Transforming Ecommerce Fulfillment and Logistics into a Strategic Weapon

John LeBaron

September 21, 2021

 

Tiffany Milar

September 21, 2021

Success on any ecommerce platform requires nailing fulfillment and logistics, yet these tend to get a bad wrap for being just a cost center. In this post, we’ll teach you how to actually leverage fulfillment and logistics to your advantage and take your ecommerce business to the next level.

The current state of ecommerce

The COVID-19 pandemic accelerated ecommerce growth in the last two years like never before. Consider the following statistics:

  • From 2019 to 2020, ecommerce sales grew 44% year-over-year from $598 billion to $861 billion.
  • Over the same period, retail sales only grew 7% year-over-year from $3,780 billion to $4,040 billion. Keep in mind, retail sales includes ecommerce sales.
  • Ecommerce penetration into retail sales grew from 15.8% in 2019 to 21.3% in 2020.
  • China’s ecommerce penetration grew to 51% this year, making it the first country to surpass 50% of retail sales through ecommerce.

Clearly, ecommerce is growing and here to stay. But at a high level, it also presents some challenges.

Brands trying to navigate this $6 trillion industry struggle to lead their customers through a massive retail channel. Within direct-to-consumer (D2C) alone, brands must decide between D2C platforms, competencies (insights, traffic, content, protect, logistics), D2C plugins, and logistics. Extending that to international markets and adding marketplaces makes ecommerce a monumental task.

While many try to shore up competencies with various Software-as-a-Service (SaaS) tools, Pattern built its own ecommerce acceleration platform that ties all of them together into one tool.

How to use logistics

That said, logistics is an important piece of the ecommerce puzzle that can be optimized for cost savings. Here, there are several leverage points to consider: shipping speed, locations/FCS, return policy, fulfillment options, and inventory pools. Each of these can be calibrated to run efficiently, and every ecommerce platform has slightly different offerings.

For example, Amazon leads the standard on shipping speed, offering its Prime members free two-day, one-day, and sometimes even same-day shipping. As consumers expect faster and faster shipments, it’s important to consider fulfilling orders through Fulfilment By Amazon (FBA). Or if you prefer to customize the consumer experience with special packaging, Fulfilment By Merchant (FBM) may be your option.

Another factor to consider is inventory pools, which refer to how inventory is controlled in the supply chain. Again, different ecommerce platforms will handle your inventory, well, differently. Walmart, for instance, is turning its over 5,000 U.S. stores into distribution centers, thereby getting inventory as close to the consumer as possible and reducing shipping costs.

Logistics as a revenue driver vs. cost center

So how do you turn logistics from a cost center to a revenue driver?

Focus on high-selling products.

Often in ecommerce, we’re tempted to list every product, but shipping rarely sold products to warehouses only compounds costs. Instead, try to predict your inventory needs. If an item sells regularly, you can afford to have a surplus. If not, you don’t want to get stuck with years worth of inventory.

Single or low-priced items under $20 are notoriously hard to sell in ecommerce because by the time you discount shipping and other costs, they are not worth the work. So, consider bundling products or offering sample sets to reduce overall shipping costs.

To drive more revenue, analyze the data and automate your inventory supply.

Optimizing shipping fees

Amazon publishes all their packaging dimensions by category online. So if you’re shipping with FBA, try to configure your product as closely to the desired packaging’s dimensions. You don’t want to waste packaging space by shipping air.

Also check the weights and dimensions of your products and make sure they are audited and listed clearly on Amazon because they won’t verify them for you. This can bring a lot of cost savings that can turn you into an office hero overnight.

Leveraging a 3PL

Adding a middle man to your ecommerce business can feel scary, but sometimes it’s worth it. Since third-party logistics (3PLs) ship orders for many clients, you can benefit from their economies of scale. They offer capabilities that you can leverage.

Plus, Amazon’s clunky multi-click tools were not designed for fast execution. 3PL partners and softwares like Pattern’s ecommerce acceleration platform add a technology layer that can soften the costs of your logistics operation.

The reality of returns

Whether or not to accept returns is a tricky decision that depends on your return rate, brand, and product. 30 to 50% of returns are non-resellable. But if you get a lot of returns or some that are expensive products, reselling might make sense.

Make sure to read customer reviews to see why products are being returned. There may be a manufacturing defect somewhere along the supply chain that you can fix, and that could massively reduce return rates.

Choosing D2C vs. marketplace shipping

D2C (Direct-to-consumer) logistics gives you more control over the consumer experience. From customer acquisition to retention, you can cultivate better consumer experiences by customizing packaging and marketing campaigns. It’s more expensive, but it can be worth it. Plus, D2C makes it easier to do cold shipping and to optimize shipping weight.

Going international

When expanding to foreign markets, you need to first think about import/export regulations and distribution. There can be a lot of logistical layers to work through.

Second, try testing out new smaller markets by drop shipping a minimum viable product directly from the U.S. This may cost more time and money, but it helps gauge demand before you fully invest in entering a new market.

Pattern recommends starting off with Amazon FBA Export, then upgrading to Amazon Global Store, and finally establishing a local presence.

Ecommerce-specific packaging

The old idea of big boxes on the shelf no longer applies to ecommerce. Bigger packaging just costs more to ship. So package for the new digital shelf with compact packaging. Ecommerce-friendly packaging can also make it easier for you to resell returned items.

Ecommerce penetration into retail is only growing, so think about the future. There is no profitable way to ship air or empty space. So if you sell something like coolers, start thinking about collapsible or fabric coolers now, and making it ecommerce-friendly. Otherwise, you’re on a collision course for non-profitability in the future.

Amazon’s limited shelf

Everyone talks about Amazon unlimited shelf, but that’s becoming less of an option. So be critical of what you’re listing. Listing a product but not giving it the love and attention it needs to grow won’t do.

Conclusion

Here at Pattern, we’ve helped brands dramatically increase revenue and units sold and expand into international markets. If you need help rationalizing your logistics, why not talk through your pain points with our experts today.

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Sept 27, 2022

Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)
Sept 20, 2022

Global Ecommerce Weekly News: 20th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to raise pay and add extra work benefits for delivery drivers Following the rise in fuel prices and protests by Amazon workers, the ecommerce giant is raising its delivery drivers’ pay and adding more work benefits. Amazon has mentioned that it will be investing $450 million into rate increases along with an education program and a Delivery Service Partners program. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/amazon-to-raise-delivery-drivers-pay-and-add-more-work-benefits/) Amazon announces it will give away shipping software to merchants at no cost Amazon has recently announced that it will be giving ecommerce merchants free software to manage shopper orders on and off its platform as it extends its reach. The ecommerce giant will be ending monthly costs for sellers using Veeqo, a shipping software it recently acquired and instead offer to them a new, free shipping software. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/amazon-to-give-away-shipping-software-to-merchants/) --- Other Marketplace News --- Walmart unveils new virtual fitting rooms In an effort to drive clothing sales, Walmart has launched virtual fitting rooms while competitors reduce spending amid the cost of living crisis. The virtual try-on tool can be used by Walmart customers to virtually measure the clothing items and see how the products would look on them. Shoppers will now be able to see how over 270,000 clothing items on Walmart’s ecommerce site would look on their bodies. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/walmart-launches-virtual-fitting-rooms-to-drive-clothing-sales/?utmsource=Retail+Gazette+Subscribers&utmcampaign=2da7f0f8f8-EMAILCAMPAIGN202209150742&utmmedium=email&utmterm=0d23e2768b6-2da7f0f8f8-61040615) THG slashes sales and profit expectations The Hut Group has slashed its forecasts for 2022 as rising interest rates, inflation and energy costs take a toll on consumers. Previously, THG estimated its sales growth to be between 22-25% but after a recent evaluation, has lowered this prediction to between 10-15%. Initial predictions did not take into account the negative effects of ceasing sales in Russia and Ukraine along with the impact that the cost-of-living has had on consumer spending. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/thg-slashes-forecast-as-cost-of-living-crisis-hits-consumers-wallets/) --- Other Ecommerce News --- DHL and Post Office team up to provide click and collect services Through a partnership between delivery company, DHL and Post Office, a new click and collect service is to be tested at Post Offices before rolling out to over 1000 branches across the UK. Online shoppers will now have the option of choosing their local Post Office as a collection point, and DHL will fulfil the delivery aspect, opening up networks for both parties. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/post-office-partners-with-dhl-express-to-provide-click-and-collect-services/) US consumer watchdog plans to further regulate the BNPL sector The US Consumer Financial Protection Bureau (CFPB) has raised concerns regarding the collection of consumer data and the fast-growing nature of the BNPL sector, which includes companies such as Affirm and Klarna. The CFPB is worried that these companies could be negatively impacting consumers’ financial health and aims to put better regulations in place to ensure consumers are safe and empowered. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/us-consumer-watchdog-to-start-regulating-bnpl-sector/) Japanese ecommerce market estimated to grow by 6.9% in 2022 The ecommerce market in Japan, largely dominated by domestic online retailers including Reakuten and Mercari, is set to reach $194.3 billion USD in 2022, after seeing an annual compound growth rate of 5.2% between 2018 and 2021. This makes Japan the fourth leading ecommerce market globally, following China, the US, and the UK. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/13/japan-ecommerce-market-to-grow-by-6-9-in-2022/) Ecommerce brands are spending more on TikTok ads TikTok may soon be surpassing Facebook and Google as the most lucrative advertising channel, with ecommerce brands spending 60% more on TikTok ads in Q2. Facebook is still ahead as the top choice for ecommerce advertisers but only grew by 5.6% from Q1, while Google grew 20.5% in Q2, and Snap declined 10.8% in Q2. [Read more on SearchEngineLand](https://searchengineland.com/ecommerce-brands-spent-60-more-on-tiktok-ads-in-q2-387876)
Sept 13, 2022

Global Ecommerce Weekly News: 13th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon scales back on US warehouse facilities Amazon is shutting down two facilities with 300 employees, discarding plans for 42 facilities, and delaying plans to open a further 21 buildings across the US. The ecommerce giant is scaling back on hiring as well as the expansion of its vast delivery network, as it was left with an excess of space following its rapid expansion during the pandemic. [Read more on Business Insider](https://www.businessinsider.com/amazon-closes-2-facilities-scraps-plans-42-new-buildings-report-2022-9?r=US&IR=T) --- Other Marketplace News --- JD.com is ‘betting’ on ecommerce grocery market Amidst a slowing economy and a decline in ecommerce, Chinese ecommerce giant JD.com has increased its urgency to seek new growth engines. The company is looking to boost its online grocery business through offline partnerships and expansion into lower-tier cities, where it may be able to unleash more consumption power. [Read more on The Star](https://www.thestar.com.my/tech/tech-news/2022/09/08/chinese-ecommerce-giant-jdcom-bets-big-on-online-grocery-lower-tier-markets-amid-slowing-economy) Shopee shuts operations in Argentina, Chile, Colombia, and Mexico Sea’s ecommerce arm, Shopee, has shut local operations in some LATAM countries but will continue to maintain cross-border operations in a few markets. Latin America is Sea’s most important region following South-east Asia, accounting for close to 19% of its revenue in 2021. The move away from these countries is largely due to increased levels of macro uncertainty and rising interest and inflation rates, and rather putting a focus on its core operations. [Read more on Straits Times](https://www.straitstimes.com/business/companies-markets/seas-shopee-shuts-operations-in-argentina-chile-colombia-mexico-sources) --- Other Ecommerce News --- Instagram scales back in-stream shopping elements Instagram is re-examining its approach as it hasn’t been able to make ‘fetch’ happen. ‘Fetch’ in this context being the online shopping trends which have become all-consuming in China, and what Western social platforms have been hoping to add into their apps to make them more addictive and revenue-generating. Consumers have not been swayed by the latest shopping tools on TikTok and Instagram, leading to Instagram scaling back its in-stream shopping program. [Read more on SocialMediaToday](https://www.socialmediatoday.com/news/instagram-scales-back-in-stream-shopping-elements-as-it-re-examines-its-app/631276/) FedEx Express supporting the growth of cross border ecommerce FedEx express has expanded its international commerce shipping service to four more markets across the Asia Pacific, Middle East and Africa (AMEA) region in an effort to support the strong development of ecommerce in this region. Three of the fastest growing markets, the Philippines, Indonesia and Vietnam are leading Southeast Asia’s ecommerce sales, which is set to reach $100 billion by 2023. [Read more on Post & Parcel](https://postandparcel.info/149889/news/e-commerce/fedex-express-supports-the-growth-of-cross-border-e-commerce-within-the-amea-region/) India ramps up hiring as companies prepare for shoppers Ecommerce companies are getting ready for the festive season by rapidly expanding their temporary workforce. As ecommerce in India grows, the country is predicted to have 372 million online shoppers by the end of 2022. The festive season this year, running from October to December, is expected to see a two-fold increase in logistics and delivery alone. During this period, companies are predicted to add 20% more to their existing workforce base, with a 8-10% higher pay scale compared to last year. [Read more on Business Insider India](https://www.businessinsider.in/business/ecommerce/news/the-great-indian-festival-of-hiring-e-commerce-companies-gear-up-for-indias-shoppers/articleshow/94000346.cms)