Simply getting items in a box and out the door, or in the case of returns, out of the box and back on the shelves are the two most basic functions in e-commerce fulfillment. But even those two most basic of ideas can be quite complex. Let’s dive into these core processes and examine where the costs add up.
Getting packages out to people who order online generally means shipping through a parcel service. Parcel services all have their own rates, and that means you may benefit from using shipping software that will rate shop between carriers and validate shipping modes. In addition to that, shipping costs have to include packaging materials as well: things like the boxes items are put in, void fill like packing peanuts or airbags, packing lists, tape, and shrink wrap. All of these costs add up very quickly when you’re shipping out thousands of packages a day.
But again, location makes a big difference in shipping costs. If you’re shipping to someone in California from a location in New Jersey, but there’s a retail location of the store with the item on the shelf a mere 20 miles away from the customer, shipping across the country isn’t the most economical choice. In this case, omni-channel distribution is an option, where items are shipped from their nearest locations. Omni-channel distribution, however, comes with its own associated costs and challenges and are well beyond the scope of this discussion.
So many retailers entering e-commerce focus so much on shipping that they forget about the returns. Being able to process returns efficiently is just as important as shipping things out quickly. When items are returned—because customers were sent a wrong item or simply because they don’t want it anymore—they have to be processed. Any returned item has to be inspected for flaws or tested to ensure quality. If the item doesn’t pass, it’s not as simple as throwing it away. Defective products have to be returned to the supplier. Otherwise, the item has to be restocked and reentered into inventory for future sales and doing so quickly helps eliminated inventory fluctuations and additional costs. How? Let’s say you let returns stack up. They’re returns right? They’re not as important as sales! That’s a common thought and a critical mistake. All those returns are potential inventory. If you don’t process returns quickly, you’ll think your out of a product when you really aren’t. Therefore you’ll re-order new inventory to fill your shelves and then once the returns are processed you’re over stocked! It’s a vicious cycle, but one that can be minimized.
So what’s your take? Do you have a handle on your shipping and returns costs? How much do they contribute to each shipment you make? For more information on this topic, download our white paper.