Selling online eliminates many expenses related to in-store operations, but any cost savings can be quickly eroded by getting the goods to the customer. As the following Forbes article reports, logistics can be a nightmare for retailers of any size.
Of the record $17.8 billion in sales generated by independent US retailers and restaurants on “Small Business Saturday” earlier this holiday shopping season, 41% came from online buyers, a 17% increase over last year. But the dark side of these ecommerce surges is that many small and midsize businesses aren’t equipped to handle them.
“A lot of companies selling online are actually losing money,” notes Diego Pantoja-Navajas, Oracle vice president of product development. That’s because those companies are incurring “net shipping losses”—they’re paying more money to ship customer orders than they receive in shipping revenue, Pantoja-Navajas says.
Even the biggest of the big are concerned. For example, Amazon.com, which spent $21.7 billion on shipping last year, warned in its 2017 annual report that if it doesn’t get its fulfillment operations right, its business could be harmed.
While most SMBs won’t spend billions of dollars on logistics, “even a tiny fraction of those costs could ruin a small business, especially if it’s not managing those operations with the right technology,” notes Oracle senior product strategist Bob Meixner.
To ring in the New Year on a more positive note, small and midsize merchants should consider cloud-based commerce and supply chain platforms that help with critical logistics capabilities, according to the Oracle executives: One way is to build the cost of free/discount and fast shipping services into their pricing models.
Delivery companies are stretched thin for the holiday shopping season both in the air and on the ground. Package volume increases every year as e-commerce sales continue to rise and retailers promise delivery by Christmas. Congested roads and sometimes bad weather conditions just add to the problem. The proverbial “last mile” to the customer’s door is the most expensive part of the shipment. If that’s not all, merchants are confronted with an expensive returns handling process after Christmas. Makes you realize that brick and mortar stores have some advantages after all.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group