Setting up an e-commerce logistics map is not as simple as setting up a website and selling products online. Beyond the technology investment of setting up an online platform for business, the move into e-commerce requires significant preparation and consideration such as product configuration, suitable infrastructure, logistics automation, and supply chain preparedness. A well-thought-through business strategy is essential.
In e-commerce, logistics plays a very significant part. It relates not only to the last mile of shipment of packages to customers but also to the general performance strategies.
Today, clients want to quickly and conveniently deliver their products. They expect service and can find shipping velocity and comfort as significant as the item’s cost and value. At the same moment, an increasing amount of goods is selected, packaged, and transported, although in lower parcel dimensions. Hence, businesses need to quickly produce large quantities of shipments when it arrives in e-commerce logistics, sometimes even within a particular or small shipping time frame.
Not all e-commerce companies can withstand the heavy price of service and high operational cost for delivery to their end customers. Often, companies cannot fully handle the expenses and therefore transfer these expenses on to their customers. Unfortunately, this can cause prospective customers to leave out e-commerce.
Everything to know about eCommerce logistics:
1. E-commerce logistic strategies:
There are three wide business model classifications based on their e-commerce logistics policies, they are:
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- Online retailer model
- Aggregator business model
- Business to Business (B2B) marketplace
- The high failure rate for delivery
2. Online retailer model:
In the online retailer model, most e-commerce companies keep their own stocks in the online retailer system and control their own supplies. Inventory and distribution expenses would add to the expenses that have to be absorbed by the companies or their customers.
3. Aggregator business model:
The companies would function as integrators for the aggregator business model in the aggregator business model without having their own stocks or monitoring supplies. However, they would have overall stock and shipment instructions for all providers listed on their website for their products. Individual suppliers or their customers would bear the price of supply and distribution.
4. Business to Business(B2B) marketplace:
Finally, the marketplace model of B2B would usually link customers and vendors via an internet portal. It is also possible to offer add-on facilities for warehouse and logistics alternatives to provide vendors with more value-added services.
Companies can also choose to have a hybrid business model. An e-commerce system, for instance, combines both the internet retail model and the aggregation model. This e-commerce system also contains products from other distributors on its page other than offering its own products. This improves the quantities of transactions and makes shipments cost-effective.
5. Challenges in E-commerce logistics:
There is still a gap between the results of e-commerce operations and the aspirations of customers. The greater expenses do not match the enhancement of excellent and safe logistics facilities.
This shows that logistics expenses are too big for many e-commerce companies, ultimately passing the expenses on to their customers. One of the greatest problems of effective e-commerce logistics is cost management.
6. The main causes of these challenges are:
- Poor infrastructure for transport
- Lack of readiness for the warehouse
- Inefficient Last-Mile Delivery
- Separate deliveries to the same customer
- Customs and excise procedures are inconsistent and time-consuming
7. Poor infrastructure for transport:
To guarantee effective last-mile service, you need an effective road network. According to Jones Lang La Salle, the greatest concern for improving logistics is to upgrade highways and reduce delays in the region.
However, poor transport infrastructure may not be the only cause for e-commerce logistics challenges, especially in cities. Moreover, urban traffic may lead to inefficient last-mile delivery.
8. Lack of readiness for the warehouse:
Land scarcity poses a big challenge in setting up dedicated e-commerce stores. Despite the scarcity of land, warehouse use is relatively small. Many companies run their own low-capacity factories, and some stores stay empty each year, presenting an estimate of 7.7% of the complete available warehouse space.
9. Inefficient Last-Mile Delivery:
Many logistics companies are still familiar with cash on deliveries and other e-commerce facilities. To advance e-commerce, they need further refinement in their procedures. Local post office operators, for instance, discover that they are often unable to satisfy the demands of distributors and customers.
The increase in the number of cars is another major problem in the last mile delivery. Rising needs for products or individuals for shipping can lead to uncontrolled growth in the number of cars, trucks, etc., resulting in congestion of traffic. Unlike the increasing number of vehicles, such vehicles, particularly for the transit of commodities, are not ideal most of the time.
10. Separate deliveries to the same customer:
It is derived that there is limited delivery consolidation between retailers. It means that a customer has to the respective websites to place separate orders. Hence deliveries are made separately.
In this process, the customer has to wait for a long period of time to receive separate deliveries, but it also creates un-necessary trips that increase the logistics costs.
11. Customs and excise procedures are inconsistent and time-consuming:
Cross-border e-commerce is required in restricted domestic markets, and shipments may be prone to import duties. These import duties differ extensively between nations, affecting the region’s diverse e-commerce industry and acknowledging customers. There are also separate limits, VAT, and duties for different kinds of products. Importing certain categories of products also needs export licenses in some counties.
12. The high failure rate for delivery:
Based on several studies, delivery failure rates are found to be higher than 15%. The primary causes of unsuccessful deliveries are- no one was there to receive consignments or if there were indications of wrong addresses. The delivery company may need to make another trip for each failed delivery, which incurs an additional delivery cost.
To avoid unnecessary return trips and incur extra costs, some companies may involve customers to collect the undelivered packages from specified places, such as at main offices or parcel lockers. It can create customer inconvenience.
Finally, setting out on the e-commerce journey needs effective logistics.
Without restructuring and cooperation, there would be inefficiency in all logistic shipments, worsening various distribution suppliers, wasting operational resources such as vehicle idle time, human resources costs, elevator use, and parking spaces.