There’s no doubt about it – the cost of living is on the rise.
From fuel prices and household bills to everyday purchases like a loaf of bread, the price of our most essential items is seemingly increasing by the day. And our eCommerce habits have taken an equal hit, with multiple factors continuously hiking up our online shopping bills.
One of the biggest reasons for the latter is the drastic growth in logistics costs, which is having a knock-on effect on the entire eCommerce industry.
In this article, we examine the reasons behind such significant increases, the impact of increasing logistics costs on eCommerce fulfilment, and also how retailers can limit the financial impact on both their business and customers alike.
Key factors attributing to a rise in logistics costs
Over the last two years, several global events have been the catalyst for a major shake-up of the logistics industry.
Brexit, the COVID-19 pandemic, and the ongoing Russian invasion of Ukraine have altered every facet of the sector, from the cost of raw materials right through to delivery timeframes.
Each crisis has served to further exacerbate an already precarious situation, and as the problems increase, prices continue to surge simultaneously.
Some of the key factors attributing to soaring costs in these areas include:
Shipping delays
A recent estimate of global shipping prices revealed that the average cost of shipping a 40-foot freight container was close to $10,000 as of March this year – almost seven times higher than what it would have cost in March 2020.
Soaring fuel prices and further COVID-related lockdowns affecting some of China’s major ports are prolonging this phase of inflation that is resulting in a whole host of problems for eCommerce retailers, with some forecasters predicting that the situation will continue into 2023.
Supply chain shortfalls
Supply chains are also under intense pressure worldwide. Cross-sector manufacturing delays have led to a shortage of and resultant price spike in raw materials, while a lack of warehouse space (more on that later) has forced some businesses to minimise inventory levels and concurrently lower their sales potential.
With research showing that a whopping 70% of customers will move their business to a competing retailer if their desired item is out of stock, these glitches in the supply chain spell very bad news for eCommerce business owners.
Lack of warehouse space
Once businesses finally equip themselves with the stock and materials needed to fulfil their orders, they are then faced with the issue of storage – or lack thereof. So severe is the shortage of warehouse space at present, that in the US alone, vacancy rates currently stand at below 4% – a record low for the country.
Reasons for this include the boom in eCommerce retail spurred on by the pandemic, paired with the propensity of many businesses to stockpile inventory in a bid to evade delays caused by supply chain shortages. While this lack of space isn’t as worrying an issue for larger companies, who have the capital to buy or even build excess storage facilities, the issue is compromising the scalability of SMEs.
Labour shortages
Even for businesses with the capacity to comfortably store their products, a lack of warehouse operatives throws a further spanner in the works. With a recent survey finding that 73% of businesses were experiencing issues in the area of recruitment, the ratio of logistics jobs to qualified, interested candidates remains severely off-balance.
Lack of space combined with a shortage of workers leads to a hike in both rents and wages to facilitate a smooth chain of operations. When this is combined with soaring shipping prices and drastic increases in the price of raw materials, the overall situation remains troubling.
How outsourcing order fulfilment can minimise logistics costs
The drastic changes mentioned above have hugely affected eCommerce businesses across the globe, with business owners often being forced to hike their prices, before deciding whether they or their customers should take the hit. This is a concerning position for retailers to be in, as they face the prospect of plummeting conversion rates; a direct result of a situation that is entirely out of their hands.
However, there are measures that store owners can take to alleviate the situation and improve cost-effectiveness both from a business and customer perspective.
One such course of action is to outsource their order fulfilment.
Recruiting the services of a third-party logistics (3PL) company is not a task to take lightly and requires a substantial amount of advanced research to ensure you choose the right fit for your unique needs.
That said, handing over control of some of the most stress-inducing elements of your business – particularly given the current economic climate – can inevitably improve your profit margin and free up your time (and mind) to focus on strategies for business growth.
The benefits of working with an order fulfilment partner
Scalability
Any eCommerce business with its sights on expansion will need the capacity to scale its operations. This involves more storage space – something that is in short supply at present. A 3PL partner can offer you the space, technology and stock management systems to keep track of your inventory so that you can focus on growing your business.
Efficiency
Merging with an order fulfilment provider will instantly increase the efficiency of your service and help you to achieve economies of scale. When you gain access to a system that is fully integrated with all major platforms and couriers, both your scope and quality of service increase in tandem, leading to an upsurge in sales opportunities.
Cost-Effectiveness
Attempting to alleviate several pain points in your business at one time, such as lack of warehouse space, improved courier efficiency, and faster returns processes, can put a strain on your bank balance. Recruiting the services of an order fulfilment partner to cover all angles will naturally lead to less capital expenditure, thanks to the application of a single minimised cost, with a flat monthly fee.
Reliability
In an industry where shipping delays and labour shortages are par for the course, outsourcing your order fulfilment can completely change the outlook for your business. Ensuring reliability in times of uncertainty, a 3PL partner can offer late cut-off times on orders, next-day delivery, stock and returns management, and parcel tracking. Notably, discounted courier rates could also benefit your business, allowing you to make further savings in crucial areas.
ParcelPlanet is the order fulfilment partner you need
Providing clients with all of the above and more, ParcelPlanet enables you to wow your customers and scale your business by up to 30% – even in these trying economic times.
We pride ourselves on delivering unbeatable customer service with an end-to-end order fulfilment solution that you can rely on.
If you’re ready to bring your business to the next level by finding a cost-effective way to fulfil your orders, get in touch today for a quote.
