Our company has a customer that is one of the most successful retailers of sporting goods equipment in the world. This particular company was started by a young entrepreneur who started selling ski equipment out of his parents’ basement. Before long, he had outgrown that, and today, his company operates from an impressive headquarters in Philadelphia, with distribution centers and warehouses located across the country.
We love these stories, right? Stories about how one person, or one small business, with a great product that catches fire and becomes an e-commerce sensation. Even on a less dramatic scale, businesses of all scopes and sizes are venturing into the world of e-commerce. We can see this from the more than two million sellers currently operating through Amazon, to the businesses in our local communities that have expanded to e-commerce, right up to big box retailers and department stores. Clearly, there is a space for everyone in the e-commerce platform.
But is your business ready for e-commerce?
Many retailers are making the jump to online selling after having built successful brands through traditional B2B or B2C channels, largely based on brick-and-mortar stores. For the most part, these businesses have well-established supply chains that include a distribution center, a few warehouses, and a transportation provider that is able to deliver inventory to retailers, businesses, or warehouses, usually through a set schedule, via an established distribution network.
Selling over the internet is an entirely different animal. Suddenly, you need a distribution plan to reach all 50 states, plus perhaps Canada and other international markets. Those deliveries are not going to stores or distribution centers, but to consumers’ homes or workplaces. And not only do you need access to those customers, you also have to have something to deliver to them — in other words, inventory. And you need to find a way to make those deliveries fast and at little to no cost to the customer.
Once a business understands that its traditional supply chain won’t be sufficient for the nuances of e-commerce, it’s usually a straightforward process to build the appropriate e-commerce transportation solution. Key components of a successful e-commerce supply chain must include:
Warehouse/Inventory Management. Amazon has addressed the need to source inventory close to its customers by investing an estimated $14 billion since 2010 in building a network of warehouses. While most businesses neither need nor can afford a network of this magnitude, there is a happy medium. There are many providers out there that can assist their clients with establishing a warehouse and managing their inventory. This is a win-win solution, since having inventory sourced in a provider’s facilities allows quick access for fulfillment and shipment preparation. But regardless of where inventory is located, it is critically important to have a technology-based system in place so that all inventory can be accounted for at all times.
Fulfillment Services. A growing trend in e-commerce is omni-channel fulfillment, which can include fulfilling online orders from retail stores and distribution centers, along with drop shipping directly from vendors. In addition to the technology challenge of tracking inventory and shipments through multiple channels, a retailer with a traditional distribution center-to-store supply chain strategy will often find maintaining enough inventory and handling returns at their retail stores to be problematic. The fundamental nature of e-commerce fulfillment, however, tends to include a significant number of stock keeping units (SKUs), considerably more than are carried in a typical retail store. And critically important is the fact that e-commerce fulfillment is highly focused on speed, with delivery to customers measured in hours and days, not the weekly or bi-weekly shipments typically associated with shipments to stores.
Seamless Transportation. Once your shipments are packaged (using the most efficient packaging possible) and labeled, your next challenge is to ensure the shipment arrives on time and undamaged. This is no small undertaking in the age of Amazon, where next day/same day deliveries are becoming increasingly common. The good news is that the vast majority of e-commerce packages will meet the requirements for parcel shipping, which generally means lower costs than a freight solution, and faster, more personalized service.
Last Mile. This is the most important phase of the logistics process, where a shipment either arrives on time, undamaged, and as promised, or it doesn’t. Last-mile services are so important that an estimated 28% of all transportation spend goes to ensuring an optimal last mile experience. As consumer expectations continue to change in favor of faster and more flexible deliveries, you’ll want to make sure your carrier is able to provide the required levels of service. Make sure your carrier can handle a last-minute request to change the delivery location. Can your carrier deliver inside an apartment or office building, for example, and will consumers be provided with real-time delivery updates? Make no mistake; consumers will not be happy if a delivery does not meet their expectations.
Returns Management. Given that e-commerce returns can account for as much as 30% of sales, they cannot be ignored. For one thing, customers expect an easy process with free returns shipping, and they also expect to be able to return an online purchase to a retail store. Nearly 60% of consumers say they check an online retailer’s returns policy before finalizing a sale.
This is another area where your logistics provider can help if you choose to go that route. Together, you can determine how often you want to receive returns, where you’d like to have them sent, and the best way to keep your customers informed during the returns process.
Cross Border Capability. A growing number of US businesses are successfully expanding their reach into Canada and tapping into that country’s double-digit rate of e-commerce growth. But as lucrative as the Canadian market can be, a US business needs to do its homework. Before selling to Canada, several factors must be addressed, including the US/Canada border clearance process and the need for a Canadian distribution network that will reach all territories and provinces. Most businesses assume their carrier can provide comprehensive coverage throughout Canada, but in fact, only a handful of providers have this capability.
E-commerce is clearly essential in today’s retail environment. I saw one estimate that there are 1.3 million e-commerce businesses, just in the US and Canada, and as many as three million worldwide, not counting China.
When it comes down to it, though, any business can sell on the internet. But only those that take the time to plan and develop a comprehensive logistics strategy will likely succeed.
John Costanzo is president of Purolator International, the US subsidiary of Purolator Inc., a leading integrated freight, package and logistics solutions provider in Canada. He leads the company’s Third Party Logistics business and the development and execution of Purolator’s strategic growth plan for markets outside of Canada. He can be reached at john.costanzo@purolator.com. For more information visit www.purolatorinternational.com
