As e-commerce retailers know, free shipping is never truly free. Instead, the buck gets passed from the consumer to the retailer, making it difficult for smaller brands to compete.
For example, direct-to-home supply chains will cost retailers upwards of three times more than a store-based model--costs that many smaller brands simply can’t absorb. In some quarters, even Amazon, one of the most revolutionary and successful retailers of our time, only recovers about 55% of its shipping costs. That’s a lot of cost for any brand to carry, even for a single quarter.
At the start of peak season, many retailers have already faced huge costs related to merchandise returns thanks to the unprecedented levels of online shopping driven by the pandemic. These retailers are bracing for a second wave of shipping costs that will follow the current holiday season, and desperately searching for ways to make their supply chains more efficient and sustainable. But how?
That’s why we were pleased to have the opportunity to talk with Spend Management Experts’ CEO and founder, John Haber, who regularly offers strategic guidance to large organizations looking to optimize their supply chain spend by reducing transportation distribution and fulfillment costs.
“GEODIS is a great example of what Spend Management Experts looks for, for our clients,” says Haber, “Our mission is to help them achieve the best service levels at the best price in an environment that protects their brand, that delivers on time, and leverages technology well.”
Spend Management Experts helps organizations change the way they view the supply chain, by looking at different distribution models and utilizing technology that facilitates increased efficiency throughout every stage of the fulfilment and delivery process.
“You can only squeeze so much cost savings out of negotiating a price,” Haber explains, “Once you’ve squeezed all of the excess cost out of it, you have to look at ways to do things differently.”
“Part of the strategy we look at is how can you divvy up parcel volume and not get tied into putting all of your eggs in one basket,” said Haber. “Because the people who have all their eggs in one basket this peak season are the ones who are in trouble right now.”
Those unfortunate enough to be tied solely to big name parcel carriers this season are experiencing huge cost increases and lack the leverage necessary to find other arrangements this late in the game.
Brands must adapt under these fourth quarter conditions and the additional pressures the pandemic has placed on them. Moving to an omnichannel environment can help to localize deliveries, using brick and mortar spaces as micro-fulfillment centers to get things delivered same-day or next-day. Some are employing other contactless solutions like Buy Online Pickup in Store (BOPIS) and curbside pickup.
Another area of cost savings to be considered is monumental expense the returns process will have on a brand.
“While customers typically expect free shipping on outbound shipments, they all fully expect it on returns,” says Haber, “And when you look at these retailers that have returns rates as high as 30%, it’s just not sustainable.”
During peak returns season, companies will handle upwards of 45% of the year’s total returns volume, so a strong reverse logistics strategy is crucial for minimizing processing costs and recovering as much value for these returns as possible.
These costs can include labor overtime and re-inventory processing costs.
“There will come a point where consumers will have to stop using ecommerce as a dressing room because they can return whatever they don’t want for free,” Haber points out. But until that happens, many are forced to find ways to optimize their returns processes to keep their brand in good standing with the general public. Since the returns process is also a crucial part of the overall customer experience, companies who fail to do right by their customers will most certainly lose future business.
Reverse logistics is still inefficient for a majority of companies, but options for cutting these costs can come through partnering with third and fourth party logistics providers that are equipped to manage the entire returns process, from merchandise pickup to merchandise return to market. And 4PLs like GEODIS | City Delivery are getting creative with their returns management strategies.
For example, GEODIS | Zipline is the companion app for last mile and same day delivery services from City Delivery. GEODIS | Zipline is a cloud-based software application, consisting of native iOS and Android mobile applications and an operational web portal. GEODIS | Zipline allows GEODIS | City Delivery clients to see live GPS visibility of driver activity, provide optimized routing to our driver partners and send real time updates to our clients via API. And GEODIS | Zipline also helps drivers assist with a rapid returns management process on a local scale.
In the end, those brands who are able to adapt and optimize their supply chains to accommodate this ever-evolving world will be the ones to not only survive the peak holiday and returns seasons, but whose profits despite steep shipping surcharges will speak for themselves.
See how GEODIS City Delivery’s last mile and reverse logistics solutions can take the pressure off of your brand this hectic holiday season and beyond to peak returns season which is not too far behind!