As the seismic shift toward digital shopping unfolds and more and more global consumers seek out the goods they need online, the critical importance of logistics only becomes clearer by the day.
Facing rising demand—not to mention more demanding consumer expectations—today’s brands must shore up their supply chain solutions in order to drive and sustain ecommerce growth. Use this guide to understand the components and key strategic considerations for ecommerce logistics.
What is Ecommerce Logistics?
Ecommerce logistics encompasses all of the processes involved in getting your product into the hands of customers—from storage and packing to shipping and delivery.
Logistics for ecommerce brands isn’t just a necessary part of doing business and completing the shopping experience. It’s also something that can be improved and leveraged as a competitive advantage. Likewise, it can be fraught with risk: those businesses without sound logistics practices risk missing out on new customers and losing existing ones.
The components of the ecommerce logistics
Much of that risk comes from the complexity involved in logistics, which is comprised of these primary components:
Ecommerce warehousing and inventory management
Warehousing refers to the storage of goods, while inventory management is the process of tracking and managing items in the warehouse. This involves maintaining optimal stock levels, minimizing storage costs, and reducing lead times. It also includes inventory forecasting, to ensure that the most popular products are always in stock. These days, inventory management also requires complex decision-making around what to do with returned items—whether it’s best to restock, destroy, donate, or recycle them. (More on returns below.)
Ecommerce order processing and fulfillment
Once a customer places an order, it needs to be processed and fulfilled. This means identifying which warehouse has the product in stock and is located closest to the delivery address to reduce delivery time. Once details are sent to the warehouse, the right products must be pulled from stock, packaged, and passed to the relevant carrier who will handle delivery.
The shipping and delivery portion of the ecommerce fulfillment process is a crucial part of every customer experience. After all, no sale is complete (or successful) until the sold items are actually received. Although it’s usually handled by third-party shippers and carriers, ecommerce brands still need to closely scrutinize and manage this part of the process and be sure they have the right relationships in place.
Ecommerce returns and reverse logistics
Last but certainly not least, there’s reverse logistics. Returns are an inescapable aspect of ecommerce these days. According to the National Retail Federation, approximately 16.5% of merchandise purchased online in 2022—worth about $212 billion—was returned.
While there are strategic decisions all businesses must make to minimize the occurrence of returns, the reverse logistics process of accepting, tracking, and processing returns is a key part of ecommerce logistics. Having an efficient reverse logistics process is critical to minimizing costs. Making it easy for shoppers to return items is also essential to maximizing customer retention. According to research from Klarna, 84% of shoppers would stop doing business with a brand after a poor returns experience.
Other essential aspects of ecommerce logistics
These components of logistics comprise what’s commonly called the ecommerce logistics or supply chain. But they’re far from the only aspects of running an ecommerce business that have to do with logistics. To build a successful approach to logistics for ecommerce, you should also consider the following aspects:
- Shopping, checkout, and payment: It can be too easy to see the front end of the ecommerce customer experience as distinct from logistics. In reality, these are two sides of the same coin. Localized, transparent shopping, checkout, and payment processes must be directly integrated with back-end aspects of the logistics chain in order to ensure efficiency is achieved.
- Technology integration: Likewise, ecommerce technologies must be integrated throughout the logistics process and work seamlessly to drive speed, scalability, and ultimately profitability.
- Customer service: Logistics chains must be coordinated with customer service operations, too. Although customer service teams deliver assistance for a variety of customer needs, equipping them with visibility into your logistics operation is vital to offering effective support.
Ecommerce Logistics Best Practices
In order to wrangle the complexity of ecommerce logistics in today’s increasingly global context, businesses need to develop a comprehensive strategy that serves their overall business goals. Keep these essential best practices in mind as you look to cultivate your own successful approach:
Meeting customer expectations for transparency, cost, and speed
Between fast shipping times, simple returns, and transparency around the total landed cost of international shipping, today’s online shoppers have high expectations. Striking a balance between profits and the costs of meeting those expectations is a key consideration in logistics management.
Speed and cost remain ecommerce customers’ highest priorities. So, at the end of the day, if it takes too long or costs too much for a package to reach a customer, every other value-add you offer along the way is probably for naught.
Again, however, it’s not just about delivering the greatest speed and the lowest costs: it’s also about transparency and fulfilling expectations. In addition to minimizing shipping costs, your brand should also make them clear to customers up-front. No customer wants to receive an unexpected bill of customs and import charges when they receive their package. To avoid these surprises that can lose customers, offer a Delivered Duty Paid (DDP) shipping experience, rather than Delivered at Place (DAP).
Payment processing. Tax collection and remittance. Fraud screening. Fulfillment orchestration. Stock forecasting. Resource planning. The list goes on—but each of these aspects of logistics represents an opportunity to incorporate automation that drives efficiency. If your business is unable to uncover automation opportunities on its own, then a logistics partner is standing by to help you improve and optimize your technology stack.
Improving supply chain diversity and resilience
If the last few years have taught ecommerce businesses any lesson, it’s that disruptions can happen anyhow, anytime, anywhere. Avoiding disruption along your supply chain isn’t always unavoidable, but there’s still no doubting the value of diversification.
Scaling to accommodate changes in demand
In addition to diversity and the flexibility, an ecommerce business needs scalability to meet sudden changes in demand—and you (or your logistics partner) need to be able to deliver it across labor, automation, warehouse management, and order management.
Choosing a logistics partner
Logistics encompasses a dizzying array of processes—all of which are (or should be) interconnected and essential to business growth. From achieving speed and lowering costs, to driving automation, improving resilience, and unlocking scalability, third-party logistics (3PL) partners can help you overcome complexities and build the ecommerce logistics chain you need. If you have your sights set on rapid growth, especially in today’s increasingly global ecommerce environment, the capabilities and economies of scale offered by a 3PL partner can help you reach your full potential.
Going International with Global Ecommerce Logistics
With one seamless integration, Digital River ecommerce logistics services give you access to one of the industry’s largest global logistic networks. Our flexible, comprehensive solution can enhance and expand your existing supply chain to help you transact and ship wherever your customers are located—with cross-border, regional, and in-country shipping support to over 240 markets. We also offer a seamless and economical way to process returns, featuring a branded customer service portal and 220 global warehouses.
Want to learn more about how to reduce complexity and drive risk-free global growth with Digital River? Connect with us today.