The best way to compete with large e-commerce players as a smaller retailer is to sell a product that is unique and differentiated, and outsource logistics and non-core competencies to third parties.
A good example of this might be a small business using Shopify for website development and back-end support, Square for payment processing, and Ryder for third-party logistics services.
E-commerce is a game of scale and smaller players that lack it need to be able to compete on a level playing field, which is where a third-party logistics solution can step in. The benefits of matching scale come in at every step of the process. For example, small businesses today can be started up and be selling online within a matter of hours by outsourcing their website development, payment processing and logistics to third parties.
This allows a smaller business to focus on what they do best and not overextend themselves in areas that are outside their core strengths. Regardless of merchant size, customer expectations for delivery and service are the same high standard that customers have grown to expect from e-commerce leaders, so it is not possible for retailers to try to cut corners and expect to be able to compete.
COVID-19 has exponentially increased the incentive for many companies to outsource their logistics operations, so that they are able to capture and serve the incremental demand today before they have the ability (or the capital necessary) to bulk up their infrastructure.
COVID-19 has simultaneously caused countless U.S. companies to be met with an enormous, rapid and unexpected influx of e-commerce demand. At the same time, sales at most retailers’ brick-and-mortar store locations are plummeting (though recovering as states reopen). This mix shift requires retailers to have an exceptional and flexible supply chain in place to be able to smoothly manage this transition.
For many companies that have found themselves in this position today with COVID-19, they not only lack the necessary e-commerce fulfillment infrastructure to support the additional growth (because the surge in demand was so unpredictable and unplanned), but even if they did, their margins would likely severely compress trying to fulfill all the additional orders with no outside assistance.
Therefore, not only does outsourcing provide access to expertise that your company does not have, but it is a capital-light avenue for growing e-commerce sales while maintaining (or even growing) margins. Companies like Ryder can be very beneficial in this regard as they allow a pool of individual retailers to leverage shared costs in a variable manner as opposed to having to make huge fixed outlays.
It is not just the fulfillment network and design that is important. Inventory management also plays a vital role in e-commerce success. “Nimble inventory management is critical,” as Jeff Abeson, VP E-Commerce at Ryder, says, because not having inventory in the right place at the right time or not having the technology to replenish it can result in missed sales or disappointed customers.
When you have a massive sales mix shift from in-store to online, orders switch to individual customer orders compared to replenishing pallets at a retail store, which means “the problem just became exponentially more challenging from a demand planning perspective” according to Abeson. Again, turning to a company like Ryder that has deep experience and knowledge of building out e-commerce networks makes sense in our view.
This article was originally published by Freight Waves and is reprinted with permission.