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For the more seasoned ones who are still trying to “solve” the “logistics problem”, please stop, it is not one of those problems that you can solve, you can only find an optimum operating point but expecting anything more than that will land you in hell right besides the Logistics Devil-Demon-Evil-Satan-Monster.
For those of you who have given up and found your optimum operating point, get back up, its time to expand and ship more orders to more locations.
And the newbies, I feel sorry for the sheer amount of pain that is coming for you. I am always here for quick tips to ease some of the pain, firstname.lastname@example.org
The sheer number of variables that come in when we talk about Logistics for eCommerce is mind-boggling. Lets look at some of the broader points involved. We will consider two channels of selling for the purpose of this lengthy case study:
- Own Website | Social Media
In my previous posts I have covered the Big 6 so I will not get into that, no matter what you start selling you will generally start out with one of these 6 and eventually get on multiple. All of them provide logistics support so initially it will be all roses and lilies until the rot sets in. The commissions marketplaces are charging has gone from costly to insane.
Do your costing very well and start slow, analyse costs then only scale if profitable (Strive for Net 15-20% but it will turn out to be more of a wet dream).
The price of shipping is prescribed beforehand, always calculate on product volume, initially you will be charged on weight or simply declared values but eventually it will normalise to the volume based charge and you will not even get to know. Marketplaces have started draconian Clawback practice i.e. they will charge the extra logistics cost for shipments which were charged wrongly previously, in future, when they know the actual Physical/Volumetric weight of your product.
eBay & Amazon let you choose if you want to use their logistics service (Powership & Easyship respectively) or not, other marketplaces are not so flexible about it, they make it compulsory to use theirs’. But lesser known fact is once making a decent commission bill you can fight with marketplace to let them use your own logistics setup rather than theirs. Paytm’s NLMD and Snapdeal’s Vendor Self, Shopclues’ MDF, and underground chatter is Flipkart also allows in rarest of rare cases but personally haven’t seen them offering openly like others. This model is on offer BUT generally there is not so much freedom to choose, you have to put up your case, meet some criteria etc etc. They are right on their part and its just there for some specific reasons and specific types of sellers, but thats a story for another time.
WHY WOULD I EVER DO THAT (use my own logistics setup), you ask?
Pros of using Marketplace Logistics:
- COD orders hence more orders.
- No Management or Extra Resources required.
- Performance Metrics remain controlled and we as poor sellers remain blameless
Cons of using Marketplace Logistics:
- Increase in return rate.
- No Control over anything whatsoever.
- You will still get self ship orders from Amazon and eBay so you need a logistics setup anyway, though now you can choose not to get self ship orders on Amazon, those orders will mostly be refused by Amazon to the customer so everybody’s loss in a way.
- THE REAL COST: Not talking about Freight charges. This is what you realise at scale. That the real cost of using marketplace logistics is not less if not more than the cost of Extra Resources and Management of Logistics in house. Try doing reconciliation for any one single month, include cost of damages, reasons for returns including RTOs, whether you have received these returns and RTOs and the charges of the same. All in all it will turn out to be a costly proposition.
But volume is at the marketplaces, building that kind of sale @ Own Website takes lot of time, money and effort. So the choice is entirely on the Outlook of the Seller. The way you want to work, the principles on which you want to work. Some sellers are happy selling less making more profit, some want to less more making less profit. Neither way is right or wrong. There is only lesser of the two evils kind of way in this business.
For Any and All Self-Ship Orders we will look at the logistics part in the Own Website section below.
Own Website | Social Media
Start with accepting a few simple facts:
- You need to tie up with at-least 2 courier partners (called Carriers henceforth), be it from local courier shop or direct tie ups with eCommerce Logistics companies.
- You cannot provide same day and next day deliveries, don’t even think of trying yet. It will take away your focus. It will take another couple of years till a few carriers (The 3PLs) are operating this service at customer bearable costs. Customers will demand it and they will not be ready to pay for it, don’t buckle under pressure you will enter an inescapable dungeon. Marketplaces have increased customer expectations, it is on us to normalise them and be transparent about it.
- Issues WILL come, and you will need to deal with them. Simple.
- Deliveries won’t happen, will happen late | This is how we learn to manage customer expectations and find out ALL carriers are same, just marginally better than the other.
- RTOs will come for no reason | Buyers will refuse prepaid orders also, carriers will return shipments for no reason.
- Breakable items will break and nobody will reimburse you | This is how we learn about investing in packaging.
- You will be overcharged | This is how we learn costing & How to deal with Carriers.
- Shipments will be lost, you will get Maximum liability by Carrier after lot of followup, customer will be pissed much before anyway.
- MANY MANY times because of N number of X type of issues your CAC (Customer Acquisition Cost will become a sunk cost)
If you expect anybody will provide you even DECENT service just because you are paying for it, forget that notion. Now there are two ways to handle it, either be pissed about everything and spend all your time fighting everyone and get some of your way eventually. OR look at the bigger picture, understand the scenario and tweak your processes and business practices accordingly. I am not asking you to bow down to every whim of every one, but only to fight on reasonable things where you know you will get something by investing your time. DO NOT ignore the TIME COST of yours and your team as well.
Truth being Carriers & the even the Infrastructure (Cargo capacity of Flights & Trains) is presently not equipped to handle the shipment volumes which they are handling, so lets try and make the best out of it. CARRIERS BE LIKE:
Why 2 Carriers? Because:
- None of the carriers provide PAN India service.
- None of the carriers is the best one.
- You need a backup.
- Eventually, by trial and error you will find it cant be ANY 2 carriers it has to be the perfect combination of two or more as per your requirements.
- And further on you will find out you still need more Carriers as you scale.
Now you can either Ship to Available pin codes or Ship to All by adding India Post in the mix. It allows you to service ALL the orders and you do not have to implement a Check Service box on the checkout/product page, you become pin code agnostic but in this scenario overall delivery efficiency and your operational efficiency decreases because of a lot of distribution among different carriers as we still haven’t talked about the tedious task of after shipping tracking, raising issues and getting closures.
Logistics industry understands, one thing and one thing only, Volume. Volume of the shipment and Volume of shipments :p The rates that you will get as you start will seem to be costly because of the lesser number of shipments that you can provide but presently fierce competition among carriers has helped the rates quite a bit. More the number of shipments cheaper the rate, more the number of shipments more you will be heard. Though it is true for any business/industry but more so for this one.
You will end up doing Ship to All when it comes to Marketplace fulfilment, you will have no choice rather. But you will still need to use the most optimum mix of service and cost, remember the task is not to ship, THE TASK is to get it Delivered in least possible time with least cost possible.
With your own website there are many other factors to consider to optimise this mix, you have more control, more freedom to choose, shipping can be charged, COD orders can be controlled, world becomes a happier place again. But at what cost? At the cost of sales? Not necessarily.
- Define clear & transparent policies. Don’t hide them in a corner in the fine print.
- If item is damaged/different you can choose to get item back if it has salvage value and will cover return shipping cost as well.
- Offering return pickups is a tricky thing, avoid at the start, you can offer eventually if you have such logistics support.
- If buyer doesn’t like the item, still accept the return but do not cover return shipping charge.
- Try and charge a nominal Shipping Fee (Rs. 29-89/- I find are feasible values depending on product and product value, charging order location based fee is yet to come into picture) and COD Fee unless you are selling very high value and high margin small sized product in which case you do not need to charge it, but its just better to manage customers expectations.
- Do not promise unrealistic delivery times. Distance based and carrier given +2-3 days timelines should be defined so that you can get time to still get things delivered within timeline.
With exactly such clear cut policies I have seen many friends, clients and websites’ raking in upto 100 orders a day. The Support needs to be phenomenal. Always answer customer calls and email queries and at the earliest resolve their queries, tell them the truth. As the eCommerce industry moves increasingly towards customer paid and customer chosen shipping, it will become a necessity to offer OPTIONS. Currently carriers do not provide an array of options but specialised carriers have started coming into picture which maybe service specific like Reverse Logistics or Hyper-local or great service specific to a region. But all of this again comes at a price. A cost which cannot be borne forever.
When you are Shipping to Available, you need to have serviceability checks before you accept these orders, then in case of COD, COD service to the pin code also needs to be checked, this is only possible when you have got this built into the website or are using Advanced COD app of Shopify. Even this does not resolve the issue completely, to implement this, you need a Serviceable pin code list WHICH is valid & true only at a specific point of time in the continuum of time and space. Carriers are updating serviceability every week, every alternate day, I know of a Carrier amending serviceability EVERYDAY. Let’s assume we work with one of these carriers, how do you maintain serviceability check properly? CANNOT.
So what to do now? Now either find a ground breaking earth blasting solution to it or let’s just Ship to All. Lets get the order first, check if we can send it with available carriers and then send it or cancel it. SO SO WRONG. “Service nahi kar sakte to order liya kyuuuuuun???” “India Post se kyuuuun bheja, mere yahan courier service hai!!”
So what do you do? You tie up with every possible courier service available and then start with the Nuclear Mathematics of Serviceability, Weight, Size, Location, Cost. For one order say you end up with 3 possible options (maybe 2 for a smaller town), now toss a coin twice to choose a winner out of the 3 :p How do you decide? One is cheap, one has better service, one is the middler. So possibly, it will go to the middler if you care about service and future of your website and your customers and your self respect but as luck would have it even after all the Nuclear Mathematics the shipment still gets stuck and delayed.
So coming back, now that you know which carriers are servicing the order carrier allocation is the whale in the warehouse. Let us for a second also imagine that it is a 3Kg product (weight or volume), you can send it by Air/Express or Surface (economy/bulk), you may end up having these scenarios:
Cheaper Express Carrier, lets call it RamBharose
Costlier Express Carrier, lets call it LutGayaBarbadHoGaya
Cheap and slow Surface Service, lets call it JaaneKab
Cheaper and slightly slow Surface Service, lets call it YahiHaiWo
Can you guess the winner? YahiHaiWo is the winner obviously, but for it to be the winner you need to be able to create all these scenarios. Every order’s shipment will and should create multiple possibilities for shipping and you need to be able to select the best balanced one. For a lesser or greater weight shipment there can be even more possibilities and they will be even more confusing.
At the end, all my time was going into managing logistics while the sales tumbled. I needed to be able to manage the Business and Sales rather than Logistics ALL THE TIME. It does not and should not have to be this hard. That is how and when I decided this thing needs AUTOMATION and started working towards the same.
Moral of the story being if you have managed to manage the logistics well for your eCommerce business, you have at-least in part slayed the demon.
More on management of logistics issues in Part 2: Taming the Devil-Demon-Evil-Satan-Monster that logistics is.