Industry Insights From Renewal Logistics:
The Biggest Challenges of E-Commerce
NEARLY 20% of Retail purchases take place online
E-commerce sales have scaled rapidly over the past decade – particularly during Covid-19 lockdowns of the past several years. Just ten years ago, about 8% of retail sales were made online. Now that has risen to nearly 20%. E-commerce is especially important in the areas of health & beauty, media, consumer electronics, fashion, and home goods.
Establishing a well-oiled e-commerce operation helps businesses sell to a wider range of consumers who may not live near retail locations or who don’t frequent commercial areas. This can also increase total sales. Today, many businesses are even making e-commerce their primary focus and avoiding the property costs of high-rent commercial districts.
Getting started in e-commerce is an absolute must for any retailer interested in scaling up their sales volume. But this is easier said than done. E-commerce is more complicated than in-person sales. Shipping, digital communication, and website management are all new factors that come into play with e-commerce. These factors also bring along new challenges for retailers to overcome.
In today’s post we’ll be discussing the top ten challenges that face retailers in e-commerce. Read through the list to get an idea of what to expect when you make the leap!
Breaking it Down:
Top 10 Challenges of E-Commerce
1. Setting Up Your Website
Many traditional, brick and mortar stores have simple websites where their customers can find their store location and operating hours. They may have a few additional features like a contact page, photo gallery, and press section, too. However an e-commerce website is much more complex than a simple informational website.
For one, an e-commerce website needs to be constantly updated to reflect accurate inventory, prices, and promotional sales. If an item goes out of stock, you need to be able to instantly update the website so that users do not accidentally purchase items that are unavailable.
Luckily, there are many platforms available today that retailers can use to set up an online store without building a complex e-commerce site from scratch. Shopify is a favorite in the space due to the wide range of plug-ins and integrations available. With these you are able to customize your site to fit with your specific business needs and sales funnel.
Aside from Shopify, it is worth checking out some of the newer platforms available, which also tend to be more affordable. These include PrestaShop and Zyroa, to name a few.
When choosing from these platforms you ought to consider pricing, native features, and available plug-ins. Any platform will allow users to order and pay for products. However, there are a number of additional features that you may want included in your website setup. Consider whether you want inventory tracking, live chat features, returns management, free shipping after a threshold sale amount, reporting, and email integrations.
Generally, more expensive plans include more features and flexibility. However, you can often find free plug-ins to expand the capabilities of a less expensive choice.
2. Shipping Expenses
The majority of e-commerce retailers use third-party package carriers to deliver orders to their customers. Even Amazon, one of the country’s biggest online retailers, relies on organizations like UPS and USPS for some of their deliveries.
Working with carriers is important because it saves you or your employees from trekking all over the country hauling packages. However, the cost of these services can certainly add up as you scale your business.
The three major shipping partners are USPS, UPS, and FedEx. Of these, USPS generally offers the lowest price while FedEx is generally the most expensive but also the most reliable. For all three, prices are calculated for each shipment based upon distance, package size and weight, packaging type and speed.
While no-rush shipping is one way to save on shipping costs, customers often prefer to receive their orders in as little time as possible. Particularly when small businesses must compete with speedy companies like Amazon, the pressure is on to deliver packages fast.
A more seamless way to reduce shipping costs is by working with a 3PL company instead of directly partnering with carriers. 3PL companies often have existing relationships with shipping companies and can ship items at a lower rate and even get better tracking options than are available to most small retailers, simply due to volume discounts.
At Renewal Logistics we offer shipping support as part of our fulfillment and distribution service.
3. Shipping Damage
Sometimes packages are lost in transit and sometimes they arrive on time but are broken into pieces. In any commercial operation, there is always a risk of damage to fragile products. Even in brick-and-mortar stores, an item might fall off a shelf or be damaged from improper storage. However, shipping items across the country dramatically increases the opportunities for damage to occur. During shipping, each package is handled by many hands and comes into contact with many other packages in the process. While carriers do their best to keep packages safe, they also need to work efficiently. They can’t keep a close eye on every single package to make sure it is kept safe throughout the journey.
Oftentimes, you only discover that an order has been damaged in shipping when a customer submits a complaint. No e-commerce retailer wants to receive this kind of message. They want their customers to see their products in the best condition possible, especially upon first receiving them in the mail.
As with lost packages, damaged packages cannot be prevented entirely. However there are preventative packaging measures you can take. When packaging your products be sure to tailor your packaging strategy to each product type. You need not waste excess padding on products that are very durable, but do be sure to thoroughly protect more fragile items.
Additionally, consider the mode of transport your package will take. For example, when shipping via FTL and LTL, be sure to wrap pallets very tightly and ensure that no items are hanging off the sides. To avoid pallets being precariously stacked, arrange items so that nothing can be stacked on top of your pallet.
Lastly, always ensure the value of your package is accurate if the product you’re shipping is worth enough money to justify buying shipping insurance.
4. Vendor and Inventory Management
When you take on the challenge of e-commerce, you will be able to rapidly increase the number of units that move through your facility each day. This means more revenue for you! However, it also means more inventory that you will need to manage.
Inventory management is extremely important to running a successful operation. You must make sure all of your units are properly scanned and counted before they are sent off to the customer, or stowed away in your warehouse.
Vendor management goes hand-in-hand with inventory management. This is the process of finding vendors, ordering from them, paying for orders, and ensuring they deliver top-quality products. The more inventory you bring in, the more complex vendor management becomes, particularly when working with a wide range of different vendors.
In order to master inventory management and vendor management, it is worth looking into management software products like SAP or Manhattan. To learn more about proper inventory management see our recent post all about this topic: How to Manage Your Inventory. If you need support in inventory management, Renewal Logistics can help with that. Reach out to us for more info!
5. Rapid Scaling
A major challenge for e-commerce retailers is keeping pace with fast growth that may come along with moving online. E-commerce sites can sometimes experience sudden upticks in growth when a happy customer shares their experience on social media. This is certainly cause for celebration. However, it also presents a challenge because it makes sales volume difficult to predict and sometimes more volatile than traditional commerce. For example, if your operation has been steadily filling 20 orders a day and then suddenly you receive 1,000 orders in one day, you likely lack the manpower to fill these expediently. Without flexibility in your processes, this could result in long delays – and dissatisfied customers.
E-commerce retailers need to be able to pivot their operations quickly in order to fill surges in demand for particular products. This means you need to be able to work with vendors to quickly increase quantities of these products. You also need to have space in your warehouse facilities, enough packaging supplies and enough workers to prepare shipments.
The volatility of e-commerce demands flexibility, adaptability, and quick-thinking. Working with a 3PL partner can help small businesses insulate themselves from some of this volatility. At Renewal Logistics we have plenty of experience with fast-paced changes and high volume. By storing your product with us, you can avoid the headache of setting up a warehouse configuration, which then needs to be re-configured six months later following a growth phase.
6. Returns and Exchanges
In e-commerce it is absolutely essential to set up an easy-to-understand and customer-centric set of policies for returning and exchanging purchases. Customers miss out on the chance to see products in-person before making a purchase so they rely on the ability to return something if it doesn’t quite meet their expectations.
Returns and exchanges can be a bit of a headache for e-commerce retailers because they require at least one additional round of shipping. Additionally, you’ll need to re-inspect returned items and make sure they are properly replaced in your warehouse.
However, making your business return-friendly is essential to creating a positive customer experience in online retail and will pay off in the form of customer satisfaction and perhaps even additional sales.
7. Worker Shortages
This challenge is currently affecting nearly all segments of the retail industry and is not isolated to e-commerce. However, it is certainly something to consider when thinking about expanding your business operations.
The rate of workers quitting jobs hit 3% in 2021 for the U.S. economy as a whole but this was higher in retail at 4.4%. This trend, along with a surge in online purchases by consumers, places e-commerce retailers in a crunch.
To make sure that you have a sufficient work force to fill orders, manage operations, and sort items, it is important to begin the hiring process early. It can take up to two weeks to hire floor workers and even longer to fill senior positions. If you need to hire C-level people there is a strong possibility that you will go through multiple rounds of recruiting before you find someone who is the perfect fit.
If this process sounds daunting, you might consider outsourcing warehousing and operations to a 3PL. This can save you some of the headache of finding additional staff to manage these parts of the business.
If you outsource warehousing to a 3PL you can also avoid having to go through mass hiring for floor workers, equipment operators, drivers, etc.
8. Setting Up Operational Processes
One of the greatest challenges you will face in e-commerce is the initial set-up process. You will need to put a good deal of time and thought into setting up air-tight strategies for inventory management, shipping, and fulfillment. This may take some trial and error, but once you’ve nailed it, it will improve the function of your operation immensely and make things easier on you, your employees, your vendors, and even your customers.
Since this step is so critical, it is worth consulting with an expert or even outsourcing these processes. You might even consider outsourcing the entire process. If you take the outsourcing route, you won’t be alone 90% of Fortune 500 companies outsource logistics.
9. Balancing the Cost of Infrastructure with Growth Investment
Once you begin investing in infrastructure for a scaling e-commerce operation, you’ll find that costs can add up. Making sure that your e-commerce company is flexible enough for sales fluctuation and well-positioned for growth means you will need to invest in savvy executives, top-tier management, and a good amount of warehouse space.
While these are all great investments, be wary of how much of your profit goes toward new overhead costs. You will need to have cashflow on hand to keep growing your customer base and filling a growing number of orders.
10. Personal Time Commitment
E-commerce is a fast-paced business. Companies like Amazon reward retailers who can manage same-day shipping and customers have become accustomed to receiving their orders quickly.
Especially when running a small business, you may find that your own time is getting tied up in day-to-day operations and making sure processes are running as efficiently as possible. Today, many high-growth businesses get their start on social media with talented creators of content and products. When creators get submerged in the logistics of packing, shipping, and order processing, these creative businesses can begin to lose their spark.
As an example, look to Beam Electronics, a McDonough, Georgia company founded in 2013, which produces a wide variety of mobile phone accessories. Beam started off as a small Amazon vendor, but after being featured on a few deal sites, they saw swings of velocity of thousands of units per day. Because they were able to keep pace with those velocity demands, they continued to grow at a fast pace to sales of over 8 figures. Beam was featured in People Magazine in 2021 and Rolling Stone in 2021, when demand for their products sky-rocketed.
Instead of devoting all their time to filling the huge volume of orders, Beam enlisted the help of Renewal Logistics. That way, the Beam team was able to carry on brainstorming, developing, and creating optimally user-friendly products. Renewal Logistics handled the warehousing and shipping and helped Beam to garner 85,000 customer reviews for an average rating of 4.5 stars!
If your business is also rooted in creativity and big ideas, it is certainly worth offloading the logistics work to a third-party company so you can carry on being the brains and heart of your operation.
We'll Help You Rise to the Challenge of E-Commerce
E-commerce offers exciting growth opportunities for retailers and online consumer purchases are at an all-time high. However, it is not without its own challenges. From navigating the digital world to fostering customer trust from afar, e-commerce will put your skills to the test.
If you need help taking your business online or scaling up an existing operation, Renewal Logistics is here to help. We specialize in logistics, fulfillment and warehousing for small businesses and can help you overcome the common challenges we see everyday.
Reach out to us today and tell us about your business plans!