With shipping costs often reaching 25% of business expenses, services like FedEx, UPS, and USPS are keen to capture their share. According to EKN Research, 18 percent of every dollar gained through online sales goes towards fulfillment costs. As rates rise, businesses need innovative solutions to lower fulfillment costs.

Customers Expect More with E-Commerce

In large part, these costs are being driven by E-commerce behemoths such as Amazon and Walmart. Both companies vie for the best rates, with Wal-Mart offering free two-day shipping on orders under $35. Amazon has matched these rates and also offers free two-day shipping on all items to subscribed Prime members. Explore further by checking out Deliver Imports to Amazon FBA

With more customers flocking to these sites, other retailers are also offering similar incentives despite the cost. For smaller businesses, however, dealing with these costs while remaining profitable is a difficult ask.

Strategies to Manage Fulfillment Costs with E-Commerce

Match Carriers to Customer Requirements and Business Objectives

Use data and analytics tools to identify customers that form the most profitable market for your offerings. Align your fulfillment systems to meet their needs; same-day or two-day delivery may not be necessary. Once you identify your key market, optimize your supply chain and shipment network to reduce costs.

Stay Lean

Many businesses make the mistake of keeping excess inventory at distribution centers to compensate for demand fluctuations. Stock-outs can damage your reputation and increase last-minute supply costs, while excess inventory has its drawbacks. It drives up operational expenses including labor and equipment costs to account for the increased load. Rather a balance must be struck between holding too little, and too much stock.

Companies should invest in scalable workforce and storage solutions to handle demand fluctuations. Enlisting demand planning experts to analyze trends and market data can ensure effective workforce planning.

Get Your Packaging Right

Shipping carriers want your packages to be compact and heavy, and they prefer them to be delivered to destinations that are already part of their delivery routes. Unfortunately, online retailers often ship to incredibly diverse geographic locations, and because items can differ so greatly; packaging is often inconsistent too. Because of these issues carriers now charge based on dimension, as well as weight.

Instead of boxes, see if you can deliver your goods safely using plastic or paper bags; as many fashion retailers are doing. If you have to use boxes try and opt for corrugated ones, rather than more costly inserts. Make sure that you have multiple-sized boxes to fit the requirements of your product; ungainly oversized boxes will bring unnecessary shipping expenses. This may entail investment in customized boxes, especially if you have a unique and varied product range, however, the ultimate savings you’ll get will more than compensate for the up-front investment.

For more in-depth information, read our related articles:

• How E-Commerce IOR Help to Scale Up?
• Simplify Your International Shipping
• Global Online Retail in Logistics

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With increased interest comes greater expectations. Empowered customers now demand quick delivery, accuracy, quality, and easy returns from their retail experience. Fulfilling these requirements in the international market places unique technical and logistical challenges on any online retailer. Here are some of the issues they face.

Flexibility

Product Ranges

Global online retailers like Amazon and Alibaba handle a diverse range of products, from small electronics to heavy packages over 50 kg. Their logistics system or third-party provider must handle this variety without consigning goods to the non-conveyable category. This is vital for driving efficiency and reducing costs.

Scalability

Online retailers constantly deal with fluctuating order volumes and a changing mix of products in each shipment. Online retailers must create scalable logistics systems that can quickly adapt to varying capacity needs, with planned processes, system flows, and staffing requirements. A system that only runs efficiently at full capacity will be ineffective during low volumes, so accounting for downtime and overcapacity is essential.

Developing Markets

Asia-Pacific and Africa are becoming key players in e-commerce supply and retail, but sourcing from and shipping to developing nations involves risks.
Read more about E-commerce Fulfillment Costs

Payment Options

Payment options in these markets are often limited; instead of credit and debit cards, customers will pay via cash-on-delivery or mobile money. Integrating multiple local payment options into existing services can be difficult. Payments that are made will be in local currency and systems must account for payment in multiple currencies.

Poor Infrastructure

Many of these countries have poor transport networks. Roads are often poorly constructed or maintained, and major routes are often subject to extreme traffic volumes creating costly bottlenecks and unavoidable delivery delays. Warehouses may also be inadequate for large shipments, with a lack of automated tracking, below-standard storage facilities, and inadequate monitoring and controls.

These issues will often result in inaccurate or botched deliveries, and in worst-case scenarios cause deliveries to fail altogether. For example, if customers are not available to sign for packages or if they have provided incorrect addresses, in some cases retailers may ask customers to pick up packages from a central shipping hub to reduce these failures, however, this does adversely affect the customer experience.

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