Wednesday, 11 December 2013

Ecommerce Business partners: Shipping integration

You have listed the products on the website, and collecting the money through payment gateways. Now the next part is to ship the product to the customer. Your service quality depends on this critical component and it  costs a lot to you, as well. So being frugal, prompt, secure and correct delivery directly correlates to your good service and  success. We briefly discuss possible shipment choices.
  1. FBA: Fulfillment by Amazon
  2. Outsourcing to third party logistics
  3. Building your own logistics company

FBA: Fulfillment by Amazon

When a customer order arrives you need to find the items they have ordered from your storage area, pack them and ship the order to the customers. Even after doing this hard work, you get customer queries regarding the order (may be regarding the customer not getting the order, or may be the product is not the expected one of the customer), and you need to answer those questions patiently. And if the customer is not satisfied with the product you have to ask them return the product and ship the new product to them. All of these operational work (picking, packing, labeling, invoice, shipping, managing returns, taking customer queries) take lot of time and causes frustration to the sellers. And you, instead of concentrating on increasing the customer orders, you spend more time doing these types of activities. So by choosing FBA you can scale fast, you can provide good customer service, but at the same time it costs a lot also. Please do read out post on this: How to start in a lean way : Fulfillment by Amazon. Comparing FBA and other third party courier companies is like comparing mangoes and oranges because the value proposition of two methods is different.   FBA caters bundle of things like (picking, packing, labeling, invoice, shipping, notification, managing returns, taking customer queries) whereas courier companies only shipping.


Outsourcing to third party logistics

In this option, yourself prepare the shipment (pick, pack, label, generate invoice) and handle over to the courier company. You should comply with the courier company terms and conditions, and pricing. As you are preparing the shipment it saves a lot, but you have to manage all these operations. The biggest challenge here is to choosing the right courier for the shipment. Few courier companies have some conditions with type of packaging, and product types, and few are not available in some geographical location. Out of feasible courier companies there are some nice tradeoffs - Delivery SLA (number of days), quality of service, pricing. This critical step of deciding the right courier company for each shipment should be done by your software. Please do read our post on the same Courier selection logic: How to decide the right courier company for your shipment - part-1 and Courier selection logic: How to decide the right courier company for your shipment - part-2

Building your own logistics company

This doesn't make sense till few years, till you have significant volume of orders and have huge capital. After that it make sense to have your own logistics company.  By having your own company you can increase brand value, better service and it will be cost effective on the long run. If it is not possible, then at least you ca have transhipment for intercity movement of goods, we will cover more on this in our future posts.

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