The coalition is being led by Amazon.com and other retail businesses, including QVC and Columbia Sportswear. In addition to analyzing the merits of the Package Coalition, the hosts offer tips for retailers to optimize their shipping rates.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
In the midst of the kickoff to the busiest shopping season of the year, news emerged that both the U.S. Postal Service and Amazon experienced data glitches that exposed customer information.
The USPS may have exposed the personal data of more than 60 million customers via a security hole, including access to information on when checks and other critical documents were set to arrive. Amazon meanwhile told an unknown number of customers their names and email addresses were exposed due to a technical error on its ecommerce site.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
Amazon.com Inc.’s retail operating income could take a 5% hit from shipping cost inflation if the U.S. Postal Service’s proposed price hikes go into effect, according to calculations by Barclays analysts. The proposed uptick in shipping and mailing fees at the U.S. Postal Service could cost Amazon more than $1 billion in 2019, according to Credit Suisse, which cut its near-term estimates for operating profit on the e-commerce behemoth.
“As we roll forward the sensitivity analysis to 2019, we arrive at a potential incremental Shipping Expense range of $400 million to $1.1 billion range with the assumption that 40 percent to 50 percent of U.S. packages are shipped via the Postal Service,” analyst Stephen Ju wrote Monday. “Our math …suggests Amazon will have 5% lower retail operating income from this shipping cost inflation, if we assume there are no offsetting factors,” Barclays said. The changes would go into effect on Jan. 27, 2019.
“Specifically, the USPS shipping rates for small and medium boxes, typically used by e-commerce companies, are proposed to be increased by 10% and 5% respectively,” Barclays analysts led by Ross Sandler wrote. “[T]he price increases for packages suggested by USPS this year are higher than in prior years.”
“If other Amazon shipping partners like UPS, FedEx, On-Trac, etc. raise their prices, which has happened in the past (but we are currently not factoring in), every 5% hike for last mile would weigh down operating income by an additional 3%, all else constant,” the note said.
President Trump said the USPS is Amazon’s “delivery boy” in a tweet earlier this year, and blamed the e-commerce giant for its billion-dollar-plus losses in the second fiscal quarter. However, the USPS said it’s actually government policy that’s hurting the group’s finances. The USPS said “legislative and regulatory changes” would be necessary for financial stability.
“To be clear, our current estimates already factor in [a] shipping cost increase by a modest level, consistent with prior years,” Barclays said. “However, the steeper increase proposed for 2019 could weigh further on Amazon’s FY19 profitability.”
Barclays forecast that Amazon shares could take a hit after third-quarter earnings if they are in line with guidance and forecast below expectations. And in the fourth-quarter, the $15 minimum wage hike will add about $310 million to expenses.
Amazon will already see declines due to the $15 minimum wage hike, analysts say. Barclays analysts think the minimum wage hike is just one of a few coming initiatives that could impact operating margin expansion.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
The U.S. Postal Service has proposed a 9 to 12 percent increase in fees for the shipping service used by Amazon, just months after President Donald Trump criticized the USPS, saying it gives Amazon too good of a deal.
The parcel select service, which is also used by United Parcel Service and FedEx, is the last and typically the most expensive step in the shipping process that gets the packages to customers’ doorsteps. The USPS proposed a 9.3 percent increase on this service for packages weighing over one pound and a 12.3 percent increase on lighter packages.
Trump issued an executive order in April to set up a task force to examine the USPS, claiming that it was on an “unsustainable financial path.” He’s also tweeted that the USPS is Amazon’s “delivery boy” and doesn’t make money from Amazon’s business.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
Amazon.com Inc. and Target Corp. have opened the floodgates on free shipping. Web orders with the free service have increased 13% in 2018. Offer can boosts sales but wreaks havoc with profit margins.
Recent moves by the two retailers to eliminate minimum-purchase amounts for free shipping have boosted the share of online orders that get delivered gratis, according to data from retail analytics company DynamicAction. Orders with the free service included have risen 13 percent so far this year through Nov. 16, including an 18 percent spike in the week that began Nov. 5., when Amazon unveiled its offer.
Free Falling
Amazon and Target have eliminated shipping fees for online holiday orders
“Free shipping is the new normal,” DynamicAction’s Chief Marketing Officer Sarah Engel said.
While free shipping can entice customers to buy, it can wreak havoc with retailers’ profit margins, which are typically razor-thin already during the holiday quarter due to rampant discounts and increased marketing costs. Web orders that included some sort of promotion since the end of October have risen 13 percent from the same period last year, DynamicAction found. It also doesn’t help that transportation costs were already soaring this year due to a shortage of truckers.
Target is offering two-day free shipping from Nov. 1 through Dec. 22 on hundreds of thousands of items with no minimum purchase, while Amazon said on Nov. 5 that shoppers without Prime memberships need not buy at least $25 to earn free regular shipping, which typically takes five to eight business days.
Walmart Inc. has thus far declined to match the offers, sticking with its $35 minimum purchase requirement. The world’s largest retailer has suffered from narrowing gross profit margins in recent quarters, even as its online sales have grown.
E-commerce sales overall will jump 17 percent this holiday season, according to data tracker EMarketer, and account for about 12 cents of every holiday dollar spent. Amazon garners just under half of all online sales in the U.S., EMarketer said.
This article was written and published at Bloomberg by Matthew Boyle
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
A 5% increase in customer retention can improve a company’s profitability by 75%, according to Bain research. Yet most retailers are more focused on acquisition and conversion than retention. Despite investing billions in this pursuit, ecommerce has created a “customer experience gap” for retailers unable to engage customers at key post-purchase moments. Brands are learning the hard way that lackluster engagement and an afterthought communication strategy is a guaranteed way to lose loyalty.
To address this important issue Pulse Commerce conducted mystery shopping at nearly 500 leading U.S. online merchants prior to the 2017 peak holiday shopping season. The result is a picture of true behavior rather than survey feedback, and benchmarking by product category for comparison to peers as well as to Amazon.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
Less than three weeks before the prices take effect the day after Christmas, UPS announced its 2019 rate schedule, including an overall rate increase of 4.9% for its ground, air and international services, leaving shippers scrambling to adapt at the busiest time of year.
Last year UPS announced its general rate increase (GRI) in October, and in September the year before that. FedEx announced its 4.9% GRI for 2019 in early November. While the new FedEx rate schedule takes effect Jan. 7, UPS’s hike happens as of Dec.26, meaning it will hit the first massive wave of Christmas returns.
“This year (UPS) announced it three weeks before the effective date and in the heat of the fourth quarter peak shipping,” said parcel consultant Jerry Hempstead. “Large shippers will have little time nor the IT resources to sift through the nuances of this year’s announced changes.”
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
How Amazon’s two-day shipping is disrupting retail. The quest to offer fast, free delivery has triggered an arms race among the largest retailers.
Amazon is already making up most of the US ecommerce sales. However, they rely heavily on 3rd party sellers. These sellers experience major pain related to shipping cost and time. Fast shipping is now an expectation, but it is expensive for most sellers. Sellers often limit fast shipping to veru=y samll items or to local addresses. This limits their buy box opportunities.
Alongside life, liberty and the pursuit of happiness, you can now add another inalienable right: two-day shipping on practically everything . Amazon.com Inc. has made its Prime program the gold standard for all other online retailers, according to surveys of consumers. The $119-a-year Prime program—which now includes more than 100 million members world-wide—has triggered an arms race among the largest retailers, and turned many smaller sellers into remoras who cling for life to the bigger fish.
In the past year, Target Corp. , Walmart Inc. and many vendors on Google Express have all started offering “free” two-day delivery. (Different vendors have different requirements for no-fee shipping, whether it’s order size or loyalty-club membership.)
Optimizing Prime
Amazon’s shipping infrastructure isn’t used just by Amazon. As shoppers who read the fine print know, it’s also available to its retail partners through its Amazon Marketplace. Of the top 10,000 sellers on Amazon—collectively representing about half of Amazon’s Marketplace revenue—at least 90% have one product in the Fulfillment by Amazon program, says Juozas Kaziukėnas, chief executive of Marketplace Pulse, a business-intelligence firm focused on e-commerce. Almost 70% use it to stock and ship at least half of their products, he adds.
Competitors Great and Small
Amazon’s nominal competitor in online retail, Walmart, also offers a marketplace for third parties to sell their goods; the big difference is, it doesn’t assist them with fulfillment—and forbids them from using Amazon’s fulfillment services. Scale is essential. Mom-and-pop shops and even midsize retailers can no longer assume buyers will put up with getting their goods days later via the U.S. Postal Service. In response, startups are trying to aggregate enough retail customers that they can offer the all-important fixed rates for nationwide two-day shipping.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
Simply put, “pick and pack” is the process of picking a customer’s order off of a shelf (or wherever it’s stored) and packing it in a box to be shipped to the customer. If you’re a new seller with just a few orders a day, you’re probably doing your own picking and packing – maybe out of your living room! The time, energy, and focus it takes to correctly pick and pack order after order quickly overwhelms sellers as they grow, though, which is why most turn to a 3PL and outsource their ecommerce order fulfillment once they get traction in the market. As you can imagine, picking and packing gets a lot more complex in a warehouse optimized for speedy and accurate ecommerce fulfillment. Read on to learn how pick and pack quality impacts your ecommerce store, how the experts optimize their processes, and how you can find the best pick and pack fulfillment service for your needs.
Why Pick and Pack Fulfillment Quality Matters
Picking speed is an essential behind-the-scenes metric for ecommerce stores because it dictates order cutoffs and on-time delivery. These metrics in turn have a big impact on your conversion rate and repeat customer rate, and therefore your overall growth!
Your order cutoff time is the time in the day before which a customer has to place an order that can be shipped out that same day. Faster, more efficient picking operations can set later order cutoffs. In the days of 7 day shipping, this wasn’t such a big deal. With the rise of 1 and 2-day shipping, though, missing an order cutoff means a customer has to wait twice as long to receive their package. According to McKinsey, almost half of online shoppers will buy elsewhere when the estimated delivery time is too long – so an early cutoff means lost customers.
Picking accuracy is perhaps even more important than picking speed. As more sellers pile into ecommerce, price and advertising competition continues to rise, squeezing margins. Repeat customers that don’t need advertising to convert are critical to a seller’s ability to build a sustainable long-term business model. Sending customers the wrong order kills a brand’s image, likely loses the chance to create a long-term customer, and on top of that incurs return shipping fees.
Finally, intelligent packing can make the difference between a profitable sale and an unprofitable one. How? It’s all in the box.
It’s easy enough to set rules that guide which single item-orders are put in which boxes. But what about multi-item, multi-quantity orders? They can quickly get confusing for warehouse personnel, and workers under pressure to go fast default to using too-big boxes to fit all the items. That in turn increases the dimensional weight of the box, which increases the cost of the shipping label.
Top ecommerce fulfillment 3PLs like Cahoot have efficient picking operations that work quickly while minimizing errors and cost. Cahoot’s processes enable 2 pm cutoff times that are a full two hours later than industry standard, while its teams use barcode scanners to eliminate errors. When every single pick is checked by a computer, the order is right every time. Finally, Cahoot software creates intelligent and dynamic rules even for the most complicated multi-item orders that minimize shipping cost, saving you money.
Pick and Pack Warehouse
How does picking and packing work in an ecommerce warehouse? The answer varies widely based on the sophistication of the operation and what types of items they’re working with. Automation also has a huge impact on how warehouses pick and pack, with the most tech-forward operations leaning heavily on robots and conveyor belts to quickly move items to humans doing the picking and packing.
Piece pick and pack
Piece picking is the most straightforward method. Fulfillment personnel will pick orders one at a time as they come in, moving about the warehouse to pick items before returning to a packing station to prep the package for handoff to a carrier.
In most warehouses, each item will be stored in its own bin or case in a distinct location. When an order comes in, warehouse software will automatically generate a “pick list” that tells the worker where each item is stored in the warehouse. That way, the worker knows where to go to find each item, and can grab them one at a time.
While this is the simplest pick and pack method, it’s also the least efficient, and most medium-to-large warehouses have moved past it.
Batch pick and pack
Batch picking is similar to piece picking in that workers still move about the warehouse picking items for individual orders, but in batch picking workers pick items to fulfill more than one order at a time.
Intelligent warehouse management software (WMS) guides this process to its optimal level of efficiency. Larger warehouses with more orders coming in have more opportunities for personnel to pick for multiple orders at once. Let’s say that four orders come in for the same pack of soap all within three minutes of one another; in this simple example, the WMS will send just one worker to pick the soap for each of the four orders, bring it all back to a packing station, and to pack all the orders sequentially. Of course, this saves three trips to the soap shelf, and helps the warehouse run more efficiently.
Zone pick and pack
Zone picking is the first big step up in complexity, and it involves splitting the warehouse into different “zones” and giving different workers responsibility for each zone. Order pickers stay in their zone, and they pick items from their assigned zone only. Instead of the worker passing from zone to zone, then, they pass the picking box or cart over to the next zone from which it needs items. Once all of the needed items have been picked, they’re passed to the packing station, which is a separate and final zone.
Warehouses that use zone picking often have automated parts of the process – for instance, many will have conveyor belts that connect different zones to one another. That makes handoffs between personnel in different zones much quicker and more efficient, freeing them up to focus on fast and accurate picking. Each zone will also connect to the packing station via conveyor belt, so that orders of single units can quickly be passed up to the packing station for shipping.
Wave pick and pack
Finally, wave picking combines zone picking and batch picking. Each zone picks a large amount of items needed for orders in a batch, and then that batch is combined with batches from each other zone and sent up to the packing station. Workers at the packing station then grab what they need for orders from the batches packed from each zone to prepare for shipping.
Like zone picking, wave picking benefits significantly from automation and is frequently employed in large, sophisticated ecommerce fulfillment facilities.
How Does Pick and Pack Work for Fragile Items?
When picking and packing fragile items, speed becomes less important than the safety of the goods. After all, sending items that arrive broken is even worse than sending items slowly; you’ll have to write down the value of the broken items and pay to ship out replacements.
Picking and packing fragile items so that they don’t break in the warehouse or during transit used to come down to experience and know-how of individual packers. Like most processes in the warehouse, though, guesswork is being replaced by intelligent automated rules to ensure that products arrive safely.
Consider our example below of a host of fragile goods from a fine Italian foods purveyor. Each item is a breaking risk, making an order with all of them a nightmare for most warehouse personnel.
An intelligent shipping software will make the difficult feasible by splitting the order into a number of shipments that finely balances shipping cost and breakage. It then will give guidance to the packing station on how to precisely protect and package each item to fit into the smallest box that will prevent damage in transit.
Many warehouses are set up for peak speed and efficiency, and they thus don’t have the flexibility to intelligently adapt to different types of goods that need different treatment. That’s where Cahoot sets itself apart.
Cahoot: The Best Pick and Pack Fulfillment Service
Cahoot’s nationwide network of over twenty warehouses provides affordable national eCommerce order fulfillment for online merchants. Our wide and diverse network enables us to fulfill a wide variety of needs, from sellers who need absolute peak speed at minimum cost to those that have fragile items or others that require special handling.
Our fulfillment centers are outfitted with dedicated personnel and technology that confers all the benefits of a top pick and pack service:
Efficient picking enables late 2pm order cutoffs
Barcode scanning all but eliminates incorrect orders
Intelligent pick and pack software optimizes boxes for every order, minimizing shipping cost for complex orders
Lowest cost by design
Unlike other providers, Cahoot also has the flexibility to work alongside existing merchant-owned warehouses (if you have them). We know that many merchants with non-standard items and order profiles carefully manage fulfillment themselves due to how difficult the process can be. Cahoot will analyze your existing network and customer base, then add a few locations of our own to seamlessly extend your network into a nationwide footprint.
With this approach, you can continue to get value out of your existing assets while delighting your customers and your bottom line with affordable fast shipping.
Of course, our approach works just as well for merchants who want to completely outsource their fulfillment, and we’d be more than happy to take that on.
Getting started with Cahoot is fast and easy – with pre-built integrations for major eCommerce channels like Amazon, Walmart, Shopify, and BigCommerce, we can get merchants started in as little time as it takes to send us your inventory.
Talk to one of our experts today and explore how we can be the key that unlocks the next level of your profitable eCommerce growth.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes
Seeing the success of Amazon’s outsourced fulfillment service Fulfilled By Amazon (FBA), marketplaces and ecommerce platforms are racing to build their own ecommerce order fulfillment networks. No doubt, it is beneficial for sellers to have access to third-party fulfillment services wherever they choose to sell, but at what cost? Do these marketplaces have the sellers’ best interests at heart?
Seeing the success of Amazon’s outsourced fulfillment service Fulfilled By Amazon (FBA), marketplaces and ecommerce platforms are racing to build their own ecommerce order fulfillment networks. No doubt, it is beneficial for sellers to have access to third-party fulfillment services wherever they choose to sell, but at what cost? Do these marketplaces have the sellers’ best interests at heart?
Multi-Channel Selling is More Profitable
When third-party sellers first started selling online, the first questions were, “Should I sell on Amazon or eBay besides my ecommerce website?” However, over time, that question has changed into, “How do I sell on both, as well as Walmart and other marketplaces when they make sense for my business?”. In fact, with the current ecommerce trend, it is almost imperative for online sellers to sell on multiple channels to grow. Numerous studies show that retailers using two or more sales channels, on average, do better with their bottom lines. It gets complicated. Now each platform has its own order fulfillment service offering and prioritizes the sale of items fulfilled through it.
Let’s take a closer look at them.
Amazon FBA: Penalizing Multi-Channel Order Fulfillment
Amazon launched its third-party marketplace to satisfy the customer demand for a broader assortment of products. Third-party (3P) sellers add products much faster than Amazon sourcing all the items itself. This helped build the “everything store” behemoth. Today, third-party sellers make up more than 58% of all physical goods sold on Amazon.
Then came Fulfillment by Amazon (FBA), a large-scale distributed warehousing and order fulfillment network for its third-party sellers. FBA helps Amazon deliver a consistent 2-day shipping (soon 1-day) to customers even if a 3P seller sold the item. Commanding 47% of all U.S. eCommerce sales, Amazon was able to negotiate unbeatable shipping rates from all major carriers and offer incredibly low fulfillment fees to sellers. Opting for FBA gives sellers a distinct advantage within the Amazon ecosystem. FBA sellers are more likely to win the “buy box” and are outright forgiven for any shipping related customer complaints.
However, using FBA to fulfill non-Amazon orders is not as rewarding financially. Amazon uses FBA to deliver excellent shopping experience for Amazon customers and power it’s famous growth flywheel by prioritizing its FBA services for its marketplace customers. The fees for non-Amazon orders are much higher. Moreover, Walmart outright banned FBA from its platform due to Amazon’s aggressive branding on boxes.
Shopify Order Fulfillment Network: The New Kid On the Block
Shopify started as an ecommerce platform enabling sellers to quickly create their own professional online store, independent of the marketplaces. Coupled with its vibrant app ecosystem, Shopify aims to be a one-stop-shop for small and mid-size online sellers.
One of its growth strategies has been the app marketplace. Shopify’s great diversity of stores means there is also a high demand for specialized features. Keeping up with this expectation through Shopify’s own development team is very challenging. Therefore, to service the growing needs of their sellers quickly, they’ve created an app marketplace. Through the marketplace, third-party companies can build and monetize specialty apps that augment and extend Shopify’s native functionality.
To continue fueling its growth, Shopify launched additional services to power more parts of the seller’s business and in turn, capture a larger share of the wallet. They launched Shopify Payments, Point-of-Sale, Shopify Capital, and Shipping Label printing services, to name a few. Small to Medium (SMB) sellers need these services, and they also like the simplicity of a one-stop-shop. These value-added services have enabled Shopify to increase their revenue per seller over time.
As an extension of the same strategy, Shopify has now tossed its hat into the ecommerce order fulfillment ring too. ‘Shopify Fulfillment Network’ is geared towards Shopify sellers with options such as custom packaging. The pricing and shipping speed aren’t expected to be anywhere near FBA (at least not in the near-term), as Shopify does not own any logistics infrastructure. However, there are plans to partner with other warehouses and 3rd Party Logistics (3PL) providers. Smaller Shopify sellers who fulfill orders by themselves may find it a step-up, but it’s too early to say. One thing we know for sure is that fulfilling orders through Shopify will not boost their “buybox” chances on Amazon. Shopify is serious about this move, as demonstrated by their acquisition of 6 River Systems for $450M earlier this September.
eBay Managed Delivery: A Defensive Move
eBay also announced its own ecommerce order fulfillment solution in July, called ‘Managed Delivery.’ The objective of the program is to take the fulfillment burden off of eBay sellers and increase delivery speeds for the end customers. The program will be available to U.S. sellers in 2020.
Third-party partners will run the program on the eBay platform, which means it may not be able to compete with FBA on cost or service quality.
‘Managed Delivery’ may, however, be able to provide some respite to larger eBay sellers with access to discounted shipping rates and faster deliveries. At the launch, eBay CEO affirmed, “We don’t want to win a fast shipping game — that’s not the point. You’re not going to hear one-hour delivery, five-minute delivery.”
So, what is the end-game here? eBay is now playing catch-up to newer ecommerce platforms, trying hard to hang on to its position as the second-largest ecommerce marketplace. eBay is competing against behemoths like Amazon and Walmart, both of which offer small businesses access to massive groups of customers. It’s not an easy battle because eBay has an “image problem.” It’s generally thought of as a marketplace where you go to buy used goods, while Amazon and Walmart are the places customers go to purchase new items. Participating eBay sellers in the “Managed Delivery” network will get them higher visibility on eBay, but the service will not be very helpful in winning in a multi-channel environment.
Be Careful Jumping onto the Bandwagon
So, nearly every major marketplace in the U.S. now has a preferred ecommerce order fulfillment network. There are definite downsides, some outright punitive, to using a non-preferred fulfillment network. These moves are contradictory to the trend of selling multi-channel and come at the sole expense of the Sellers.
So why not sign up for all the order fulfillment networks?
It’s not even about the fees charged by these networks, which can be significant for any business. The large hidden costs come from maintaining inventory at multiple locations. Let’s break it down:
Redundant inventory in key markets: Imagine a merchant wants to offer fast shipping to customers in California, and that merchant operates on three different marketplaces. They will then need to store their inventory in California but at three separate warehouses for each marketplace. After accounting for safety stock, that’s a lot of excess capital tied up unnecessarily.
Multiple inbound shipments: If a merchant signs up with three fulfillment networks, they will have to transport their inventory to three warehouses in every major region. This will be more expensive because they’ll be splitting their one big inbound shipment into multiple smaller inbounds.
Safety stock: Splitting the same amount of inventory between multiple warehouses, instead of one or two, increases the amount of safety stock merchants must maintain. The square root law of inventory dictates the additional safety stock that is needed to keep as the merchants expand their order fulfillment locations.
Clearance through multiple channels: If a product doesn’t sell well, merchants will incur the cost of clearing the dead stock through each of these redundant fulfillment channels.
Returns through multiple channels: Sellers will also have to compensate or pay for restocking returns to every platform, which can be as high as 20% in some product categories.
Apart from the tangible costs, there are other headaches with managing multiple order fulfillment programs — for example, the added complexity from juggling multiple contracts, billing audits, and keeping track of ever-changing rates and terms. Furthermore, holding more inventory exposes sellers to a higher risk of losses from shifts in customer demand or during a recession. If a seller opts to go with an unaffiliated third-party logistics provider, they end up being a buy box pariah on every platform.
It is hard to ignore the cost to the environment too. The inefficiencies of excess inventory at its core result in a larger carbon footprint through excess transportation and warehousing operations. The repercussions are hard to ignore when humanity is inching towards irreversible damage to the climate every day. Sellers are losing, and so is our planet!
The Future of Order Fulfillment is Wide Open
The platforms and marketplaces are doing what’s best for them. They are building their own ecommerce order fulfillment networks to drive revenue and lock sellers to their platform. What’s best for marketplaces may not be best for Sellers. Captive order fulfillment services add unnecessary costs and do not scale to a seamless customer experience across channels.
The optimal future of order fulfillment is customer-centric. It means delivering goods to customers the way they prefer it, not limited to the options thrust upon them by the seller or the fulfillment partner. The options should not be limited to lightning-fast delivery, or the ability to pick up an item at one of the company’s “owned” stores. They should also allow the customer to choose delivery options that are greener for the earth or the ability to have the order delivered the same day from a local store without costing an arm and a leg. When order fulfillment networks operate under this new paradigm, they’d be able to offer these options and more to merchants of all sizes, and such services will not be a luxury limited to large multi-billion dollar retailers (think Amazon-Kohls as an example).
The future of ecommerce order fulfillment must also be efficient, where all constituents of the supply chain work together to serve the customer profitably and responsibly. Instead of walls and hurdles preventing growth and advancement, true next-generation fulfillment solutions will facilitate collaboration between all members of the value chain. It will unite the manufacturers to the retailers and everyone in between, including the competitors. At Cahoot, we firmly believe that unless we re-imagine and re-design our captive order fulfillment models, both customer-centricity and merchant profitability will continue to suffer. You can read more here about what we believe the future of order fulfillment is, and how our solution can help you get there today.
Offer 1-day and 2-day shipping at ground rates or less.
E-commerce Revolution with Strategic Packaging Solutions Like anyone in the e-commerce world, small business owners are always looking for ways to streamline their operations and
Hazardous Materials What is a Hazardous Material? What Items Are HAZMAT? Classes of HAZMAT Items What Classes Can Ship on Various USPS Services? What Changes