Logistics Of The D2C Store – How To Deliver, Distribute, And Keep Logistics Costs Low

Introduction

Long before the COVID-19 pandemic began to affect our lives, online D2C stores were already on the rise. 2020 witnessed accelerated global business trends towards eCommerce at a much faster rate while sounding the death knell for many traditional brick-and-mortar businesses.

With this shift towards online buying, customer expectations are exploding. A whopping 89% of online shoppers are prepared to pay extra for an improved customer experience, with the majority citing the product delivery experience as among the top three factors when choosing a brand.

As D2C grows, so too has the need to develop better logistics for eCommerce capacity, supported by the best logistics software. Unfortunately, small online sellers were unprepared for the massive influx of customers suddenly shifting to online purchases during 2020. As a result, long waiting times, package mix-ups, and capacity shortages plagued many D2C customers as sellers struggled to optimize their eCommerce logistics channels.

Seven Tips to Boost D2C Logistics

As we start to take stock of the "new normal," we look at what can be done by D2C stores to better optimize their logistics for eCommerce in getting products to customers quickly, efficiently, and affordably. We examine seven steps in taking your D2C logistics to the next level.

1. Decide Who Will Handle Shipments

Many D2C stores rely on third-party logistics (3PL) companies to handle their shipping needs. Besides the fact that most D2C store owners do not have the capital to invest in logistics infrastructure, 3PL's can keep costs low. These carriers are experts in shipping, make use of the best logistics software infrastructure, and often have a much more comprehensive network than the typical D2C store. D2C owners often have two options in making use of 3PLs:

• Professional Logistics Companies – Professional logistics companies have been operating for generations, taking products right to customers' front doors. More recently, these companies have begun to take care of packaging, returns, and stock management as well.
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  Tried and tested brands like OEX and Omnipack are two brands with proven track records, while Arvato has built a network that spans the globe.
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• Partnering with Another e-Store – Sometimes, joining forces with other D2C stores results in a win-win for everybody involved. Often, more established brands already have an existing eCommerce logistics system in place that is willing and ready to ship your stock.

Assuming that we’ve established where we’ll manage our shipments from, it’s now time to decide how we’ll be handling delivery. Let’s discuss this next.

2. Diversify Shipping Options to Prevent Delays

Putting all of your eggs in one basket can be a risky move. For example, if your existing logistics carrier closes down, you may find yourself coming under fire from upset customers as you scramble to find a new shipping partner.

This became especially true during the onset of the COVID pandemic in 2020. With the sudden surge in demand, 3PLs could not keep up with purchases, and many D2Cs found themselves unable to service their customer's needs.

Depending on where you are operating, how far you're able to deliver, and the types of products you sell, D2C owners may consider the following options in optimizing their logistics for eCommerce:

• Hiring Your Own Delivery Staff – allows D2C stores that only operate on a local scale or within a major city to handle any overflow or shipping backlog themselves.
• Signing with Multiple Couriers – covers your bases if one of the providers becomes unavailable, is fully booked, or closes down. Simply turn them to one of the other companies. Depending on your products, you could also consider signing with a service like Uber Eats or Deliveroo.
• Pick-Up and Parcel Lockers – This cost-efficient logistics solution allows customers to order your products and then collect them from a secure locker using a code or app to access their already delivered goods. Some established partnerships are already reaping rewards for many big companies:

1. Mondial Relay – Has partnered with H&M in offering over 11 000 pickup points in France. During COVID, this delivery option proved especially popular, virtually eliminating the need for customers to sign with delivery personnel.
2. InPost Parcel Lockers – Is another provider that is making a big impact in eliminating the need for customers to visit stores or deal with delayed deliveries.

3. Reduce the Number of Carriers to Negotiate Rates

While making sure that a diversified logistics for eCommerce framework gives you flexibility in managing your costs, be careful not to have too many of these partners on your books. Logistics specialists take advantage of economies of scale, keeping costs low by providing their services for multiple eCommerce and traditional stores.

Many companies offer attractive discounts for their clients to increase their package volumes. At the same time, D2C's can use freight volumes as leverage in negotiating better fees and rates with their carriers. Now, this doesn't mean that you should become completely dependent on one carrier in reigning in costs, as discussed above. That being said, try to strike a good balance between making use of a diversified logistics channel while building solid partnerships.

4. Introduce Cross-Docking

Cross-docking essentially eliminates the need for a seller to store inventory. Products are transported straight from the manufacturer and offloaded onto another form of transport that takes the goods directly to the customer.

Naturally, this allows for massive cost savings in removing the need for storage space and streamlines the supply chain, boosting overall efficiency. However, while there exist different forms of cross-docking approaches, this just-in-time inventory model generally requires some focused capacity.

• Visibility - To take advantage of cross-docking benefits, sellers must have a complete idea about production rates and transit times.
• Software – The best logistics software systems are required to couple orders with inbound freight in very short timeframes. Logistics software is now necessary for keeping up with orders while communicating updates to both the D2C seller and customer.
• Integration – Small to midsize companies making use of cross-docking must make an effort to build effective communication channels with logistics companies, efficiently coordinating activities throughout the process. This is imperative in warding off chronic delay problems.

5. Consolidate Loads (Including Teaming Up with Competitors)

D2C sellers are all trying to achieve the same logistics for eCommerce goals: ship their products while keeping costs as low as possible. Often, a D2C seller will find that their entire sales for the month still do not fill up a truck, resulting in a higher cost per delivery than if the truck was full.

To combat this, online brands are teaming up with one another, consolidating their products for delivery into larger, more affordable ‘loads’ – especially when their products are going to similar customers, in similar areas.  

This allows them to take advantage of the discounts offered by carriers for higher volumes, with more deliveries going out in fewer trips. While many products within a consolidated load may come from competing D2C brands, the sale has already been completed, meaning that nobody is losing out.

6. Synchronize Your Inventory

Effectively managing your inventory can be a tricky endeavor. Too much stock sitting in a warehouse for months on end can quickly become very expensive, while not enough inventory in reserve may mean you cannot satisfy your customers' needs, should there be a sudden spike in demand.

Choosing the best logistics software systems is crucial when looking to make use of inventory management software (IMS). These systems allow you to take care of this tricky task, empowering you to keep track of your inventory levels, monitor trends, and avoid stock-outs. These systems are designed to track products, inventory, orders, and fulfillment both to and from customers as well as among suppliers.

It is vital to ensure that your IMS is tailored for your business. Shopify Plus, for example, recommends IMS solutions based on the specific needs of different D2C sellers.

• Stitch Labs – integrates well with Shopify, managing mostly U.S.-based brands.
• TradeGecko – is geared towards offering IMS solutions for small and medium online brands.
• Orderbot – is great for fashion, homeware, and food D2C brands.

7. Offering Free, Fast Shipping

It's no secret that free shipping is fast becoming the norm among D2C value offerings. Brands that fail to realize this are losing out on customers looking for better value and affordability. Gone are the days of waiting for two weeks for products to arrive, replaced by more demanding expectations for speedy delivery.

While it may be difficult for some D2C brands to incorporate free shipping into their models, the benefits will soon offset any short-term cost implications.

• Free delivery increases closing rates – According to influencer expert Shane Barker, nearly 60% of cart abandonments arise due to extra shipping costs.
• Same-day delivery is on the rise – Invespcro states that 56% of online customers expect same-day delivery, and 61% are willing to pay more for a 24-hour turnaround.

Summary

When it comes to providing the ultimate customer experience, D2C sellers must consider every aspect of the consumer's interaction with the online brand. From the research phase to receiving the final delivery, there are many elements to consider in optimizing the UX.

Take care in choosing the right logistics carrier for your brand, and know if it might be better to partner with other e-stores over making use of a 3PL company. Diversify your shipping options, but keep your partnerships limited in negotiating shipping costs. Consider introducing cross-docking and consolidated load options and investing in the IMS solution best suited to your business. Finally, don't get left in the cold – add free, quick delivery features to your model.  

One of the most critical issues faced by online sellers is the complexity and challenges of developing a low-cost eCommerce logistics model without compromising delivery efficiency and reliability.