No matter if your shipping a few parcels a day or hundreds, having a really good fulfilment process will help drive up customer satisfaction, which will naturally lead to more sales. On today’s episode, Brad speaks with Rob from Shippit, who has some amazing insights into why it is so important to get your fulfilment process right. If you’re serious about increasing sales, this should not be missed.
Brad: Hey, Brad Younger here, and welcome to episode 17 on how to streamline your fulfilment process. Today I’ve got a very special guest with me. I’ve got Rob from Shippit, who’s gonna come in cover a whole bunch about how to streamline your fulfillment process, why it’s important for you to streamline your process, how to see shipping costs in a different light, and cover other things about how you can increase your repeat sales and drive up customer satisfaction simply by having a really good fulfillment process. Let’s get into today’s episode.
Welcome, Rob. Thanks for coming along to the show today, great to have you on here. We’ve got Rob here, from Shippit. He’s coming on to have a quick chat about fulfilling. How you going today, Rob?
Rob: Very well, Brad. How are you, mate?
Brad: Good, good. Can you give our listeners a quick rundown of what you do there at Shippit, and let us know what you get up to over there?
Rob: Absolutely. Hi everybody, my name is Rob Hango-Zada, I am the co-founder and joint CEO of shippit.com. Shippit’s mission is to really simplify the way we send anything, anywhere, to anyone in the world, and the way that we do that right now is by connecting retailers to a number of different courier companies, and Shippit has the smarts to allocate the right company for the right jobs, and simplify the workflow of retailers across the nation, and now across southeast Asia.
Brad: Fantastic. That’s awesome, and it’ll fit very well into what I’ve got lined up to ask you. A lot of the listeners have started to sell on different places, and they’re starting to see an increase in orders, and I’m sure they’re feeling the heat a bit as those orders come in, particularly around the fulfillment process in the extra work that’s getting created. That’s why I had you on today, to answer a few questions, and give the listener a good idea about what it’s like when you create a better fulfillment process around all these orders coming in.
Absolutely, absolutely. I’d say your listeners aren’t alone, Brad. From the data we’re looking at and the data volume hitting our platform, we can see the shape of demand, and if for nothing else it’s not like the problem’s gonna go away, it’s just gonna get worse in time. Happy to get into the discussion.
Brad: Fantastic. Cool. All right, let’s jump into then. Got a few questions I wanted to ask you, and I’ll get your opinion on a few things.
The first thing I wanted to ask is: how important in this day and age is it to have a streamlined fulfillment process, and what impact does that have on selling online in particular?
Rob: I always like to take a step in the shoes of a consumer, because no doubt most of the people who would be listening to this podcast are also consumers in their own right. You’re buying things online, you know how frustrating online deliveries can be, I’ve just gotten off the phone with Optus, for example, and I’ve ordered an iPhone about six weeks ago that I still don’t have, and the whole fulfillment delivery experience has been the biggest pain point of practically my existence, and it just really shouldn’t be the case, but if you think about the importance of fulfillment in terms of being that one key barrier that stands between you and your end customer, obviously mediated by a courier company or delivery partner, fulfillment is the one area where we’re noticing lag being added to that timeline of delivery. To put some context around that, I think last year, what we saw on our platform was it took an average of 24 hours for a retailer to fulfill an order after the order had been placed on the eCommerce platform, and just to materialize that some more, if you’re customer is waiting 24 hours in order for you to dispatch the item, there’s still another process which needs to take place, which is the courier coming to collect and deliver that item.
The average delivery time for carriers across Australia is about 2.3 days. Doing the math on all that, you’re looking at about 3.3 days before the customer is being able to interact with the product. The unfortunate reality of Amazon coming into our market, the reality of the customer-centric organizations out there, like the Iconic for example, you can place an order at 9:00 pm at night, have it delivered to your office doorstep or your front home doorstep before lunchtime the next day, and that really is the competitive landscape that small businesses need to contend with.
Brad: What are some of the key ways that a listener could go about streamlining their fulfillment process? What are two or three quick wins, or some key ways that they could do that?
Rob: We’ve got a great deal of content around fulfillment practices and processes on the Shippit blog. I’d encourage people to download some of the resources that we have there to help a few different areas, but the way that we look at it at Shippit is very simply across three main areas. One is around process, the other is around technology, and the other one is around people.
People is the obviously one, and I think it differs per industry and per business, but if we look at process and technology, these are two aspects which really shouldn’t differ too much across business types, but should more so differ based on the volume that a merchant is processing. If you think about the life stages of a business, coming from the very early stages of very minimal order volume, processes are really quite manual, you might be handwriting satchels for example, or labels onto boxes using prepaid labels. The coordination and consistency across systems is very disparate, and that really creates a lot of confusion, and what then it doesn’t actually help set a lot of businesses up for is success when you start to see demand increase to some really crazy levels, because it’s not a scalable process. We think about different types of processes in the fulfillment stack. You’re looking at pick-by-order, pick-by-wave, batch picking for example. Pick-by-order is logical for anyone who’s processing under a thousand orders a month. Your daily volume is sitting somewhere in the vicinity of 50 or so, and then once it starts to scale beyond that, it really requires a change in process to separate out the picking and the packing stages of the pick, and to be picking in waves or batches based on the locations of items in orders.
That then informs the technology stack that needs to be used. The very basic outset, having a fulfillment system or a basic shipping platform like Shippit involved in your business from a very early stage, you’re getting a lot of consistency in terms of getting a label from a carrier, optimizing for cost, and not having to spend time making decisions as to which courier company you should use or what type of packaging you need to put your order into. All that information is automatically entered, et cetera, and it streamlines that flow for a lot of businesses.
The second one, though, is once things get a little bit more complex, and you’re peeking through the one, three, four, five thousand orders a month mark, then it starts to warrant real investment in technology. Warehouse management systems, inventory management systems, or order management systems then become key areas of focus. These are not areas that Shippit is focused on, but our platform integrates into. Those technologies are really important, and they can be quite expensive for a lot of businesses, but they are probably the best foot forward into scaling a company, versus failing when the demand hits.
Brad: Fantastic. That was an awesome little overview there. Those three points I’ve used for years, I’ve called the continuous improvement triangle. The people process tools. Definitely. It’s what I aim to touch, each three of those points. You hit on some good stuff.
Onto the next question: I heard from many sellers that they’re seeing a direct increase in sales, and particular returning customers. For a simpler thing, like getting their tracking information for shipments in as quickly as possible, is that something that you see across the board? Do you see people getting an increase of sales when they start paying attention to things even as simple as getting tracking links done properly?
Rob: The funny thing about this, and I’m a little bit biased, right, so go with me on this journey, if you really think about the purchase, eCommerce merchants tend to think of the purchase as being completed at the time the checkout processes a transaction. In the mind of a customer, and again, putting our consumer hat on, that’s really when the clock starts to tick. You haven’t fully become a customer yet. You’ve paid money, but the retailer has not fulfilled their end of the transaction, which is getting the most important thing to the customer, which is the product, and we talk about the experience extending beyond the buy button, all the way to the front doorstep, and back again. A lot of merchants don’t believe they should be held accountable for that delivery experience, because they’ve outsourced it to a delivery provider, and it’s the delivery provider’s job to get it from A to B. The majority of customers with penalize a retailer for a poor delivery experience. Owning that delivery experience is really important.
To give you more statistics around that, if you think about the tracking experience, that’s when customers really wanna hear from a brand. Oftentimes you send out newsletters, and our average open rate is sitting sub-40%, the average click-through rate is much less than that, sub-2% for a really good performing campaign, but if you think about the order dispatch notification that gets sent to a customer, it’s got something like an 80% open rate, and a 60% click-through rate. Not only that, the customer is checking their tracking screen at least 2.4 times during the delivery process. If you think about a space of missed engagement opportunity, and marketing potential, it really comes down to that tracking experience not being owned by brands, and that’s something that Shippit really empowers.
Brad: Excellent. Excellent. That sounds like it’s something people should make sure that they get in place there.
Rob: Absolutely. Just to add a final point to that, it’s also capturing feedback from customers. Right now the feedback loop is pretty nonexistent for a lot of merchants in the market. Obviously, once products are handed over to a courier company or postal provider to conduct delivery, there’s no feedback unless something goes terribly wrong, and a customer reaches out and says, “I never got what I needed,” and that kicks off a whole process of inefficiency for a business.
Collecting feedback will actually give you some insight into the reasons why delivery experiences are negative. For example, what we see as negative delivery experiences can be triggered by four or five different factors, including products missing from a package, products being damaged, the box being damaged, the driver’s behavior, tracking inconsistencies with the delivery progress. These are areas of opportunity for businesses to focus on improving, and without that feedback loop it’s really hard to understand how your delivery experience is actually contributing to repurchase rates.
Brad: Right, yes. Perfect. I’m gonna move on to the next thing that people start seeing is obviously an increase in their shipping cost as they start getting more orders in. If they stay on the same shipping cost, or they might have been asked to get a reduced price, they’re still getting an exponential increase in their shipping cost. Is this something you see, and is this something that sellers can do something about as their number of orders increase that they’re sending out?
Rob: Yeah. The unfortunate reality of shipping is it costs a lot of money, and nobody wants to pay for it. The shopper certainly doesn’t want to and the merchant certainly doesn’t want to. But it’s not a one size fits all. There are a couple of strategies, and again, I’d encourage anyone who wants to learn a lot more about this stuff to head to our blog, because there’s a whole bunch of resources that speak to just that, cost and recovery on shipping, and what we encourage people to look at when they view their shipping cost in their P&L, it really should not be seen as a cost on the business, but rather an investment in marketing for the business.
Hear me out when I talk about it. If you think about some of the more new generation metrics of cost of acquisition and lifetime value of a customer, these are the numbers that you need to start including in a cost of acquiring in a customer, and also looking at the lifetime value of a customer. Driving purchase through offering free shipping is a misinformed strategy. Whilst there is a high expectation for free shipping, you can give people free shipping if they hit a purchase threshold, and that plays very well into the psychology of shopper behavior which says, “I’m more likely to spend $20 more on product to qualify for free shipping, than spend five extra dollars on shipping, because I’m getting something that I value and is tangible.”
Shipping thresholds is one tactic that we talk quite a lot about. The second one is also flat rate shipping and providing multiple delivery options. If you’ve only got one mode of shipping, then chances are customers will get pretty upset unless you offer it for free. However, if you give the customer an opportunity to pay for the speed of their delivery, chances are they’ll invest in it, depending on the industry. If you’re in fast fashion and high fashion, it’s very hard to even charge your customer for express shipping these days, but if you’re selling jocks and socks, express shipping is definitely on the money. You can charge five or six dollars for that delivery. It’s express, give away standard.
It’s a good cost recovery mechanism, and the best one by far is same day delivery. I think it’s got a 70% intent to pay rate from consumers. 70% of consumers say they will pay for on-demand delivery. If I can get it today, and I need it today, I’m more willing to cover the absolute cost of that delivery.
Those are just a few tactics that retailers can look at to manage their cost base. The very final point and piece of advice would be around understanding what their magic number, and the magic number is the average cost of the shipment for their store. That takes into consideration law of averages, obviously. Many different destinations around Australia or the world, and many different types of product profiles and freight profiles if you happen to send different types of freight, and so long as you’re working to that average, and keeping a very close eye on that average, you can then start to factor that in to your cost of sale. You can look at your margin structure on an order per order basis, and again you’re looking at average order value in comparison to your average shipping cost. By the by, you should be able to run a very profitable business, and it’s a simple measure that not a lot of businesses actually look at.
Brad: I see that as well across the board. There’s definitely a lot more talk going on about the lifetime value, and we’re actually seeing that particular metric hit the headlines across the board as well, a bit more. I’m sure people will start embracing it a bit more.
You’ve spoken about your blog a couple of times, we’ll put a link to that just below the podcast, so people can go and grab some of that great information that you’re providing.
Brad: No worries. I think you’ve touched on this on a few points, but it sounds like if you get those few bits together you could definitely look at driving up your customer satisfaction, and it sounds like getting those few things right, and getting a good start on improving your processes and your tools over the fulfillment space in the different areas that we’ve touched on you’ll be looking at driving up your customer satisfaction, and I’m assuming that’s something that you’re seeing as well.
Rob: Yeah, it is, and I think it’s always really hard to look at what the game has been for businesses, if they’ve improved their delivery, or fulfillment flow, that’s very hard for them to gauge what they would’ve lost if they hadn’t of improved it, but one thing that is clear is there’s a lot of empirical evidence to suggest that a negative delivery or fulfillment experience results in a lack of repurchase intent, and I think the data that was released by MetaPack a couple years back said that of those that have a bad delivery experience, two-thirds of those customers surveyed said they would never buy from that retailer again, and I think it was eight out of ten of them would actually tell their friends not to buy again. That just gives you a bit of a factual point around how negative delivery experiences can really impact repurchase intent.
We definitely see a bump up in terms of customer satisfaction, and that customer satisfaction linking back to that lifetime value piece. You’re also reducing friction through the delivery process. The most tangible example I can provide there is, think back to the last time you were on a flight that was delayed, and think about two potential scenarios about how the polite wants to deal with that. In one scenario, the pilot doesn’t tell you anything about the delay, and in the other scenario the pilot walks you through the delay and what they’re doing about fixing that delay, and getting you off to your destination on time. Apply that to the delivery space, and what you see is if you tell the customer nothing about a delivery, they’re gonna get very anxious, and they often hit your customer service team, or if you’re a small business owner, they hit you up, and you’re the one on the ropes having to look into the delivery issue for them. The flip side, if you’re openly communicating, and proactively communicating to the end customer, then you’re keeping them really happy along the way, and that results in much better customer satisfaction ratings.
Brad: Fantastic. I think, moving on a bit, the last thing I wanted to touch on is returns, and you were speaking before about that wholistic view of the whole purchase, from the purchase all the way to the door and back again. I assume by that you’re meaning returns? We have a lot of the audience here see a lot of high returns when it comes particularly to some of the marketplaces out there. Is this something that they should be worried about, or is this something they should be embracing, because it’s an evolution of how shopping is changing?
Rob: I think returns are here to stay. There’s a really big trend, if you look into the data on it, returns has two core benefits for any business in this day and age. Maybe I’ll start with a bit of a macro trend.
I think the average millennial, it’s the big dirty M word, the groups of consumers that responsible for most of our success in the eCom industry, but also the reason for a lot of the headaches. The millennial, I think, will return an average of one out of three of every purchase, and that’s because what we’re seeing a lot more apparent in purchasing online is this whole wardrobing trend. People will actively add two or three of the same dress in different sizes or colors in order to see which one they like best, and just want an easy way to return the rest that they don’t want. Returns actually has the impact on repurchase intent as much as it does purchase intent. Surprisingly, there’s a very high percentage of customers, and don’t quote me on this, but it might 70 or 80% of customers, will actually sight the returns policy before clicking Buy Now on your website. Without an easy returns process, you actually don’t get the maximum conversion of sale, and I think some data that we have had access to suggests that it’s the second most important thing behind free shipping as a conversion driver.
You will start to see a lot more retailers and big brand name retailers move on this trend. There are other retailers which start to advertise their return window, and some of them are unrealistically providing hundred-day return windows. You can have product for a hundred days and choose to return it after that. It does pose massive risk to a business, but there are lots of hidden costs if you don’t think about having a very simple and easy returns process, thinking about wastage, thinking about loss and damage, thinking about lost sales opportunities, et cetera. Streamlining that process is really critical, and we’re gonna see this become a lot more apparent in due course.
Brad: And I hear on the grapevines that you may be including something around that in your product range. Is that correct?
Rob: Yeah, yeah. I’d love to tell everybody that it’s available now, but it isn’t, unfortunately. We’re still getting it out the door. We do have a returns product that’s in a closed beta. It’s a very simple Amazon-like experience for any business. It doesn’t matter how big or small you are, you should have the ability to allow customers to self-initiate a return, get a label, drop it into a postbox or get a courier to come and collect it from their home, and take it back to your warehouse or store, and that was really the philosophy that we used to build the returns platform with. As I said, we’re in a closed beta with some fairly large retailers, giving us a lot of feedback, and we’re incorporating that into our first general release, which will come somewhere between the May/June period this year.
We’re really looking forward to that, because it is a really easy process to get up and going with. There’s not a lot of deep integration that’s required in order to get something like that stood up, and it should result in A) much better conversion rates at checkout, and B) a much simpler process when a customer wants to return something.
I was returning a product the other day, and had to jump onto a website, go to the FAQ section, scroll down to the Returns Policy, scroll down to download a form, download a form, print it out, fill it in, scan it back in, and then look at the address on that form and go and figure out how to get a shipping label to send the product that I have to return back to the return location. That for me is a very inefficient process, but it is the standard process, which you’ll see across the majority of websites run by small businesses.
There’s a lot of friction in that.
Brad: I just wanted to round everything out. A little bit of a fun questions for you: we’re obviously hearing a lot in the transport industry about self-driving trucks and drone deliveries and all sorts stuff. Where do you reckon we’re gonna be in the next few years? Do you think a lot of that’s gonna take over the delivery process, or is it still a while off?
Rob: Yeah, it’s a really interesting question. I was in the States for South by Southwest last week, and I actually asked the head of UPS, which is the largest carrier in the United States. Frankly speaking, if you project out the delivery volumes driven by eCommerce over the next five to ten years, it will get to a certain point where the volume of parcels moving through logistics networks will not be able to be physically sorted by hand. It’s gonna exceed the human capacity to fulfill these items through a network, and that’s a pretty scary fact. What that actually means is robotics and augmented robotics and automation is gonna be the biggest trend in the logistics industry over the next decade. When it comes to last mile delivery and fulfillment, the jury is still out on drones.
There is a very, very distinctive role they can play, particularly to delivery to remote areas, but if you think about hyper-urban transport, and a million drones taking to the skies of Manhattan any given day, I think that’s gonna be an impossible reality, but autonomous vehicles, I think that that is a very logical next step for the industry, particularly around trucking lines and line haul. That’s the backbone of the logistics networks that power every shipment you send out. Those right now are driven by truckies that will cross the state in a truck over five business days, for example. That can be sped up with autonomous vehicles, obviously subject to compliance and regulatory, but I definitely see that as a mechanism to enhance delivery processes.
In terms of the end mile, and that interaction with the consumer, that can really go anywhere, and we’re seeing a lot of different trends start to exist, but I probably looked at China as the market that’s testing and learning in various ways, and this is refuting the headlines of what Amazon will be projecting out of the States, talking about the future of delivery, because it just isn’t economically viable. What you’re seeing in China is, there’s actually one centralized neighborhood outlet which receives and dispatches all deliveries, and there’s one local delivery person – man or woman – that is the neighborhood delivery person, and whether they’re augmented with a special eBike or something to allow them get to your house and back to the dispatch and receive point, that could be the future of what we see happen across the world as well.
Brad: Wow. I know in India, you can buy something and they’ll turn up at your doorstep with the two or three- you were talking about before, throwing three different sizes on. I know you can go and buy a dress, and they’ll turn up with the three different size at your door. You try it on, and return the other two, and then pay cash on delivery. It’s very interesting.
Rob: Yeah, yeah. Absolutely, and you see that across southeast Asia, actually.
Brad: All right, that’s pretty much round out the show for me. I think we’ve covered a lot today. We’ve definitely looked at the fulfillment process, and how that an be improved in a few areas, in particular tracking and returns, and having a fast fulfillment process there, so that the customer stays informed, and thank you for coming along and sharing all that information. That’s fantastic. We’ll get links to your blog and your products just below this podcast so that we can share it, and thanks again for being on today.
Rob: Absolutely pleasure, Brad. Thank you very much for the good line of questions, mate, and I hope I’ve helped answer some questions that people may have. By all means, if I haven’t, there’s the blog link that will be shared, but also feel free to add me on LinkedIn. Rob Zada is my short name on LinkedIn, or follow me on Twitter, which is TheRealRobZada, and we can keep the conversation going from there. But thank you very much, Brad, for having me, and I’m really pleased to have been able to share some insight into the wonderful world of fulfillment and delivery.