Supply Chain and Logistics: Forming A Shipping Strategy That’s Right For Your Business

February 4, 2019

Flow was thrilled to participate in this year's IC Summit West Coast eCommerce event in Los Angeles. A uniquely diverse, powerful and sophisticated event for attendees and partners, IC Summit West served as a catalyst for discussions among retailers. I had the pleasure of moderating a panel discussion about supply chain and logistics featuring executives from three exciting brands in the industry: Douglas Roy, Vice President of Supply Chain for Dollar Shave Club; Steve O'Dell, CEO and Co-Founder of Tenzo Tea; and Laurie Anna Kaplan, Senior Product Manager with REI. Each brand had a distinctly different approach to logistics and shipping based on their business model and goals.

To be clear, most of the discussion on the panel focused around domestic supply chain and logistics strategies. However, many of the points that came up during the conversation and the questions that were raised are worth noting because they can also be applied to businesses crafting their international logistics strategy.

Balancing Economics with Customer Expectations

The key to a winning logistics strategy is to find the most cost-effective method to deliver goods to consumers within the standard time expectations. But brands and retailers must first understand how those expectations are changing.

As the National Retail Federation reports, many U.S. consumers now consider shipping costs even before getting to the checkout page, with 65 percent saying they search for free-shipping purchase thresholds before they add any items to their carts. Consumers also want their products fast, with 39 percent expecting two-day shipping to be free, and 29 percent indicating that they’ve changed their minds about a purchase because two-day free shipping wasn’t an option. This trend is worldwide: Chain Store Age notes that 54 percent of international shoppers say they’ve abandoned their carts due to “expensive” shipping, while 39% abandoned their carts due to the lack of free shipping, and 26% abandoned their carts due to “slow shipping.”

Dollar Shave Club is in fact expanding globally with its subscription-based, direct-to-consumer business model. Roy from Dollar Shave Club explained that balancing delivery time expectations and the economics and approach of optimizing for the customer experience is important. He went on to share how in these global markets the company is now thinking about how to pivot from their one core brand experience and expand their product line in order to continuously delight their current customers and attract new ones.

Flexible Delivery Models

Flexibility is a must for e-commerce providers. That includes giving consumers multiple ways to order and receive their goods. For an outdoor sportswear and gear retailer like REI, fulfillment and logistics can be very challenging for e-commerce purchases of kayaks or other large equipment especially because these goods can be expensive to ship. For this reason, many domestic REI consumers prefer the buy online, pick-up in-store option.

While REI might not be selling internationally online just yet, the point around flexibility for fulfillment options is also important to note for cross border retailers in similar verticals. For brands entering new global markets, it's important to consider how you can address the challenges for shipping large items overseas.  Determining whether you should adopt a cross docking or direct shipping model is a key conversation to have when exploring cross border expansion and developing your international shipping strategy.

Your Brand’s Image is Tied to Shipping

Supply chain and logistics can have a powerful impact on what consumers think of a brand. Steve of Tenzo Tea noted that his company continually has internal discussions around their approach to the supply chain, sourcing and logistics, and how it might impact the consumer’s perception of the brand and ultimately influence sales.  Although Tenzo Tea has not yet started shipping internationally, Steve’s point applies to cross border e-commerce, too, especially in markets like Germany where brand perception and trust is a particularly important factor for customers when placing an order. If the brand can’t deliver an order smoothly and within the advertised time window, then they may risk losing that customer for good–and this is true in almost any market.

What Questions To Ask

When building out an international supply chain and logistics model, brands and retailers must evaluate their model from the point of view of the customer in that market. Some key questions to explore include:

  • Which shipping options should you offer shoppers in different international markets?
  • What strategies should you use to maximize speed of delivery and minimize cost to the global consumer?
  • How do you protect your margins if you offer a free shipping option to customers in certain markets?  
  • What kinds of A/B tests can you conduct on shipping tiers and messaging to generate the highest conversion?  
  • When it comes to shipping and logistics, how do the expectations of international customers differ from those of domestic customers?

Different global markets will have different needs that must fit into the brand’s overall logistics strategy. For example, Multichannel Merchant points out that Asian consumers have very high expectations when it comes to same-day and next-day delivery compared to other markets. In fact, 73% of Asian consumers surveyed said they should quality for next-day delivery from an online retailer, even when they place orders between 5 p.m. and 9 p.m. Behind Asian consumers in this study were those from Mexico (59%), Brazil (51%), Europe (50%), Canada (39%) and the U.S. (36%).

Understanding and responding to global shoppers’ shipping demands is crucial in this rapidly changing e-commerce landscape. To stand out, brands and retailers must recognize that their consumers have high expectations for fulfillment and logistics not just from their domestic brands and retailers, but from international ones as well.

Find out more about how Flow can help you build and grow your international business and streamline your global logistics – contact one of our experts today for a demo.