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When Amazon launched its free same-day delivery service in 2015, the question immediately arose: Would this buy customer loyalty? Ultimately, yes. Then consumers began to wonder what that meant for small retailers. Could marketplace sellers on Etsy and eBay keep up with the new “status quo”--to satisfy customers with same-day shipping?
Let’s be honest: most small businesses don’t have the resources or capability to fulfill same-day delivery. That said, same- or next-day shipping is attainable for many SMBs. But, before we get into the how of same-day logistics, let’s establish why this matters in the first place.
Why do retailers care when a package gets to their customers? Just so long as it gets there, right?
Not quite.
A study by Dotcom Distribution found that customers have a short fuse when it comes to error. They value transparent fulfillment processes and are willing to pay extra for faster delivery even if the need is non-urgent. Ultimately, consumers care more for delivery speed than product quality.
Customer loyalty can be fickle, though: 47% of respondents of the same survey said they have chosen not to shop again at a retailer with poor fulfillment transparency or delivery processes. So while customers don’t necessarily require same-day delivery, they do need to know that you’re shipping their items as soon as possible and want to be able to track where their packages are at any point in the delivery process.
Online shopping has become more than an element of convenience--it’s an experience, from homepage to checkout. The process is more nuanced than ever. But it doesn’t end at checkout. Since e-commerce retailers don’t get face time with customers the same way brick and mortar stores do, the time between checkout and arrival of an order is a crucial step in building customer loyalty. With a quick and easy shipping process, preferably in nice packaging, users will continue to come back.
But what is the most important aspect of being able to achieve same-day shipping? Simply, inventory levels.
Think Two Steps Ahead
Planning ahead on inventory levels and providing a transparent fulfillment process skyrockets the likelihood that you’ll retain customers. Having too much inventory is wasteful, while having too little hurts your ability to fulfill orders. And, of course, it makes sense in today’s on-demand world that speedy delivery is a key factor in user retention.
So, how can small business owners and entrepreneurs get closer to same-day services when Amazon-levels of inventory aren’t an option? Never fear, there are plenty of ways to plan inventory in a way that is scalable for a small business.
As the Boy Scout motto goes, be prepared.
Be sure to recalculate safety stock levels, the inventory that acts as a cushion before you run out of stock, on a regular basis to ensure they are up to date. According to Bain consultants Pratap Mukharji and Sam Israelit, well-functioning operations teams update their calculations every three to six months for accuracy. You can update the calculations more frequently if appropriate, but avoid letting the frequency dip below six months.
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Once you’ve accurately padded your inventory, remember to aim for higher inventory turnover. Inventory turnover, or the amount of times you sell out of inventory during a given time, should be relatively trackable. The higher this number, the more efficient your operations, so in order to see higher turnover, sometimes it makes sense to capitalize on lean inventory management, or, more simply, produce in smaller batches.
Smaller batch sizes not only take off a major financial burden, but also adds to the operational efficiency of your business by avoiding excess inventory. You can work with suppliers to reduce costs, and invest in items that are in high demand. Ideally, the supply and demand of the product are comparable so you are not bogged down by the weight (figuratively and literally) of excess product and can operate at optimal efficiency.
How can you have high turnover, while keeping your safety stocks at a reliable level? As your inventory ebbs and flows, a crucial responsibility is to determine a reorder point for ordering new inventory to replace sold items. Formally setting your reorder point takes the guesswork out of inventory planning and restocking. Once your inventory dips below your set number, it’s time to restock.
Always Look at the Clock
An often forgotten element to consider when determining reorder points is the time it takes to receive inventory from your vendor. If you know it takes two weeks to receive orders, factor that timeline into you reorder points. Also be sure to base your decision on demand for your product and standard amount of time it takes to get it out the door, which, with all this preparation, should only be one day!
There are plenty of services, like UberRUSH or my own company Shyp, that help SMBs incorporate a speedy delivery into their business plan at a cost-efficient level. Ultimately, inventory planning is the most crucial step in keeping up with the demands of same-day shipping. If retailers are able to plan efficiently, same- or next-day shipping will follow.