learn that mobile internet traffic has outpaced desktop traffic. However, what is surprising is the fact that the search results for the same queries on mobile versus desktop searches are often different. This comes down to whether your website is mobile optimized or not. Get the upper hand for your ecommerce business in the search results by making sure your website is optimized for all mobile devices (phones, tablets, etc).
- Create content and build authority. One of the best ways to build trust with your customers is to establish your business as an authority in the industry. You can build trust by offering high-quality, informative, and relevant content on your site. Don’t limit yourself to print content either, use photos and videos as well. The process of using content to market your business is called Content Marketing.
- Connect with your target audience. The power in digital marketing comes from being able to connect with your target audience in a more personal way. No other form of marketing does this better than social media. Social channels like Facebook, Instagram, and Twitter give you the ability to connect, engage, and grow your business in a more personalized matter. Whether you’re simply building a following on social channels or using their ad platforms to connect with your demographic, you should invest time and energy into your social media strategy.
When it comes to ecommerce, digital marketing is not a one-and-done strategy – you’ll need to keep at it if you want your business to grow. There is no harm in starting out small but, as your business grows, you’ll want to start expanding your marketing strategy with it.
2. Switch to Third-Party Logistics (3PL)
In the early stages of your business, you might be able to handle order fulfillment yourself or with a limited staff. As you start scaling your business, however, you’ll need to decide whether you want to invest in your own warehouse space or if you want to outsource the order fulfillment process to a 3PL provider.
A 3PL is a third-party logistics provider who takes over one, some, or all of the aspects of your order fulfillment processes. Hiring a 3PL means that you will no longer be responsible for storing your inventory, picking and packing your orders, arranging shipment with different carriers, and handling returns. This will free you up to focus on the other things that will help you scale your business.
If you do choose to run your own warehouse, it is critical to choose the right warehouse management software.
3. Develop Excellent Customer Service
When it comes to running a successful ecommerce business, the quality of your product matters greatly. What matters even more, however, is customer satisfaction. When it comes to the scalability of an ecommerce business, word of mouth marketing is gold. This all comes down to the ecommerce buying cycle. The buying cycle looks like this:
Since ecommerce products are not tangible, like they are in brick-and-mortar retail stores, the cycle is often time more drawn out. Consumers spend more time making a buying decision because they cannot see the product in person and because there are some many choices available to them. The way you can tackle both of these obstacles is by offering customers supreme customer service.
Take for example Zappos, the world’s biggest online shoe store. In 1999, before ecommerce really became mainstream, they were able to convince people to buy shoes online. How? Through incredible customer service. In fact, Zappos encourages their customer support team to make a connection with all customers. To put this in perspective, their longest customer support call clocked in at a whopping 10 hours and 51 minutes.
Every business is unique, so the steps you need to take to build your initial momentum may be different than the steps another company needs to take. Keep reading to learn some simple ways to start scaling your business in order to retain that momentum.
6 Ways to Scale Your Ecommerce Business
As we mentioned in the beginning, building and implementing a strong digital marketing campaign is the best way to establish an online presence and to start obtaining customers. As your business grows, you’ll need to think about logistics and how best to maximize efficiency while minimizing costs.
Here are a 5 ways to do it:
- Evolve your marketing strategy. Over time, your business is going to grow and with that growth comes change. Upon achieving certain milestones, you should take a closer look at your current customer base and check to make sure that your marketing strategy is finely tuned to targeted that audience.
- Optimize your order fulfillment strategy. Whether you’re filling orders in-house or you’ve hired a 3PL, make sure that your order fulfillment strategy is designed for cost-effectiveness as well as efficiency. If you do have a 3PL partner, set aside time each year to talk to them about things such as your growth and how they can work to help.
- Consider expanding into a new market. If you are already working with a 3PL, expanding to new markets could be a fairly straightforward process.
- Upgrade your technology. As your business grows, that could mean potentially hundreds, if not thousands, of new SKUs. Your initial ecommerce platform might not cut it at a certain point. Invest in technology that helps automate your business — whether that means upgrading from SquareSpace to Magento or simply finding a new project management app.
- Keep an eye on your competitors. One of the best ways to scale your business is to fill a niche that your competitors have left open. Study your competition to understand what they’re doing right and, more importantly, what they’re doing wrong. Look for unmet needs by reading their customer reviews to get a sense of how you can fill in the gaps they’re missing.
Don’t feel like you have to implement all of these ideas at once. In fact, some of the ideas on this list might not work for your business at all. It is your job to know your business and to understand its potential – only you can decide how best to achieve your long-term goals and what tools and strategies to use along the way.
There are no guarantees in the world of ecommerce – a business that is thriving one day could tank the next. Though you cannot possibly predict every little thing that could affect your business, it pays to be thorough in the planning process if you hope to scale your operations down the road. Think carefully about building a strong foundation to create momentum in the early days of your business and always keep working to maintain that forward progress. Good luck!
ShipHero is one of the top providers of warehouse management software for ecommerce companies. See how we can help you here.
Jan 13, 2019 | Blog, Fulfillment
How to Create a Global Ecommerce Order Fulfillment Strategy That Works for You
With each passing year, more brick-and-mortar retailers are taking their businesses online. In 2017, ecommerce accounted for roughly $2.3 trillion in sales and is projected to exceed $4.5 trillion by 2021. Every year, ecommerce accounts for nearly 10% of retail sales, but that number is expected to grow by as much as 15% each year.
Since the internet has become readily available and due to the COVID-19 pandemic, more customers than ever are shopping online rather than in stores. Ecommerce retailers have the opportunity to cash in on this rising trend by providing customers with what they really want – easy access to the products they want, fast shipments, and excellent customer service. To keep your customers coming back time and time again, you need to ensure that your orders are fulfilled quickly, accurately, and efficiently.
Optimizing your ecommerce fulfillment strategy is the key to minimizing your costs while maximizing profits and meeting customer expectations. Keep reading to learn more about the challenges facing ecommerce businesses and to receive some tips and tricks for creating a global ecommerce order fulfillment strategy that works for your business.
What Challenges Do Ecommerce Businesses Face?
In the early years of ecommerce, the competition was low, products were flying off shelves, and the potential for profitability was high. Over time, technology has become more affordable, ecommerce platforms have made it easy to start an online business, and the world of ecommerce has become crowded with online retailers of all sizes. Opening and running a successful ecommerce business is no easy task, especially with monsters like Amazon controlling a significant portion of the market.
Competition is one of the biggest challenges any ecommerce business has to face. Still, there are other factors to consider, particularly when it comes to planning and executing your order fulfillment strategy. Here are some of the biggest challenges facing ecommerce businesses today:
- Finding the best products to sell: With so much competition out there, the fate of your business rests in your decision of what products to market. You need to choose products in high demand without too much competition to sell with a decent profit margin.
- Reaching your target audience: Selling great products doesn’t do you any good unless you reach those who want to buy them. Creating a marketing strategy is all about identifying and reaching your target audience to drive sales.
- Generating traffic: You won’t sell anything if no one visits your site, so generating traffic is extremely important. Conversion rates fluctuate depending on your industry, so you’ll be putting in a lot of effort to generate leads.
- Engaging with email subscribers: Having an email list of subscribers doesn’t do you any good unless you actively engage with them. Only a fraction will convert into paying customers, so give yourself the best chance at converting those emails into sales by offering as much value as possible (e.g., promotions, coupons, and even exclusive content).
- Converting shoppers into customers: If you want to close a sale, driving traffic and making the most of your leads is the best way to do so. You want to give shoppers a reason to choose you over the dozens of other retailers like you that are out there. What is your unique value proposition?
- Retaining customers: Once you’ve turned a shopper into a customer, you want to keep that customer coming back. Why? Based on the research and industry you’re in, acquiring a new customer is anywhere from 5 to 25 times more expensive than retaining an existing one. Customer service and perceived value are two critical factors for higher customer retention rates.
- Achieving long-term growth: Higher sales volume doesn’t always equate with profitability, so your long-term growth strategy needs to be multifaceted. Look for ways to cut inventory costs, optimize order fulfillment, speed shipping, and reduce overhead and returns.
- Choosing the right technology: Technology is an integral part of any online business, and choosing the right tech is vital. Look for technology that will help you integrate and automate your business’s different aspects to reduce costs, improve accuracy, provide real-time insights, and boost efficiency.
Understanding and accounting for the challenges listed above is a big step toward ensuring your online business’s success. If you want your business to succeed in the long term, you need to make sure that you have a solid foundation to build from, and that means creating and executing a successful order fulfillment strategy.
What is Involved in Order Fulfillment?
Order fulfillment is the backbone of any ecommerce business. Rather than offering a particular service, you’re selling goods and products directly to the customer (aka D2C). The strategy you use to fulfill customer orders affects everything from profit margin to customer satisfaction, so it’s something you need to think about carefully.
Before getting into the details about different order fulfillment strategies, let’s quickly review the various stages involved in the order fulfillment process:
- Receiving: The first stage in the order fulfillment process is receiving your inventory. If you’re filling orders in-house, you’ll be receiving or manufacturing the products yourself.
- Storage: Proper storage of inventory is vital because you need to find, access, and ship your products as quickly and efficiently as possible.
- Processing: Order processing involves receiving an order and taking the necessary steps to fill it.
- Picking: The first step in order processing picking involves gathering individual items for an order from their storage locations.
- Packing: Once items in an order are picked, they are grouped by order and packaged.
- Shipping: When the order is packaged and ready to go, it is shipped to the customer.
- Returns: Processing returns is another step in the order fulfillment process – returns may be shipped directly to you or your storage facility for processing and corrections.
As you can see, order fulfillment is a multistage process, and there is room for error every step of the way. Choosing and utilizing a solid order fulfillment strategy determines both the immediate and long-term success of your business. Keep reading to learn more about the different fulfillment options available for ecommerce businesses.
The Most Popular Ecommerce Order Fulfillment Strategies
Every company is unique, so the order fulfillment strategy that works best for one company might not be ideal for yours. Before getting into the details about choosing the correct order fulfillment strategy for your business, let’s take a look at some of the options.
Here are some of the most popular ecommerce order fulfillment strategies:
- Direct Fulfillment
- Drop-Shipping
- Third-Party Logistics (3PL)
Now, let’s take a closer look at each of these strategies.
1. Direct Fulfillment
Also known as in-house fulfillment, direct fulfillment is a strategy in which the business fills orders itself. This strategy is generally the starting point for smaller and at-home companies, though it also works for massive corporations with the funds to run their warehouse operations. Direct fulfillment looks different depending on the size of a business. You could be fulfilling orders from your garage or using a fulfillment center to ship out hundreds of orders a day. Here are some of the pros and cons:
Pros for Direct Fulfillment:
- You retain total control and have complete visibility over order fulfillment operations.
- You can add personal touches to your orders.
- It could save money, depending on the size of your business.
- You may not need to negotiate as many business contracts.
Cons for Direct Fulfillment:
- It takes a lot of time and energy that could be directed elsewhere.
- You could be limited in what shipping options you offer customers.
- You’ll need a lot of storage and warehousing space, depending on size.
- You might not be able to get discounts on shipping.
2. Dropshipping
This is an order fulfillment strategy in which you pay for fulfillment as your orders generally come from the vendor or manufacturer itself. When a customer places an order, it goes directly to the dropshipper who picks, packs, and ships the product on your behalf. You are then charged for that order. This strategy works well with ecommerce businesses that prefer not to own any inventory themselves, but it does require a certain degree of marketing expertise. Here are some of the pros and cons:
Pros for Drop-Shipping:
- Inventory management is non-existent since you don’t have to purchase, store, and manage inventory yourself.
- You can offer a broader range of products without worrying about space or overhead.
- Overhead costs are low due to low operational expenses.
- You only pay for products that are ordered after they have shipped to the customer.
Cons for Drop-Shipping:
- You have no control over the packaging and shipping of your products.
- You still handle customer service, so you’ll need to communicate with the drop-shipper.
- Profit margins will be narrower since you’re working with a middle-man.
- It’s challenging to establish a brand because products are owned and packaged elsewhere.
- Dropshipping is incredibly competitive, with multiple stores selling the same product.
3. Third-Party Logistics
Also known as 3PLs, third-party logistics involves handing over the details of order fulfillment to a third-party provider. Your company will still be responsible for purchasing or producing your inventory, but you’ll be relying on another company to store, pick, pack, and ship it. When your customer places an order, the order goes to the 3PL who picks the item from its storage location in their warehouse, then packages it and ships it to the customer. Here are some of the pros and cons:
Pros for Third-Party Logistics:
- You’ll have more time to devote to other aspects of the business.
- You can still access important data about your inventory and sales.
- You may benefit from reduced packaging costs and shipping discounts.
- You’ll be able to offer your customers faster shipping options.
Cons for Third-Party Logistics:
- You have reduced control over how your products are packaged and shipped.
- You’ll need to stay in close communication with your 3PL provider to ensure everything is running smoothly.
- You may not be the 3PL’s only client and could have to share warehouse space.
- Hidden fees could cut into profits depending on which order fulfillment service you pick
Choosing the Right Fulfillment Strategy for Your Business
Now that you have a better understanding of the different options for order fulfillment, you’re ready to start thinking about the best option for your business. Though the three most popular strategies described in the previous section work for most companies, you may find that a combination of different methods works best for you. You also need to think about making the transition from one strategy to another as smoothly as possible, so you don’t have to shut down operations altogether.
How To Handle Inventory Management
The first factor to consider when choosing an order fulfillment strategy is inventory. If your business designs and manufactures its products, a direct order fulfillment strategy or 3PL partnership may work best. This is because dropshipping is best for companies that don’t produce or own inventory. Your business’s size and the number of products you sell are the determining factor between choosing a direct order fulfillment or 3PL strategy. For smaller companies with a limited inventory, you may be able to handle order fulfillment in-house until your sales volume and inventory grow to the point that you have the ability (and margins) to hand over operations to a third-party provider.
Can Your Ecommerce Fulfillment Strategy Scale?
Another factor to consider when choosing an order fulfillment strategy is scalability. You need to think about the current size and state of your business and your hopes for the future. The supply chain for ecommerce stores is complex, and hiring the right experts can be time-consuming. Companies like Amazon and Nike can handle fulfillment in-house because they’ve spent billions optimizing their supply chain and sales channels. Unless you have millions in capital, it’s going to be challenging building a fulfillment network that offers Amazon Prime levels of transit times and shipping speeds.
If you expect your business to grow quickly or if you hope to expand into additional markets, a 3PL provider may be the way to go. Many 3PL providers have multiple warehouses and distribution centers which can give you access to new markets without significantly increasing your costs.
Technology & Integrations
Technology is another vital thing to think about when it comes to order fulfillment. If you plan to handle order fulfillment in-house, you’ll need some kind of order management system (OMS) software to organize customer data and process orders. This kind of software can be expensive, especially for large-scale operations where different stages of the fulfillment process are automated. If you’re worried about the upfront cost to purchase this kind of technology, choosing a dropshipping or 3PL order fulfillment strategy may be best.
It’s also essential to have integrations between your technology. For example, if you use a warehouse management system (WMS), it must integrate with your ecommerce platform to sync order and inventory data, so orders are processed efficiently. Otherwise, customers could add products to their shopping carts and place orders for out-of-stock products.
Providing Value To Customers
Finally, you need to think about providing your customers with the best value when choosing your order fulfillment strategy. Customers want to find what they are looking for easily, pay a reasonable price, and receive their orders as quickly and accurately as possible. For small operations where you have time to prepare and process orders yourself, direct fulfillment is a cost-effective option. For more prominent companies with extensive inventories, however, drop-shipping or 3PL fulfillment may be the best way to speed order processing, reduce errors, and offer faster as well as more affordable shipping options.
There may not be a clear right or wrong answer when it comes to choosing an order fulfillment strategy. You’ll need to think carefully about your business in its current state and consider the direction you want to go in the future. Factoring in these details, along with customer satisfaction and profitability, will help you make the right choice for your business.
Tips for Implementing An Ecommerce Fulfillment Strategy
Once you’ve chosen your order fulfillment strategy, all that is left is to implement it. Unfortunately, that is easier said than done. You’ll need to make the transition as quickly and efficiently as possible so there are zero hiccups in your daily operations. Here are some tips for making the transition:
- Ensure everyone is on board with the new strategy: You’ll need to make sure that everyone understands their role within the new system so the transition can happen smoothly.
- Prepare your inventory for an onboarding experience: You’ll need to prepare your existing inventory and future inventory according to the requirements for your new strategy to make the receiving process as fast and efficient as possible.
- Make arrangements for the transfer early: The key to a smooth transition is making sure that your inventory arrives in the desired location on time. Planning ensures that you’ll be able to choose a cost-effective transportation method without putting your deadline at risk.
- Work with your logistics company to make the transition as quickly as possible: If you’re transitioning into 3PL for the first time or switching to a new company, go over the process in detail with your new provider so that their staff and yours can work together to make the process as quick and painless as can be.
- Keep your customers updated and involved: Making the transition to a new order fulfillment strategy can take time, so you may have some interruption in service that could impact your customers. Keeping your customers updated about the transition is vital if you want to avoid lost sales and dissatisfied customers. Share the details with your customers and highlight the benefits they’ll see when it’s complete.
ShipHero – The Best Ecommerce Fulfillment Provider
There are plenty of ecommerce fulfillment services available today. But ShipHero stands out. We work with over 4,000 ecommerce businesses to handle fulfillment. Here are some of the benefits of working with ShipHero as your 3PL.
Offer 2-Day and Overnight Delivery
Tired of losing sales to Amazon because you don’t offer 2-day shipping? With ShipHero, you can offer 2-day delivery and overnight delivery to compete with Amazon and other enterprise ecommerce companies. With our shipping discounts, 2-day shipping can be a powerful way to improve conversion rates, make more sales, and keep your customers happy.
Distributed Fulfillment
Distributed fulfillment is a proven method to decrease shipping costs and improve transit times. For example, if you’re based in Los Angeles, the cost of shipping an order to New York is going to be much more expensive than shipping an order to San Francisco. With ShipHero’s distributed fulfillment, your inventory is split among our network of fulfillment centers. When an order is placed, it goes to the fulfillment center closest to the customer. You’ll save money on shipping costs, and orders will be delivered faster.
Integrations With Your Ecommerce Platform
ShipHero supports a wide variety of ecommerce platforms, including Shopify, Shopify Plus, BigCommerce, WooCommerce, Amazon, and others. The integrations are simple to activate and are a great option for companies selling on multiple platforms. For example, if you sell on Amazon and Shopify, we’ll handle fulfillment for orders from both platforms. All the order data is available in one platform so you won’t have to fumble through multiple apps to track everything.
Transparent Pricing
ShipHero believes in transparency. Unlike other 3PLs that nickel-and-dime you with hidden fees, our pricing model is simple and easy to understand. Our single shipping rate includes picking, packing, packaging and postage and is a flat fee for the lower 48 states and we don’t lock you into long-term contracts.
Conclusion
The key to maximizing profits and efficiency with your ecommerce business is to choose the right order fulfillment strategy. The speed, accuracy, and efficiency with which you fill your orders directly impact customer satisfaction, which also impacts your bottom line. Take what you’ve learned here to evaluate your current order fulfillment strategy to see whether there might be room for improvement and, if there is, put the tips you’ve received to work.
Dec 4, 2018 | Blog, Fulfillment
Every year, consumers drag themselves out of a post-Thanksgiving stupor to hit the stores for Black Friday. With some stores now opening as early as noon on Thursday and offering online promotions through the following Cyber Monday, Thanksgiving has become one of the biggest commercial holidays of the year.
According to Amazon, the five shopping days starting with Thanksgiving itself, nicknamed the “Turkey 5,” broke U.S. records this year with consumers purchasing millions more products than they had the year before. Adobe Analytics experts have revealed that e-commerce sales alone hit a record $8 billion this Cyber Monday alone, making it the biggest shopping day in U.S. history.
Sales figures are the most obvious way to capture a glimpse of the commercial significance of holiday shopping days like Cyber Monday, but it paints a limited picture. To grasp the true scope of this shopping extravaganza, it is interesting to view the shipping data for Cyber Monday purchases.
Let’s take a closer look at some of the sales data for Cyber Monday 2018 and how it correlates with data from the top shipping carriers in the U.S.
A Deeper Look at Cyber Monday 2018
While some families spend their post-turkey hours settled into their easy chairs watching Thanksgiving Day football or sleeping off their third helping of pumpkin pie, others load the kids into the minivan as soon as they finish their last bite and head out to hit the mall.
And then there are the online shoppers. Those savvy savers who avoid the long lines, taking advantage of holiday deals from the comfort of their La-Z-Boys.
According to Adobe Analytics, Thanksgiving Day shopping totals about $3.7 billion online with Black Friday sales totaling over $6 billion. The real money is spent on Cyber Monday – what Adobe has dubbed “the largest shopping day in US history.” John Copeland, head of Marketing and Customer Insights at Adobe announced that Cyber Monday sales topped $7.9 billion with $2 billion coming in from smartphones, an all-time high.
Financial figures aside, Amazon recently released a report of the types of products that sold on Cyber Monday 2018. Across the “Turkey 5,” Amazon customers alone ordered more than 180 million items. On Black Friday alone, customers ordered over 4 million toys and electronics through the Amazon mobile app and customers around the world purchased more than 18 million toys and over 13 million fashion items over the course of the weekend.
Not only did Cyber Monday 2018 reveal a record number of sales, but Akamai has released data on conversion rates for mobile and desktop devices. Conversion rates for mobile devices averaged 2.72% with desktops averaging around 5.12%. Bounce rates were up as well, with mobile devices bouncing 34.71% and desktops 25.74%.
Cyber Monday Shipments by Carrier
Every holiday season, retailers and customers rely on shipping carriers to get their purchases where they need to go. Shipping carriers hire countless seasonal employees and offer extra initiatives like Sunday delivery to help manage the increased load. They also release shipping deadlines to help consumers make sure their domestic and international shipments arrive in time for the holiday.
During the holiday season as a whole, shipping carriers struggle to keep up with the growing number of holiday sales and the challenge peaks on major shopping days like Cyber Monday. While private carriers like FedEx and UPS shoulder a significant portion of the holiday load, the United States Postal Service takes the biggest piece of the pie.
Here is an overview of the percentage of Cyber Monday 2018 shipments divided by carrier:
- USPS – 56%
- FedEx – 20%
- UPS – 9%
- First Mile – 9%
- DHL – 6%
Cyber Monday Shipments by Country
Though Cyber Monday is widely regarded as an American commercial holiday, online purchases made on this day travel around the world. According to 2018 Cyber Monday shipping data, the majority of purchases made in the U.S. were shipped domestically but another 9 international shipping destinations made the list. Here is an overview of Cyber Monday 2018 shipments divided by country:
- United States – 94.62%
- Canada – 2.34%
- Great Britain – 1.26%
- Australia – 1.03%
- France – 0.26%
- New Zealand – 0.15%
- Ireland – 0.06%
- Japan – 0.03%
- Singapore – 0.03%
- Korea – 0.02%
Cyber Monday Shipments by State
The beauty of online shopping is that customers can purchase from any online store no matter where they are physically located. Some states carry a larger piece of the pie, of course, based on factors such as population and demographics. Here is an overview of the percentages of Cyber Monday 2018 shipments divided by state:
- TX — 13.50%
- CA — 11.30%
- NY — 6.20%
- FL — 5.40%
- IL — 4.70%
- PA — 3.40%
- OH — 3.10%
- GA — 3.10%
- NC — 2.70%
- NJ — 2.60%
- MI — 2.50%
- VA — 2.40%
- WA — 2.30%
- TN — 2.10%
- MA — 2.10%
- IN — 2.00%
- MO — 1.90%
- AZ — 1.90%
- CO — 1.90%
- MN — 1.60%
- OK — 1.60%
- AL — 1.60%
- MD — 1.60%
- LA — 1.50%
- SC — 1.40%
- WI — 1.40%
- KY — 1.30%
- OR — 1.20%
- UT — 1.10%
- IA — 1.00%
- CT — 1.00%
- AR — 1.00%
- KS — 0.90%
- MS — 0.80%
- NV — 0.80%
- NE — 0.70%
- WV — 0.50%
- ID — 0.50%
- NM — 0.40%
- NH — 0.40%
- ME — 0.30%
- HI — 0.30%
- DE — 0.30%
- ND — 0.30%
- RI — 0.30%
- MT — 0.30%
- SD — 0.30%
- DC — 0.20%
- WY — 0.20%
- AK — 0.20%
- VT — 0.20%
Each year, more brick-and-mortar businesses close their doors or take their sales online to meet their customers where they are. Modern technology has made it easier than ever for consumers to find the products they want without setting foot outside the comfort of their own homes.
As holiday sales break records year after year, however, one thing remains constant – someone has to deliver those millions of purchases. Shipping carriers make use of modern technology themselves to streamline the shipping process, and they take steps to prevent holiday delays as much as possible. FedEx hires 55,000 seasonal employees each year, and UPS hires some 100,000 over the period of several weeks while also increasing hours and extending shifts for regular employees to manage the increased holiday load.
The world of consumerism is constantly changing, and it falls on the shoulders of shipping carriers like USPS, FedEx, and UPS to carry the burden of that change. Even as the world changes, however, U.S. consumers will still expect their packages to arrive on time and shipping carriers will do their best to meet these demands. 3PL software companies like ShipHero help your business find the best and cheapest carrier shipping options.
*Data based on an analysis of over 100,000 shipments during Cyber Monday 2018.
