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 6, 2022

Global Ecommerce Weekly News: 6th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon announces new inventory and distribution service, AWD Amazon has launched Amazon Warehousing and Distribution (AWD), providing inventory and distribution services to its sellers as a means of addressing current supply chain issues. AWD is now available for sellers using Fulfilment by Amazon (FBA), i.e. outsourcing their fulfilment to the platform. Amazon has plans to expand the service outside the platform in 2023. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/02/amazon-introduces-new-service-to-help-solve-supply-chain-challenges/) Amazon Web Services (AWS) launches in the UAE AWS, Amazon’s cloud-computing platform offering, has launched its second region in the Middle East and now provides its services in the UAE. The move will now allow anyone in the UAE who utilises cloud technologies to harness AWS’s advanced platforms and APIs. An estimated $11 billion USD is expected to be added to the UAE’s GDP thanks to the implementation, with an average of 6,000 external vendor jobs to be created annually. AWS is now available in 87 zones across 27 regions, with sights set on expanding further across Australia, Canada, India, Israel, New Zealand, Spain, and Switzerland. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/30/amazon-web-services-launches-region-in-uae/) --- Other Marketplace News --- Lazada to launch in Europe Alibaba-owned ecommerce platform Lazada is set to launch in Europe, marking a refreshed internationalisation push from the company. The move follows toughening economic conditions and performance in Southeast Asia, advancing the need to tap overseas markets. In Europe, Lazada will face tough competition from giants like Amazon and Zalando. Lazada’s exact entry strategy is to be confirmed and will be reliant on macroeconomic and market conditions, according to Lazada CEO James Dong. [Read more on DigitalCommerce360](https://www.digitalcommerce360.com/2022/09/01/alibabas-lazada-to-take-on-amazon-zalando-in-europe-push/) Chinese ecommerce giant Pinduoduo to launch cross-border platform in the United States Pinduoduo, a Chinese ecommerce giant rivalling Alibaba and JD, has announced it will be launching a new cross-border ecommerce platform. The marketplace is set to launch in the United States next month, as part of the company’s larger push into new markets. Pinduoduo found success in China thanks to its rock-bottom price offerings and harnessing of social commerce marketing, emulating strategies similar to fast-fashion giant Shein. [Read more on Yahoo Finance](https://uk.finance.yahoo.com/news/pinduoduo-launch-international-e-commerce-034129263.html) Alibaba launches its biggest B2B sales event, ‘Super September’ China ecommerce giant, Alibaba, has now launched its month-long B2B sales event ‘Super September’. The event provides 40 million buyers and 200,000 suppliers with the ability to connect on the platform, showcasing a ‘virtually unlimited’ number of products. The event hopes to foster new cross-border business relationships to tackle supply chain challenges currently faced by businesses. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/alibaba-launches-super-september-b2b-sales-event/) --- Other Ecommerce News --- Klarna’s losses quadruple in first half of 2022 BNPL provider, Klarna, has reported losses of $581 million USD for the first half of 2022. This figure is almost four times larger than a year earlier, where $129 million USD in losses were reported. The company attributes the losses to employee costs, technology investments, and rising credit losses. Klarna’s figure reporting comes amidst worsening economic conditions, fresh legal and regulatory scrutiny, and pressure from Big Tech competitors. [Read more on The Financial Times](https://www.ft.com/content/483451db-9221-4ca4-83a6-b4ddc6bfcfbb) [Read more on the Guardian](https://www.theguardian.com/business/2022/aug/31/klarna-losses-more-than-triple-as-consumer-spending-slows) One fifth of Snap employees to be laid off amidst poor financial performance Social media platform Snap (‘Snapchat’) has announced it will be laying off 20% of its employees and closing out a number of projects following a year of poor financial results.The move will see 1,200 employees globally lose their jobs, saving the company an estimated $500 million USD in costs. Snap is currently valued at $20 billion, an 84% decrease from its valuation of $130 billion last year. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/01/snap-to-lay-off-20-of-its-workforce-and-wind-down-a-number-of-projects/)
Aug 30, 2022

Global Ecommerce Weekly News: 30th August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon set to shut down Amazon Care Amazon is closing its telehealth service, Amazon Care, which launched in 2019 as a trial program for its headquartered employees. Later the service was rolled out nationwide for employees and other companies. The ecommerce giant has now made the decision to move away from the healthcare space, believing it was not the right long-term solution for its enterprise customers. [Read more on CNBC](https://www.cnbc.com/2022/08/24/amazon-is-shutting-down-amazon-care-telehealth-service.html) Peloton closes new deal to sell on Amazon Following a recent deal, Amazon customers will soon be able to buy Peloton fitness equipment on the marketplace, marking Peleton’s first move outside a direct-to-consumer model. According to Peloton’s CCO, there are already around half a million searches on Amazon for Peloton products every month, despite having no presence on the marketplace. Some key products include the original Peloton Bike, retailing for $1,445 and Peloton Guide for $295. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/24/peloton-strikes-deal-to-sell-fitness-equipment-on-amazon/) --- Other Marketplace News --- 60% of Malaysians are buying from local sellers on Shopee A recent survey of nearly 3,500 respondents found that nearly half of the shoppers prefer to purchase from local sellers due to shorter delivery times. Other shoppers decide to shop locally due to the quality of the products made in Malaysia and an interest in keeping the economy running. As a result, smaller local merchants have been able to grow their businesses, and shoppers benefit from shorter delivery times, products of high quality and supporting local businesses. [Read more on The Malaysian Reserve](https://themalaysianreserve.com/2022/08/25/around-60-malaysians-are-buying-from-local-sellers-on-shopee/) Flipkart’s social commerce platform Shopsy crosses 100 million users Flipkart launched a social commerce arm, Shopsy, in July of last year, which has now surpassed 100 million users, ahead of its target timeline being the end of 2022. This acquisition of new users has made Shopsy one of the largest platforms of its kind in the country, and is expected to onboard a further 100 million by the end of 2023. The platform is centred around boosting local entrepreneurship and powering ecommerce for consumers across tier 2+ regions where users face challenges around trust and navigation when shopping online. [Read more on Business Standard](https://www.business-standard.com/article/companies/flipkart-s-social-commerce-platform-shopsy-hits-100-million-users-1220828006851.html) Meta joins Amazon and Walmart in bid for Indian ecommerce market Amazon mentioned earlier in the year that it would be building a logistics division in-house through its purchase of a 51% stake in Ecom Express, an end-to-end logistics firm, to make ecommerce deliveries more efficient in the country. Walmart operates Flipkart in India and is set to continue its investment in the marketplace. In an effort to compete in the Indian ecommerce market, Meta has partnered with Indian ecommerce company, JioMart, to offer customers a grocery shopping platform within its WhatsApp chat feature. [Read more on Pymnts](https://www.pymnts.com/news/retail/2022/meta-joins-amazon-walmart-indian-ecommerce-market/) --- Other Ecommerce News --- Ecommerce in Spain worth €57.7 billion in 2021 Spanish ecommerce saw 11.7% growth compared to last year, largely attributed to cross-border sales. In the final quarter of 2021, ecommerce sales in Spain were at €16.9 billion euros, at least 60% of which came from cross-border sales. Transactions from foreign locations to Spain generated a turnover of €1.56 billion in Q4, a growth of 27.7% compared to Q4 a year before. [Read more on Ecommerce News](https://ecommercenews.eu/ecommerce-in-spain-was-worth-e57-7-billion-in-2021/)
Aug 23, 2022

Global Ecommerce Weekly News: 23rd August 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to add mental health support to primary-care service Amazon is set to move into mental health therapy with its primary-care division, following its recent acquisition deal of One Medical. The plan is to partner with virtual behavioural therapy service, Ginger, to offer its Amazon Care users with on-demand access to mental health services, licensed therapists and psychiatrists. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/11/amazon-plans-to-add-mental-health-support-to-primary-care-service/) GMB union calls for £15 an hour minimum pay at UK Amazon warehouses Amazon recently offered its warehouse workers a 3% pay rise, which in comparison to the June inflation rate of 9.4% left employees disappointed. Following this, hundreds of Amazon warehouse workers stopped work last week, protesting against the minimal pay increase, seeking a minimum of £15 an hour. Recent protests consisting of employee walkouts and sit-ins aim to get a better offer out of Amazon. [Read more on The Guardian](https://www.theguardian.com/technology/2022/aug/09/gmb-calls-for-15-an-hour-minimum-pay-at-amazon-warehouses-in-uk) Amazon third-party sellers have received their first-ever holiday fee hike Amazon’s third-party marketplaces account for close to half of the company’s online sales. The company introduced a 5% fuel and inflation charge to its third-party sellers earlier this year, and has now implemented another inflation increase charge. Commencing 14 October, any seller who uses Amazon’s fulfilment service is subject to the price hike, which is set to be an additional 35 cents per item for products sold in the US and Canada. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/17/amazon-third-party-sellers-have-received-their-first-ever-holiday-fee-hike/) Amazon puts a pause on UK grocery shop roll-out as the cost of living increases Amazon has slowed down on its UK roll-out of till-free Amazon Fresh grocery stores following disappointing sales and the rise in cost of living. Allegedly, the company is no longer looking for potential sites to expand and if more stores are opened, they will likely no longer use a till-free system, as consumers become more cautious about spending. [Read more on The Telegraph](https://www.telegraph.co.uk/business/2022/08/21/amazon-pauses-uk-grocery-shop-roll-out-following-disappointing/) --- Other Marketplace News --- Shopee overtakes Alibaba across international markets Shopee has surpassed Alibaba and taken the top spot for sales outside of China. Singapore-based marketplace saw a year-on-year increase of 51.4% at the end of Q2 of this year, while Alibaba saw a 3% drop during the same time period. This can be seen as a promising development for start-ups and their ability to compete with some of the largest ecommerce giants in the market. [Read more on Exchange Wire](https://www.exchangewire.com/blog/2022/08/18/shopee-surpasses-alibaba-in-international-sales-amazon-searches-for-entertainment-exec/) H&M reopens its official store to Alibaba’s Tmall ecommerce platform It has been nearly 18 months since Alibaba removed H&M from its Tmall platform, following H&M’s criticism of human rights abuses in Xinjiang. It is estimated that over a million people, predominantly minorities in the area, have been unlawfully detained in camps across the city. Brands including Nike, Adidas, Burberry and Converse were swept up in the controversy, however H&M was one of the first to be targeted for speaking out about the issue. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/16/hm-returns-to-alibabas-tmall-platform-16-months-after-xinjiang-controversy/) Klarna launches new feature allowing UK consumers to view full online order history Buy-now-pay-later company, Klarna, has launched a new feature on its shopping app, which allows UK consumers to view their full online order history, regardless of whether they purchased the product using Klarna. The feature also shows delivery tracking and aids consumers in managing their online purchases more conveniently. [Read more on The Industry](https://www.theindustry.fashion/klarna-launches-new-feature-allowing-uk-consumers-to-view-full-online-order-history/) --- Other Ecommerce News --- Online marketplaces responsible for £280 billion business turnover in the UK Nearly 900,000 UK businesses are currently selling on online marketplaces, generating an estimated £282 billion worth of sales each year. This figure represents 6% of the UK’s annual business turnover, highlighting the notable contribution that marketplaces make to the UK economy, along with the potential for further growth in this area. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/08/09/online-marketplaces-responsible-for-280-billion-business-turnover-in-uk/)