Fulfillment and supply chain logistics might not be the sexiest part of the e-commerce ecosystem, but it's impact on the overall customer experience is undeniable. I'm joined by ShipHero founder Nicholas Daniel-Richards to dive deep into how he's expecting shipping and fulfillment to impact customer experience this holiday season.
Listen to the episode above, or check it out in your favorite podcast app.
Many brands are transitioning from running their own warehouses to outsourcing them to services like ShipHero.
“So there are a lot of e-commerce brands, e-commerce merchants, if you will, that they are moving away or do not have their own warehouse...So we're seeing a growing number of brands, especially in the response to e-commerce growth, where they would much rather outsource that warehouse bit. So not using our software, they can use our fulfillment as a service. They just send us product and we're actually doing the fulfillment. We have the warehouses that have the inventory and do the shipping out.”
Before, brands were moving huge chunks of product around the country. Now, it’s all about small individual shipments.
“So you see those kinds of brands that have huge infrastructure. They can't just throw away that infrastructure, or they're just more capable from a logistics perspective. And what they are having to do is move away from big pallets of things coming into the warehouse, and then those pallets leave the warehouse and go to retail stores. Now they're having to break down those pallets and fulfill orders individually.”
Customers expectations are higher than ever thanks to Amazon Prime.
“Amazon has really set the expectation as far as how we, as consumers purchase and then have a delivery experience. And what I mean by that delivery experience is, oh yeah, it's going to be here in a couple of days. Which is, you go back a decade, maybe not even a decade, but it's such a game changer in many ways. So I think it starts at what is the ability for you to have a resilient shipping capability.”
A domino effect of negative consequences can quickly escalate from small operational issues.
“if you have some things that are not running very efficiently from your logistics perspective, whether it's ordering new product so you don't run out obviously, or you have accurate inventory counts, the way in which your pick and pack process is working - so how items are being selected for an order, put in a box, and shipped out. If there's something wrong with that, then what's going to happen is it’s just gonna create a whole chain of events that's going to cause more pain. Because things are going to be returned by unhappy customers.”
Getting the right items within a realistic time frame is all customers really want.
“I think what a lot of brands are contending with right now is just get the order right. Like, that's the first step. Get the order right and make sure that it's shipped to the customer in a reasonable amount of time. There are a lot of carrier delays happening. So at the minimum, what a brand should be doing is setting those expectations on their site. And I've seen this a number of times I shop. So you'll go onto a site and they'll have a banner at the top that says, expect some delays. Which is indicative that they’re struggling a bit, or dealing with carrier delays. So I think, you know, table stakes right now is just make sure you have resilient shipping and you're getting the right things in the boxes to customers.”
The best brands are superb marketers who understand when to outsource.
“you're definitely seeing a difference between those that are struggling with tech in their own operations, versus companies or DTC brands where e-commerce is in their blood, and that's what they've done. For them, fulfillment as a service is like, yeah, that's what you do. I use Shopify. I don't build the e-commerce platform myself, I use Shopify as an outsource shipping service. You're seeing this huge evolution in terms of e-commerce that's happening with these smaller brands emerging and driving volume, because they're really good at marketing and they're using services that are making them really good at logistics. They’re not trying to do it all.”
Not only will it disrupt other aspects of your supply chain, but unhappy customers will add up quickly.
“So if the cause for the return is you're sending the wrong product or the item you sent is broken, you need to address that. I mean, obviously you need to. But that's a huge amount of work that that's going to create, because now you've got inventory that is being affected. You know, if you sent the wrong thing, you've sent something else that you could have sold that is not in the warehouse that could be now in an oversold state...at volume, that little dot of a percentage point also is resulting in unhappy customers.”
Customers will be returning items. Set up a great self-service return system.
“you do have customers that are, “I'm going to order this pair of shoes. Sometimes I'm this size, sometimes I’m that size depending on the manufacturer. I'm going to order both pairs and I know I'm going to return one of them.” So that happens. So from a business perspective, and this is one of the things that we help with, and we have partners that we work with as well, to make the returns process as smooth as possible. Self service; so I can decide this item doesn't work for me, I can go online and create the return myself, print the label, someone can come and pick it up and take it away. That's fantastic.”
Use returns to strengthen your customer bonds. How? Offer a future discount, grant proactive refunds, or replace the product.
“Being able to quickly respond to someone, turning that return experience into an opportunity to either cross-sell something else or at least retain that customer. It's an opportunity to delight them. If they're unhappy, you can delight them by giving them a discount on something else or tell them, "Hey, you're going to return the item. We've already given you a refund, even though it hasn't arrived yet," or "We've sent another one too." So there's lots of opportunity to actually turn a return moment into a way of just further strengthening the connection with the customer.”
Products get to customers faster, and companies save money in the process.
“one of the things that we really focus on from fulfillment as a service is we have a network of warehouses. So we're essentially taking on Amazon at their own game when it comes to national distribution of fulfillment centers. And we are then moving product around that network...So when someone orders, say on the west coast, it's coming from a warehouse that's optimized for the West coast versus east coast. There's going to be a warehouse closer to that. And one of the reasons for this is it reduces shipping costs. In the U.S. we have zones which can get prohibitively expensive if you're shipping from one side to the other from coast to coast. And then the other big thing is you are not at the mercy of a major shipping carrier having a bottleneck in the main shipping hub and say Memphis, Tennessee. So by having that localized product or localized inventory, you can now rely on ground shipping, which we're optimizing for.”
Orders should be processed immediately in order to create a valuable shipping time buffer.
“So the big part of running a good warehouse or having a good fulfillment service is the responsiveness in which those orders are being processed when they're placed by a customer. So when an order comes in, it’s going to be processed in a couple of days. Like the order comes in and that team is just getting through them and they are responding as fast as possible. Because that's really where there's a lot of time that you can make up. Instead of that thing sitting in the warehouse for two days and then getting on a shipping carrier, you can ship it out either same day or next day. And you've bought yourself a day or two of time that can now be made in the shipping carrier process of getting something delivered.”
Get new interviews with DTC operators and their customers in your inbox every Thursday.