With the push of a button, an Uber can promptly arrive outside my house and take me anywhere in the city I need to go. An experience that used to require calling a cab service, having them dispatch a taxi, and spending endless minutes over the phone for status updates has now been simplified into a seamless, 30 second in-app experience.
Amazon launched their Prime service back in 2005, charging customers $79 per year for free 2-day delivery across a variety of products. While Prime had steady user adoption between 2005 and 2011, it didn’t take off until 6 years later in 2011. This was due to several reasons, the most apparent being growth in their product selection. For years, Amazon had to invest heavily in their fulfillment infrastructure (e.g warehousing, shipping, etc.) to offer a wide enough selection for Prime to be valuable to customers. Similarly, Uber didn’t take off until late 2011 (2 years after being founded), as they needed to build enough network density within each city to become valuable to riders. Their asset-lite model enabled them to grow at a much faster pace than Amazon.
However, I believe that there lies another, deeper reason behind both Uber and Prime’s seemingly “coincidental” hyper-growth in late 2011. As both products became more attractive to users, they planted the seed for entirely new type of consumer – one that expects instant gratification. This created a symbiotic relationship, as the “Uber” consumer was attracted to Prime’s 2-day shipping, while the “Prime” consumer was drawn to Uber’s 5-minute pick up times. Both products built off each other’s momentum, and as they acquired more customers, their products became intrinsically more valuable.
So, what do Amazon and Uber tell us about the future of eCommerce? That the future of eCommerce will be driven by instant gratification. And that great fulfillment drives instant gratification.
Uber is now positioning themselves as a logistics network, leveraging their network density to offer same-hour delivery of household goods via UberRUSH. Amazon is pushing their fulfillment even further, spending over $4.55 billion last quarter on fulfillment alone, up from $3.5 billion the same quarter a year prior. They too are looking to control the last mile with two-hour PrimeNow delivery, and are even promising thirty-minute delivery times through PrimeAir drone delivery.
This trend will extend far beyond just Amazon and Uber. Other retailers, like Walmart, Jet and Target, will look to improve their fulfillment through similar programs (check out Walmart’s newly released Shipping Pass). Even the tech giant Google is looking to deliver Amazon-like fulfillment experiences with Google Express, offering free same-day delivery to their new customers.
Perhaps Toby Russell put it best in his TechCrunch article last August when he said “the next generation of retail will be dominated by online sales and direct-to-consumer logistics companies.” As consumers begin to demand instant gratification, great fulfillment will drive the next generation of retail.
In the world of operations and logistics, seasoned vets of commerce operations are accustomed to receiving coal in their stocking every year. Holiday fulfillment means things will fall apart, things will get delayed, or things will fall through the cracks. But it doesn’t matter, ops teams are used to getting their hands dirty every holiday season. Every one of them has already been planning for months beforehand to tackle yet another unpredictable holiday season, using two absolute truths as the core of their playbook:
1. Forecasts are crucial. If you don’t plan ahead, you plan on hurting.
Planning ahead makes it easier to handle the inevitable rush of demand. Servers and systems can be upgraded to handle the website traffic while warehouses and carriers can be prepared to staff up the infrastructure-heavy pieces.
2. Forecasts will fail.
The holiday season is a capricious one. Something can literally fall out of the sky to ruin your best laid plans*.
*Protip: It doesn’t matter how smart you are, sometimes you just can’t outwit heavy snowstorms hitting all of your Midwest hubs.
Contradictory? Of course it is, it’s the holidays. The magical season where absolutely anything can (and usually will) happen. This is where our story starts – at the junction of best practice and actual execution.
The Week Before Christmas…
One of our clients had planned to receive a shipment of containers filled with their products the week before Christmas.
That’s a lot of Christmas presents that needed to get out of a container, onto shelves, picked and packed into boxes, loaded on a carrier pick up truck, processed at a sortation center, put on a plane, processed again at a sortation center, loaded on a delivery truck, and lowered into someone’s chimney. Again, because of the work required to process these products, proper forecasting was required to get the necessary labor to keep things running smoothly. This was built into our forecasts, which we then used to prepare our warehouses and carriers for staffing. There was ample time to receive the inventory and fulfill 40,000 orders with it.
That’s when we got another holiday season curveball: the containers got delayed at customs by a week, which made our forecasts as useless as the paper it was printed on. Let’s look at the fallout.
Receiving and Fulfillment
Once a shipment of product arrives at the warehouse dock, several things need to happen before the contained products are put on shelves for order fulfillment:
- The shipment needs to have a record and must be associated with a client.
- Its contents need to be sorted and counted, while damaged units must be separated.
- The units are then transported to the pick locations.
I’ll let you visualize how many man hours are needed to receive a container full of product. All of this must be done before orders can be processed, picked and packed into boxes, and picked up by the carrier.
Thanks to our rockstar warehouse partners, we carefully orchestrated staffing and overtime schedules to receive the shipment. As inventory numbers increased, our systems slowly released eligible backorders to their fulfillment systems. Over the weekend, all 40,000 backorders were ready for shipment. Now, it was time to get these backorders where they belong – the customer’s doorstep.
At this point, it’s four days before Christmas Eve, and our warehouses managed to process 40,000 boxes that were needed to be under Christmas trees all over the U.S. Normally, trying to push 40,000 extra orders onto our carrier networks wouldn’t be a problem, but not on the 51st week of the year.
Here’s a little context:
Each year, the news labels UPS or FedEx as “The Grinch Who Stole Christmas” depending on each carrier’s holiday performance (or lack thereof). Not wanting to be in headlines this year, FedEx invested $1.6B (yes, with a B) upgrading airplanes and package-sorting systems in addition to hiring extra drivers and package handlers for the holidays. They even installed enhanced vision systems on their aircraft so pilots could land in low-visibility conditions. All of this to accommodate a projected 12.4% increase in holiday shipments. They worked with the largest shipping accounts, including us, to get accurate shipment projections so everything would run smoothly and they would avoid the “Grinch” label.
The 51st week’s projections were mostly Express shipments, but these additional 40,000 packages put us out of compliance with our forecasts. I thought this might be a good time to rope in our carrier account managers, who we have built great relationships with over the last four years. I thought, “No problem, let’s just call them and see if they can fit in a last-minute request. I know these guys, I know they’ll come through.”
Except they couldn’t, even if they wanted to. Our carrier partners couldn’t take more than a portion of the packages on the Express network. Their planes were simply at capacity*.
*Protip: You can’t beat physics. If you can’t fit those boxes in, you can’t fit those boxes in.
So I called my team for an emergency brainstorming session. It wasn’t because I wanted them to partake in the client’s agony, but because I knew this was a problem that needed a creative solution. After spending what seemed like eons (but was really only two hours), we had a strategy:
In 2015, Symphony launched multi-warehouse capabilities, which afforded 2-day transit times to anywhere in the United States, provided the client had inventory in all locations. For this client, the inventory was only being replenished in one location, and the ship methods for all packages was express. So we disregarded the requested ship methods, and superimposed the recipient zip codes with the carriers’ zone-map. We discovered that roughly 45% of all orders would see a 2-day transit time on ground networks and another 20% or so within 3-day transit time.
We hopped on calls with the carriers well out of business hours and managed to negotiate accommodation of 35% of the packages in their express network in lieu of utilizing their (basically empty) ground network. Once acknowledged, we proceeded to electronically modify the orders with updated ship methods. Our warehouse had the packages relabeled and ready to be picked up by Monday afternoon.
The end result? Out of the 40,000 shipments, 39,560 found their way to their recipients’ doorstep before Christmas.
Which brings us to a new truth that I’ve added to my playbook:
3. You have to think agile. And agility is the result of innovation and execution.
There were three things that came into my favor this year – one was the highly talented set of fulfillment operations managers on my team who were able to think and act fast. Two was the great relationship we have with our carriers that helped us absorb deviations from our forecasts. Three was our capability to fulfill out of multiple warehouses, which was only possible after some very hard work by our Product team.
For clients that have high sales velocity and low SKU counts, shipping out of multiple warehouses is an obvious choice. Not only do they get the benefit of lower ground shipping costs, they also get to outwit the holiday shipping traffic by leveraging underutilized ground networks. Plus, it acts as insurance against Mother Nature, who’s more than capable of rendering a particular warehouse location inoperable.
So while it was the Ops team who did the heavy lifting to pull us out of this Christmas pitfall, it was actually a company-wide effort (even if they weren’t reading zone-maps with us) to get this done. Our engineers and QA teams worked countless hours to implement a great multi-warehouse feature that didn’t fail under such complex use cases. Our brand strategists kept the client apprised of our progress in real-time (and allowed everyone to work towards a solution undisturbed). I can’t think of another service that would go this far for their clients. To us, however, it is just another day at Symphony.
So there concludes our crazy holiday story. If you have one of your own, we’d love to talk.
Customer expectations are the demarcation between a poor shopping experience and an amazing one. Fall short of the line, your customer satisfaction and brand equity will fall. Go beyond the line, and you have an opportunity to convert that customer into a brand evangelist. When you make business decisions or pore through analytics, you should always ask yourself: Are we meeting the demands of our customers? If so, how do we exceed them?
When your customer is shopping online, he wants a store that’s descriptive and easy to navigate, no hidden fees revealed during checkout (shipping, handling, etc), and orders to arrive as soon as possible.
You can look through your site engagement metrics and pricing models to find answers to the first two, but for fulfillment, we have studies that confirm our natural assumptions – customers want their packages as fast and as affordable as possible.
Since the advent of Amazon Prime, we’ve seen a shift in customer expectation when it comes to receiving their orders. First, we can look at how many people have signed up for Amazon Prime since its inception – its main claim being unlimited 2-Day fulfillment with no extra fees at checkout, just an annual membership fee:
According to Business Insider, Amazon was about to tally around 57 million Prime subscribers at the advent of 2015. The lure of unlimited 2-day shipping began spiking in 2013, and now customer expectations are beginning to shift to what Amazon can provide instead of what the market at large is providing. Backing this claim is the gradual penetration of Prime users on other eCommerce platforms according to research done by Millward Brown Digital:
In the graph above, you can see that almost 1 out of 10 shoppers on Walmart.com, ToysRUs.com, and HomeDepot.com are also Amazon Prime members. This statistic becomes even more stark when you see the rate of cross-shopping between all Prime members and these same stores:
0.9% of all Prime members are willing to cross-shop between these same retailers on the same session. So even when Prime members make up 10% of shoppers on certain retailer’s sites, it seems Prime members shop almost exclusively with Amazon. The ease of use and convenience of Prime is a pretty compelling reason. Customers are now accustomed to receiving their packages in two days or less without paying extra at checkout.
Like it or not, this the new standard of fulfillment, because today’s customer will carry most of that expectation when shopping on other brands. It’s why many online stores are offering more expedited shipping options at reasonable rates, so that they can compete on equal ground.
Of course, it’s a vast undertaking to cobble together the logistics and scale to balance expedited and free shipping without eating into your profits. You can’t get one without sacrificing the other, not unless you invest truckloads of capital into developing your own nationwide fulfillment network (on top of that, that network has to integrate seamlessly with your store and inventory pieces).
When you’re a growing brand, it’s a daunting task to build the logistics on your own. Unless you’re backed by a ton of capital from investors, you’ll most likely have to find a provider or a partner that already has these logistics in place. So when looking for a partner, you should look for these key traits to see if they’ll do the job for you:
- The smarter network that’s truly “nationwide.”
Your logistics partner shouldn’t just have warehouses all over the country, they also need the analytics and tools necessary to ensure the fastest deliveries at the cheapest rates. If you want to offer 2-day shipping at an affordable rate to all of your customers, you need a partner capable of such things as inventory load balancing and delivery analyses to know which warehouses to stock in order to achieve affordable 2-day shipping to your customers. A vast network matters, but a smart network is even more important.
- Pricing matters
It’s an obvious thing to look out for, but it is an important factor. Whatever your fulfillment partner is charging you, you have to decide to pass on those costs to the customer or absorb them in order to offer discounted or free shipping. Also keep in mind, free shipping (the kind that stays free and doesn’t show up later in the subtotal) is a very powerful driver for successful checkouts. Reports say that 20% of consumers believe “free shipping” is the most compelling reason to shop with a specific retailer.
- Consider your brand
With some 3PL or Fulfillment-as-a-Service solutions, you won’t be able to maintain branding of your packaging. They either won’t support customized packaging, or they might insist on applying their own branding in lieu of yours. Remember the value of expressing your brand at the fulfillment stage of the customer experience. This is another important touchpoint you have with your customer, and it can be the tipping point that can convert customers from regular shoppers to brand loyalists.
Your customer’s loyalty and desire for your products is the lifeblood of your business, which makes it even more important to think of innovative and scalable ways to exceed their expectations. You shouldn’t have to sacrifice your revenues to keep your customers happy, which is why choosing the right partner and making the right fulfillment decisions can be a make-or-break moment for your brand.
If the present isn’t under the tree on Christmas Day, customers are more likely to blame you for shipping delays than the delivery man.
Most commerce brands rely on FedEx/UPS/USPS to deliver their packages on time during the peak holiday season. Last year, bad weather and unexpectedly high order volume resulted in over 2 million late packages, which was a severe blow to online commerce. The good news is that FedEx and UPS have staffed up significantly for the 2014 season.
Use these tips to protect your brand and give your customers what they expect: accurate information and packages delivered on time. Many brands use multiple shipping carriers to achieve the cheapest and fastest customer delivery. At Symphony, we created a detailed delivery grid by carrier and US US timezone to help brands communicate accurate shipping tiers to customers.
But it is important to remain vigilant throughout the season for early warning signs that your packages aren’t arriving on time. Be proactive: every day counts during this crucial period.
Have a daily huddle with your team to ensure:
- Orders are being fulfilled at your warehouse within 24 hours, or 48 hours at the latest.
- Customers are receiving their packages consistently for the tier they paid for: whether that is standard ground (3-5 days), 2-day ground or overnight.
- Incoming inventory is being received and stocked within 24 hours and that inventory counts are immediately updated on the website.
- Out of stock items are pulled out of prominent positions on the site.
- Alerts, banners, and emails are ready to go just in case you cannot fulfill orders by the holidays. It’s best to alert customers to unavoidable delivery delays (snowstorms) so they at least have a chance to buy replacement presents.
- Digital gift cards are ready for those last-minute shoppers. They’re a great way to keep revenue coming in even after Christmas delivery windows have passed.
- You can get on the phone with your 3PL and FedEx/UPS/shippers immediately in case of troubles.
At the first sign of delays, take action swiftly to avoid disappointing customers:
- Encourage customers to order earlier to avoid the last minute surge with a schedule of expiring promotions. “Save $5 on shipping when you order before December 15” is a great incentive that rewards shoppers for planning ahead and shifts demand away from the peak cut off periods.
- Set earlier cutoff dates to encourage urgency, and then extend the dates if your carriers can handle it. For example, set shipping cutoff to December 20, and then move it up to Dec 23 if your fulfillment and shipping providers can realistically deliver overnight. If not, you got the last minute lift from promoting the cut off date. If yes, you get to promote “extended shipping for 2 more days!” to last minute shoppers.
- Encourage customers to purchase digital gift cards to avoid disappointment (and avoid shipping altogether!)
- Remove shipping options from a carrier that is not delivering on time. If ground shipping is not arriving within the 2 – 3 day window, remove that option and only offer customers premium options such as a “2nd Air” or “Overnight Delivery.”
- If one carrier is getting behind, switch more order volume to a different carrier. If FedEx is bogged down, ship more orders through UPS
A surge in orders is often accompanied by a surge in customer service requests, and news media about shipping delays will cause a spike in jittery customers calling your customer service agents for delivery updates.
Take steps to ease pressure on your customer service team:
- Automate email order updates at each step of the process so customers can monitor their package progress without calling your customer service agents.
- Allow your customers to get SMS updates for package tracking.
- Offer package tracking on your site, so customers revisit your website for updates (rather than the carrier’s site). This is a great time to add additional messaging to address customer concerns.
- Have your email marketing and social media teams keep on top of weather news,so they can proactively inform customers before your customers flooding you with calls (ie. the Noreaster will not affect any of our orders, hooray!)
For most brands, the holidays represent a significant opportunity to increase customer acquisition and brand awareness. Some of the brand experience is directly within your control, such as your products, your web experience and your packaging. Don’t let your brand suffer from the things that are out of your control, like shipping and delivery. Communicate proactively with clear cut off dates and delivery options as well as automated delivery tracking to keep your customers informed and up to date at every step of the way.
Here come the holidays. The good news is that 86% of retailers expect holiday sales to increase YOY, and online sales will be the fastest growing segment. The challenge is that sub $10M ecommerce brands and Fortune 500 corporations prepare for retail’s biggest season in dramatically different ways. Most notably, SMBs don’t have the staff and resources to offer the volume and breadth of promotions, web site optimizations, marketing campaigns and volume discounts that are standard for mega-retailers. So what can SMBs do to increase efficiency and sales given constrained resources? Stick to the basics: focus on these five areas to deliver an awesome shopping experience and maximize revenue regardless of your brand size.
Get your mobile experience right.
Many of Symphony brands see upwards of 45% of traffic coming from a mobile phone or tablet. And guess what? Some of the biggest brands are difficult to shop on mobile—it’s hard to build a mobile site on top of decades-old technology. Here’s where being a smaller, more agile brand works to your advantage. Optimize your marketing emails to be read on mobile phones, use large call to action buttons in these emails to direct traffic to your site, and make sure it’s as easy to browse and checkout from a phone as it is from a computer.
Keep your online store open 24/7.
Shoppers can’t buy from you if your site goes down. Last year, Symphony’s top clients experienced 1100% increase in traffic during peak periods like Black Friday and Cyber Monday. Check with your hosting provider to make sure that your site has sufficient bandwidth to handle demand spikes without going black.
Focus on the big five days.
Black Friday, Cyber Monday, Free Shipping Day, Shipping Cutoff Day, and Christmas Eve each require a different messaging strategy to tap into the holiday buying cycle. For Black Friday and Cyber Monday, set up your email and social campaigns in advance and offer your most competitive pricing – shoppers are cruising online for deals before they hit the mall and your online ads should be firing at maximum capacity during this time. At a minimum, ensure that your ads, emails and landing pages are all aligned with the same messaging.
For Free Shipping Day and Shipping Cutoff, messaging switches to delivery times and “Guaranteed Delivery” messages should be more prominently displayed. Once these dates pass, make sure to pull your ads and swap them out with the next promotion messaging. Expect to severely slash your online advertising after Shipping Cutoff, and switch all messaging over to “last minute gifts” such as digital gift cards.
Christmas Eve is the biggest day of the year for digital gift cards. Yes, all of those last minute shoppers are desperate for something to stuff in a card or wrap under the tree, and digital gift cards that have a coupon or promotion code are just the ticket. Make sure your brand is ready and able to cash in on this trend.
Plan your shipping strategy.
As an SMB, the economics of fulfillment and shipping are stacked against you: you can’t negotiate the volume discounts that the mega-retailers can. Worse, 71% of consumers EXPECT free shipping, which puts pressure on your brand to compete on services that eat into your bottom line. As an alternative to a blanket free shipping policy, SMBs can implement smarter and more targeted promotions such as tiered shipping rates, free shipping to your best customers, free shipping on certain days (Today Only!), free shipping in exchange for referring a friend, or even free shipping in exchange for social media participation such as liking you on Facebook.
Optimize your web site for holiday shoppers.
For many shoppers, this may be their first experience with your brand, so your first impression has to be a great one.
Leading up to Christmas, make it easy for customers to find what they want by creating gift guides (“Gifts for Him”, “Gifts for Her”, “Gifts Under $100,”), easy to understand return policies (in case the gift doesn’t fit), explicit delivery times (including updating your normal shipping delivery times to account for holiday delays), easy gift messaging options, and automated package tracking so frazzled customers can quickly locate where their package is and confirm it will arrive on time without burdening your customer service team.
After opening presents on Christmas Day, consumers are back online looking to spend those nifty gift cards and hunting for bargains on gifts they wanted but didn’t receive. Make sure your site messaging ties into post-Christmas shopping experience by featuring new items (at full price) for those gift card shoppers who want to splurge, and swap out your gift catalogs with “After Christmas Sales” to move excess or seasonal inventory. Whatever they want to buy, redeeming their gift card should be quick and easy.
From planning to promotions, there is much that brands can do to boost holiday sales. For SMBs, just keeping up with holiday demand can be a daunting task. By covering the basics, SMBs will be ready to take on this holiday season with a strategy that addresses consumers needs on five levels: be where your customers are shopping (mobile), be open when your customers want you (increase site bandwidth), communicate differently during the buying cycle (pay attention to calendar milestones), anticipate consumer demand for free shipping (craft your free shipping strategy) and make sure your customers have a great online shopping experience (optimize your site for gift buyers).
Regardless of what products you sell online, all mid-size and growing businesses have one challenge in common: keeping costs under control while meeting – or exceeding – customer expectations. A lot of that has to do with getting orders delivered quickly and accurately across all of your sales channels as your business evolves. New sales channels, additional volume, changes in customer performance expectations can all put pressure on manual and legacy systems. Not only can this result in lost revenue but an uptick in customer service complaints and returns can increase operating costs
Here are four signs it’s time to implement – or upgrade – an integrated order management system (OMS).
Your sales channels are increasing.
As your brand adds additional sales channels, an efficient order management system is a game changer. Perhaps you started out as a wholesaler, but are now launching an online store for direct to customer sales. Every new channel adds increasing complexity to managing the commerce infrastructure to fulfill, transport, report and analyze orders. Whether your customers are ordering online, by phone, 3rd party, by EDI, or you are placing orders on behalf of your customers, an OMS has the flexibility to seamlessly capture and process multichannel orders.
Your customer service team has trouble locating the information they need to resolve customer issues.
Whether it is a damaged product, a missed delivery, a change of address, or any other customer request, your customer service reps need to be able to quickly and accurately pull up real time data from all of your back end systems. Instead of multiple calls to the warehouse, delivery carriers, etc., all of the customer and order information is located in one place to speed up customer resolution. A tightly integrated, centralized OMS also provides a 360-degree view of customer orders, purchase history, order tracking and preferences so your reps can provide customized service and engagement.
Your customer service team can’t implement order changes.
Sometimes customers need to make changes. An order management system allows your team to change quantities, add or remove items, change the shipping method and process full or partial refunds to existing orders. The ability to make real time updates and changes before an item is shipped greatly reduces the chances of returns and cancellations. Whether it is removing an item, discounting one or more items, or applying a promotional code to the whole order, an OMS gives your agents the tools and flexibility to “make it right.”
You don’t know where your returned merchandise is going.
Returns and reverse logistics are one of the most expensive and time-consuming activities for brands (fashion and apparel brands report returned merchandise as high as 20% of total orders). From a customer perspective, returns should feel like an easy and cohesive experience. From the brand perspective, an OMS can track the reverse logistics from pickup to automatically returning the items to stock. Additionally, OMS analytics helps brands understand return rates by product and consumer segment to make better business and product decisions in the future.
We’ve seen each of the above scenarios with brands whose business is growing faster than their legacy technology systems and processes can support. This is where an OMS really shines. While order management systems used to be the sole province of mega-retailers due to the cost and complexity of implementation; technology advancements, such as software as a service, are making more enterprise level tools available to brands of all sizes. When paired with a well-defined set of customer service policies, an order management system improves workflow efficiency and helps brands provide better customer service, prevent returns, and reduce revenue loss.