Summary
This festive season, the boom in economic activity is partly because of higher eCommerce activity. With the 2020 situation, eCommerce players have experienced a radical shift with the extensive use of digital media and electronic communication.
Today, the industry is touted as a major driver of economic growth and companies can’t ignore the revenue opportunities an online portal or marketplace brings. While retailers focused on low prices and convenience earlier, they’re now inclined towards improving the overall digital experience, products, and services. See Also: A deep dive into business outlook for the quarter beginning Oct 20 While setting up a digital eCommerce portal or a marketplace can be easy with Shopify or Woocommerce, it is only 1/3rd of the process. The order fulfilment cycle usually remains hidden. Logistics is a major part of this fulfilment cycle. Even though logistics remain hidden behind the scenes, it is crucial for improving the customer experience. It is essential that online businesses must come up with strategies to address logistic concerns. That’s why we’ve created an article that gives an overview of the latest logistics processes and have enumerated their pros and cons.
eCommerce Logistics Options used in past
An average retailer spends about 20-40% of their turnover on logistics. And this cost can’t be recovered easily as the consumer isn’t willing to spend on shipping and returns. Given the above scenario, how can retailers survive in the marketplace alongside eCommerce giants like Amazon? Should they outsource logistics or maintain the operations in-house? This section on eCommerce logistics options will give you an overview of the various options used, and the pros and cons of each option to help you choose the right option for your business.
Dropshipping (also called direct shipping) is the practice of selling products not stocked by the retailers themselves. Suppose you are a retailer with an online portal, when someone places an order on it, you in turn order the product from the manufacturer or supplier who then sends it to the customer. And it’s a lucrative option if you want to start with a small investment and scale up from there. For instance, brands like Wayfair have built a business centered around dropshipping. They deal with more than 7,000 different vendors and sell more than 7 million items on their site.
Here are some pros and cons of dropshipping:
eFulfilment Centers
eFulfilment centers handle all operations from the time an order is placed on the website. These fulfilment centers can:
They are flexible enough to handle one or more of the above operations and charge based on the services they provide. You should consider outsourcing logistics operations only if it makes financial sense and will help streamline your operations. Consider this example: Let’s say you see that there will be a huge demand for diwali items and if you stock and store some of these items, it would be to your advantage. But, at the same time, for the rest of the year, these items are not usually sold under your roof. In such cases you don’t want to build infrastructure to handle only this seasonal demand. But at the same time, you don’t want to lose out the opportunity. So, you would perhaps look for an eFulfilment center. But you should carefully weigh the costs and revenues before you make a decision. See Also: Amazon launches mega logistics hub in Bengaluru to meet festive demand At Logibee, we feel that if you are new to online business and want to quickly establish your presence, then you should take advantage of massive festive events and build your brand presence. If you can provide a good shopping experience customers are likely to come back and buy.
In-House Logistics
Companies with a brick-and-mortar store use an in-house logistics system as they can use stores as distribution centers. However, they still need to enter into contracts with multiple carriers to ship their products. One way to get around this is to have your own fleet as well. YOu may begin with a single delivery vehicle doing small volumes and scale up as you increase. An example is Pepperfry. They did not find a transporter who could ship bulky furniture safely, without damage and cost effectively. Thus, they started their own fleet to gain full control over the entire delivery journey. Today their fleet has more than 500 vehicles and they are able to deliver to tier 2 and tier 3 locations as well.
Conclusion
The type of logistics operations you want to run depends on what exactly are your goals are for the festive season. Appropriate planning and the right choice will ensure your marketing will lead to better returns. While dropshipping gives you the easiest scaling up and lowest of margins, In House Logistics gives you complete control over the delivery operations and long term RoI. A judicious decision has to be made. Drop us a line, in case you need help with managing your delivery operations. Logibee will be glad to reach out with our technology solutions.
