For many e-commerce businesses, managing logistics can be a major headache. However, there are now solutions that allow you to outsource logistics, reducing friction while keeping costs under control. As peak e-commerce periods approach—like Black Friday and year-end holidays—this question becomes more critical than ever.
Rakuten, the online retail giant, launched its Fulfillment Network about a year ago, giving e-commerce businesses a chance to simplify their logistics management on a budget. Let's explore how to best optimize logistics in partnership with Rakuten.
Understanding the Logistics Challenges for E-commerce Retailers Regardless of their size or what they sell, all e-commerce businesses face similar logistics challenges that can significantly impact their operations:
- Storage: Storage costs rank among the most significant expenses and vary depending on warehouse location, capacity, and how long products are kept in stock.
- Order Fulfillment: Sorting, packing, and verifying orders before shipment also represent logistics costs.
- Delivery: Shipping fees have a major impact on customer experience and depend on the various services offered (home delivery, pickup points, etc.).
- Customer Service: Managing lost items, damaged shipments, and returns is a significant cost associated with customer service.
- Insurance: It's essential to insure goods against theft, loss, or damage.
According to Rakuten, on average, logistics costs represent about 11% of an e-commerce business's expenses, and they increase each year—mainly to reduce delivery times and meet customer expectations. Delivery management accounts for roughly 50% of these costs. The challenge, then, is to keep these costs in check while delivering quality service, especially when it comes to delivery, in order to build customer loyalty.
Optimizing Logistics Costs
To control and optimize logistics costs, e-commerce businesses can take action on several fronts.
The first is to optimize inventory management. The more products you have in stock, the higher your costs. It's therefore crucial to maintain minimal inventory while avoiding stockouts. The right strategy is to set a minimum stock level and reorder once that threshold is reached. It's essential to anticipate periods of high demand, like Black Friday or sales events, and adjust inventory accordingly.
Another way to reduce logistics costs is to increase your customers' average order value. For example, you could offer free shipping on orders above a certain amount. According to Rakuten, 58% of shoppers add items to their cart to reach the free shipping threshold.
Outsourcing Logistics
To simplify these logistics challenges and streamline costs, e-commerce businesses have the option to outsource their logistics. This is exactly what Rakuten offers with its Fulfillment Network. This solution lets you offload logistics concerns, even during peak periods like year-end holidays or Black Friday.
The advantages of outsourcing are numerous. The service allows you to rely on a single partner who handles every step of the supply chain, thus reducing your costs. The logistics service takes care of receiving goods, unloading, storage, order fulfillment, delivery, after-sales service, and returns management.
Outsourcing also delivers considerable time savings. Managing customer complaints and transport-related issues can be extremely time-consuming for e-commerce professionals. Moreover, it allows you to focus more on running your business rather than low-value tasks, such as order fulfillment, which are entirely managed by Rakuten. This approach is particularly beneficial during peak periods, like year-end, when order management can become complex and lead to delays.
In terms of pricing, the advantage is that you have transparent and precise pricing based on package weight, delivery methods, and storage duration. Storage fees with Rakuten Fulfillment Network are, for example, free when products are stored for less than 5 weeks. Outsourcing certainly has a cost, but the benefits in terms of time and productivity make it a highly advantageous move for merchants, providing peace of mind, especially during peak periods.
