What All New Ecommerce Business Owners Need to Know about Logistics




  • — March 31, 2017

    To someone who has never run an ecommerce business, it may seem that all it takes are some good products and a website that will attract customers and help them convert. And while the products and the website are both essential parts of ecommerce, there is another factor that decides how successful or unsuccessful an online store is going to be – logistics.


    Logistics is often neglected when people start thinking about going into ecommerce and they only later find out that shipping, storing, dealing with returns and other logistics-related processes can be superbly difficult to take care of.


    Today, we will be taking a look into all the things new ecommerce business owners need to understand about the complex issue of logistics.



    You Have to Pack It


    If you thought logistics as a whole is overlooked, then the fact that you have to do packaging does not even register. In reality, you do. You have to put your product in a package that will get your product safe to the customer.


    It seems like a simple enough thing to do, right? You put your product in a box and that’s that, right?


    Well, there are dozens of types of boxes, both when it comes to sizes, shapes and features such as insulation or hazmat protection. Then there is the option to go with alternatives packaging options such as coffee bags which can be a game-changer in case your product cannot really break.


    Of course, you need to keep your costs in mind, both when it comes to purchasing boxes and when it comes to shipping (bigger equals more expensive). If you sell products of different sizes, this means finding the right size boxes for each and figuring out how many of each to purchase.


    It is not exactly rocket science, but it is something you have to think about.


    Who Pays for It


    Pretty much every marketing-oriented ecommerce article (especially those on cart abandonment) will tell you that offering free shipping is a must.


    The only problem is that there is no such thing like free shipping.


    Instead, it comes down to who pays for it. If you really offer free shipping, no strings attached, you are paying for it. And you will feel it when the time comes to review your revenue, there is no doubt about that.


    Of course, you can offset this by increasing the prices, but your customers may not like this. You can also offset it so that both you and your customers pay for it (through a moderate price increase).


    A great way to handle this is to let your customers see how much shipping really costs and to choose the carrier themselves (federal postal service, UPS, FedEx). This shows them that shipping is simply a cost that cannot be avoided and it also tells them that you are not adding to the prices of your products on account of shipping.


    It comes down to some fine balancing and tuning and you need to start thinking about this sooner than later.


    Insurance


    Insurance is always a good idea when you are shipping products. Some carriers have insurance included in their prices, while others charge extra. For the most part, insurance (and tracking) does not cost a lot and you will have a peace of mind knowing that you will be covered in case something goes wrong. This is especially true of larger orders and more expensive packages.


    Shipping Abroad


    If you ship abroad, there are a few things to keep in mind. First of all, the shipping prices will be increased. They will be increased substantially. If you are planning on covering all shipping costs, you might be very unpleasantly surprised as to how this can cut into your profits.


    Then, of course, there is the paperwork that will include different forms depending on where you are sending the package, who you are sending it to and what the package contains. The good news is that you will be able to find which forms exactly you need to ship where and for the most part, this will not be an issue.


    That being said, you will want to inform your customers that their country’s customs might charge them additionally, but this is really out of your hand. You simply have to inform them to check their local laws and regulations. Also, you need to explain to them that packages can get stuck at customs as this is pretty much inevitable.



    Taking It up a Notch


    Hopefully, your ecommerce business will grow and you will outgrow packing your products at home. If you simply resell other manufacturers’ products, this day may come even sooner.


    This is the day when you go beyond using the postal service and the major carriers and you start thinking about your own logistics. It is important to point out that you will still not be handling your warehouses and your shipping yourself, but you will be partnering up with a third-party logistics company that will take care of this for your company.


    When this time comes, it is absolutely essential that you are smart about your 3pL partner, as they will become an extension of your company. Your customers don’t care who is delivering their products, they are purchasing them from you and in their minds, you are responsible.


    A good piece of advice would be to find a third-party logistics partner that has experience in ecommerce work. Namely, traditional and ecommerce logistics could not be more different in every respect and you need someone who knows how to handle shipping smaller packages to an increased number of customers.


    It might also be a good idea to look for 3pL partners from one of world’s traditional logistics hubs like Hong Kong, Los Angeles or London, or from one of world’s emerging logistics hubs. We are talking way into the future here, but it is best to get some idea about global logistics early.


    Instead of a Closing Word


    We will leave you with an important word of warning – things will go wrong logistics-wise. They always do. Shipments get lost, products arrive in poor shape, shipping prices get increased without warning, etc.


    This is an integral part of the ecommerce way of life and you need to accept it.


    Inform yourself, be prepared and react accordingly when something goes wrong.

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    Author: Dan Radak


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