By Joe Fogg, Business Development Director, Supply Chain Management, arvato UK
Thanks to the growing popularity of online shopping, even the smallest companies now have access to potential customers all over the world. A useful stepping stone for many fledgling businesses is the ability to not only sell through their own e-commerce shops but to also list products on various online marketplaces like eBay and amazon. With more international products available via these channels, consumers are becoming more used to cross-border shopping.
According to IMRG - the UK’s online retail association - 48% of UK online shoppers have already made an online purchase with a retailer based abroad. Its research suggests that if the price and delivery timescales are right, consumers won’t think twice about buying from across the border. But therein lies the challenge. If you’re a growing UK business gaining traction overseas, how do you fulfil international orders without pricing yourself out of the market or breaking the bank?
Many organisations find themselves in a catch-22 situation - handle your own distribution from the UK, and you may encounter large shipping fees, but taking the plunge and setting up local distribution centres in the new territories could prove costly as well as risky if orders from those markets aren’t sustained in the long term.
It’s a particular dilemma for smaller e-retailers, who are unlikely to have the scale or resources to put lots of capital into an expansion. These companies will often be dealing with smaller numbers of orders which need to be shipped directly to consumers across a disparate geography.
As a result shared warehouses are becoming a popular option, providing the infrastructure and economies of scale to allow businesses to punch above their weight in terms of their logistics capabilities. Many providers offer centralised warehousing on a pay as you go basis. The benefit of this is the ability for a business to flexibly manage how much storage space it needs – scaling up and down in line with seasonal demand, without paying for any wastage.
If a business is anticipating large volumes of international orders from a small number of key markets, it might pay-off to partner with a supply chain operator which already has a presence in those markets, thus allowing stock to be based closer to customers while reducing the upfront investment needed to break into these markets.
From a customer’s point of view, the cost and convenience of how their order is fulfilled is likely to be the deciding factor in whether they buy from you. It’s estimated that half of all e-shopping baskets are abandoned at the checkout stage – much of which can be attributed to customers who have been put off by delivery charges or a lack of options, and may be looking for a better deal elsewhere.
Outsourcing warehousing and fulfilment also offers benefits here, by allowing businesses to access economies of scale. Quality supply chain providers will have established relationships with international carriers, while the enhanced buying power of being one of a larger group of buyers can allow businesses to access shipping rates which would normally only be available to businesses dealing with much larger order volumes. Access to a network which can provide a wide range of delivery and return options, and multiple carriers, will help to keep costs down and improve the customer experience.
Working with the right partner can also give you access to sophisticated technologies such as order management systems and picking technology. These technologies allow a business to have greater visibility of its stock levels, enabling better purchasing and stock allocation decisions.
Of course, outsourcing isn’t for everyone - some business owners won’t be comfortable with handing over stock to a third party. However, professionalising warehousing and distribution activities is a key step in enabling a company’s growth, and forming a partnership can be an effective way of quickly accessing the kind of scale and infrastructure that could otherwise take years to build.