eCommerce shopping is only 12% of all retail sales, but it continues to be the fastest growing shopping channel. The backbone of any successful eCommerce retailer is its logistics strategy and how quickly and efficiently it can fulfill orders to customers.
Why is shipping so important? First, as more sales move online, customers want what they order almost as instantly as they would get it if they were in the store. This expectation is largely attributable to one company: Amazon. It was only a few years ago that acceptable delivery timeframes were 5-7 business days. Not anymore. Amazon has transformed the market in such a way that free, two-day shipping is now the accepted norm and that’s quickly evolving into one-day expectations.
One of the biggest challenges for eCommerce retailers is shopping cart abandonment. Sixty-nine percent of all online shopping carts are abandoned. Multiple sources of industry research confirm that the number one reason is due to high shipping costs. According to the Baymard Institute, of those shoppers motivated to buy, 61% of them will abandon a purchase if the extra fees associated with shipping costs are too high. Another study from Dropoff reveals 97% of shoppers say speed of delivery is a key part of making a buying decision.
So, one antidote to shopping cart abandonment is faster, more affordable shipping. And one antidote to Amazon is being able to deliver at a comparable cost and speed.
The answer? Next-day ground delivery.
Reaching your customers with next-day ground delivery is made possible with a larger, dynamic fulfillment network. But it doesn’t come without its challenges. As more and more retailers seek to compete with Amazon and offer fast, cheap delivery to customers, here are the top five things to know about a next-day delivery fulfillment network with FLEXE:
- Managing Seasonality—All Months of the Year
- Identifying the Right Fulfillment Locations
- Allocating and Managing Inventory
- Integrating Dynamic Order Routing
- Evolving Customer Delivery Promises
1. Managing seasonality—All months of the year
For most retailers, the busiest time of the year is the holidays. And every year, as more and more holiday sales move online, the demand to fulfill orders faster increases. 2016 marked the record high for Cyber Monday sales at $3.45 billion, a 12.1% increase from 2015. And, at the end of 2016, it was projected that Amazon had a 37% market share for all online sales.
High-growth eCommerce retailers that want to boost their own sales outside of Amazon’s marketplace need to be able to compete with its delivery promise of fast, cheap shipping.
The FLEXE network dramatically transforms warehousing by providing your business infinite options to expand your fulfillment footprint throughout the entire year—all without high, fixed costs. Leveraging our marketplace of hundreds of warehouses, businesses can proactively plan for the holidays and add more fulfillment centers to better manage the demand.
For example, if you determine your holiday strategy is to promote your top-performing SKUs with faster delivery promises, we can work with you to identify the number of locations you’ll need and start to determine which warehouse partners in the FLEXE marketplace have availability and can accommodate your inventory during that time of the year.
We work with a variety of warehouse partners. Some are retailers that have the same holiday peak seasonality with little availability during the holiday season, some are countercyclical with higher demands in the summer, and some don’t have seasonality based on the nature of the business, like our partner Iron Mountain.
Helping you scale your fulfillment network to provide your customers with fast, affordable next-day ground delivery—even during the busiest time of the year—is the foundation of our fulfillment network for next-day delivery.
2. Identifying the right fulfillment locations
The crux of offering next-day ground to your customers is adding more fulfillment centers to your distribution network. Traditional means of doing that has either meant you buy and operate your own facilities and resources, you outsource to a 3PL, or you go through Amazon’s fulfillment services.
Next-day delivery from FLEXE is different. Instead of investing in fixed assets, long-term lease commitments, or Amazon’s services, you can leverage our marketplace of already-operating facilities that have excess space and resources for warehousing and fulfillment services.
But, if you want to reach 98% of your customers with next-day delivery, how do you know how many fulfillment centers to add and where to add them?
You don’t have to throw darts at a map. When you work with FLEXE, we’ll start by running a full network analysis that models various fulfillment scenarios using your actual product data. Based on your fulfillment goals for time and cost, we’ll work with you to find the most cost-effective network scenario to achieve those goals.
In addition to a full network analysis to reach 98% of your market, we can also put together a timeline that will enable you to incrementally reach 98% by increasing fulfillment locations over time—at the most cost-effective rate.
3. Allocating and managing inventory
Having more locations in your network does complicate how you manage and allocate your inventory. However, there are several ways to work through this with FLEXE.
As you move into more FLEXE locations, what should you consider when planning for inventory?
- Decentralized demand increases uncertainty and variability and makes forecasts harder to pin down
- Regional and local preferences may create a different mix of inventory at each location
- Rebalancing inventory and transshipments between locations may occur
Here are three ways to keep your inventory in check as your grow your network:
- Understand the needs of your customers: We can help you move to next-day fulfillment to all of your customers, but is next-day shipping their expectation for all of your products? Analyzing historic inventory backorders can provide a rough understanding of what you’ll need at each location, and performing A/B testing can help quantify the improvements to conversion that’s associated with shorter ship times.
- Start with your top-performing SKUs: Inventory allocation becomes exponentially more complicated when you combine your high- and low-performing SKUs at the regional and local level. As you begin to offer faster ship times, start with your top performers and allocate those by region. Keep it simple.
- Proactively manage your projects and relative inventory: In the early stages, you may need to spend more time managing inventory. Take it slowly and measure every move until you can better predict and proactively manage inventory and its allocation.
We’re also here to help you make the most of your network. We can partner with you to help you analyze and forecast demand, establish the right mix of A, B, and C SKUs, plan safety stock across the network, and generate different scenarios that iterate on new network designs.
4. Integrating dynamic order routing
How do you determine which fulfillment location handles each order? Optimizing for shipping cost is one way to optimize order routing; factoring in transportation mode, carrier, service level. Orders can also be routed based on store and fulfillment center labor capacity and cost.
However, it may not always make sense to have the closest facility do it. Or, if you have two locations within the same geographic, which fulfillment center gets the order? This is where dynamic order routing comes in.
Using preconfigured logic, you can put a workflow in place for dynamic order routing based on a combination of not just shipping cost or service, but also inventory availability and storage costs. Based on a combination of these variables, “if-then” logic can determine the first or second best location from which to fulfill orders in real time.
5. Evolving customer delivery promises
FLEXE Next-Day Delivery is designed to help you improve your fulfillment strategy with a dynamic solution that makes sense for your business. With it, you can monitor, test, and adapt how your fulfillment strategy affects your bottom line and, eventually, your overall delivery promise to your customers.
FLEXE Next-Day Delivery does this in three ways:
- Drive growth: You can reach more of your customers faster through a network that offers the flexibility and scalability traditional 3PLs and warehousing solutions can’t
- Cut costs: Eliminate traditional warehousing expenses and get the right inventory to the right location at the right time for the right cost
- Reduce risk: Control your own brand experience by delivering to your customers in your own brand
As you refine your fulfillment strategy, you can begin to evolve your customer delivery promise and differentiate yourself from your competitors. You can reach more of your market without substantial investments in static networks or having to rely on Amazon to reach your customers for you.
For high-growth eCommerce retailers, your logistics strategy is the backbone of your business. Stand taller with FLEXE.