Ecommerce Distribution: Process, Strategy, & Solutions
June 6, 2022
Supply chain issues have led to widespread delivery delays. And those issues won’t be going away anytime soon. Despite this, more than 40% of shoppers still expect to see a two-day shipping option when they make a purchase online. If businesses can’t meet that expectation, their customers will turn to other brands that can. Online retailers need to rely on efficient ecommerce distribution processes.
Jump to the section you’re most interested in:
- What Is Ecommerce Distribution?
- 4 Steps in the Ecommerce Distribution Process
- Types of Ecommerce Fulfillment and Distribution Strategies
- How Last Mile Delivery Can Make or Break Ecommerce Distribution
- FAQs About Ecommerce Distribution
What Is Ecommerce Distribution?
Ecommerce distribution describes the methods and strategies companies use to transport products from the distribution center to customers. To put it simply, it’s how ecommerce companies handle order fulfillment. This includes every step, from filling an order at the warehouse to when the delivery person hands the package to a customer. And if a customer chooses to return their order, the management of the return will fall under the umbrella of ecommerce distribution as well. Online retailers can handle distribution entirely in-house, or they can partner with a third party to orchestrate transportation and delivery. Regardless of who handles the process, the steps are the same for all businesses.
4 Steps in the Ecommerce Distribution Process
There are four key steps in the ecommerce fulfillment and distribution process: order management, shipping, last mile delivery, and returns management.
Order management involves everything from receiving and tracking orders to preparing them for shipment. Managing orders begins when a customer first makes a purchase and places the order online.
Next, the business will approve the purchase, authorize and accept the payment, and send the order to the warehouse. A business with good customer service will also send the customer an email receipt, confirming the details of their purchase and providing information on how to track their package. Next, the order fulfillment team at the warehouse will find the items to fill the order and package them for the next step of the process.
Shipping isn’t as simple as just putting an item on a truck. When a package leaves the fulfillment center, it often doesn’t go straight to the customer. That’s because enterprise ecommerce brands with high order volumes often have more than one fulfillment center, typically located in different parts of the country. To maximize efficiency, those companies send packages to shipping centers based on the region of the delivery destination. The shipping teams at those centers then plan and schedule routes to deliver packages to the customer.
Last mile delivery
Last mile delivery is the final stage, when the package arrives at the customer’s doorstep. Unfortunately, it’s also the most expensive part of the distribution process and the most difficult to plan. There are countless possibilities for how delivery drivers can travel from one destination to the next. It’s very challenging to evaluate all of the options quickly and find the most efficient route without software to help streamline the process – especially when a company has more than a few deliveries.
More than 20% of online purchases are ultimately returned by the customer, which means final delivery won’t always be the final interaction a customer has with your business. This makes a seamless returns process vital for customer retention. Facilitating returns requires a system for receiving and approving customer return requests as well as logistics planning to coordinate the pickup and transport of returned products. But a truly effective returns management process will go beyond this to also help improve brand image by offering a competitive returns policy that aims to win over customers. For example, the popular online retailer Zappos has a convenient return policy that provides free shipping and allows customers a full year to make the return.
Types of Ecommerce Fulfillment and Distribution Strategies
Ecommerce fulfillment and distribution look different for every business, and the specific practices and distribution strategies can vary depending on the size of the company, the size of the delivery range, and the type of products the company sells. However, there are three common models that businesses implement for fulfillment and distribution: in-house, dropshipping, and third-party logistics.
Whether they’re completing a delivery or picking up merchandise to return to the warehouse, the delivery team is the final point of contact for your business. Self delivery allows you to capitalize on this by giving you complete control over the entire process, which means you can hire and train your own drivers. Control over fulfillment operations also means you can customize your delivery practices to meet your business needs.
In-house fulfillment also means that you won’t have to pay the additional fees for nonstandard deliveries that many shipping and logistics companies charge, which is ideal for companies that may have special delivery needs. For example, an online floral business needs expedited shipping to deliver fresh-cut flowers as quickly as possible, so customers can enjoy them longer. In-house delivery will allow the florist to accomplish this while avoiding costly overnight and expedited shipping fees.
Keeping distribution in-house also allows you to optimize operations based on your specific business needs, which means it is often the cheapest fulfillment strategy for enterprise businesses.
Dropshipping is a model in which an ecommerce business advertises and sells another company’s products without ever handling them. Rather than warehousing its own inventory, a dropshipper will advertise products on its site. When a customer purchases an item, the dropshipper will then buy it from the manufacturer. Then, the manufacturer ships the product to the customer.
So, is dropshipping worth it? The answer to that question is that it depends. Dropshipping is a great business opportunity for entrepreneurs with a growth mindset. It can also be a good opportunity for sellers, as there are few costs involved and the risks are low. But businesses that create their own products and already have an existing sales model should look elsewhere for an effective way to deliver products to customers.
Outsourcing logistics to a third party can be expensive, but sometimes it is still the best option for ecommerce companies. Third-party logistics providers (3PL) often have extensive service areas and large delivery teams, which small and seasonal ecommerce businesses may not have. For these kinds of companies, the cost of outsourcing may still be less expensive than in-house delivery, especially if delivery destinations cover a large geographic area. A 3PL can also be helpful for growing businesses that may need support facilitating deliveries while the brand scales operations.
How Last Mile Delivery Can Make or Break Ecommerce Distribution
The retail distribution strategies a company uses will dictate what last mile delivery looks like, which will have a major impact on delivery success and the customer experience.
Last mile delivery for ecommerce distribution businesses
Ecommerce distribution businesses like Amazon facilitate the transport and delivery of products, often for multiple customers. But juggling a high volume of deliveries is difficult. Distributors need to receive the product from retailers, store the product in the warehouse, then pack and ship orders when they’re ready. If companies aren’t using distribution center best practices, they could run into problems like delayed deliveries or even inaccurately filled orders.
To avoid these problems, distributors can take steps like:
- Optimizing inventory management practices to streamline picking and packing
- Standardizing processes to streamline operations and boost productivity
- Implementing a route planning tool to maximize the efficiency of last mile delivery routes
Last mile delivery for ecommerce businesses
When it comes to distribution, last mile delivery is the final chance to impress a customer, making it vital for customer retention. And since 82% of customers will tell their friends about a good delivery experience, smooth deliveries can also help you earn new business. Keeping delivery in-house means you’ll have complete control over that final interaction, from hiring delivery drivers to training the team on proper package handling. This makes self-delivery the best option for companies that want to guarantee a great customer experience.
To bring delivery in-house, a business will need to buy delivery vehicles and hire a delivery team, including drivers, planners, and dispatchers. The business will also need to assess the cost of in-house delivery and determine if it will begin to charge for the delivery services. Then, implementing a routing and scheduling tool like OptimoRoute will help streamline the transition to self-delivery.
Learn more about efficient distribution by taking a look at these tips for optimizing ecommerce logistics. Or sign up for a free, 30-day trial of OptimoRoute to see how routing software can help your business bring delivery in-house!
FAQs About Ecommerce Distribution
In this section, we’ll answer a few common questions about ecommerce distribution.
Is ecommerce a distribution channel?
Yes, ecommerce is a distribution channel. Distribution channels are the methods companies use to market and sell products to customers. Ecommerce distribution does this by marketing and selling products online.
How can OptimoRoute help with ecommerce fulfillment?
OptimoRoute helps improve ecommerce fulfillment by streamlining routing and scheduling to maximize efficiency. This improves last mile delivery by finding the best path to each destination on the delivery route.
How can ecommerce businesses use self-fulfillment?
Self-fulfillment allows ecommerce brands to take full ownership of the distribution process, from order reception to last mile delivery. This helps to improve efficiency, ensuring customers receive deliveries on time.
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