Delays and shortages across every area of shipping—containers, drivers, fuel, etc.—have led to rapidly rising costs. The global energy crisis is impacting the availability of all kinds of products, especially in manufacturing hubs like China. Increased demand has caused bottlenecks at ports around the world, while the lack of available drivers means there may be no one to deliver goods to their next destination. And ever-changing health regulations and restrictions due to the global pandemic are still further complicating the supply chain.
It’s a huge logistical challenge for merchants around the globe. If you don't have the product, you simply can't service the customer. So for this article, we talked to a few Shopify Partners to find out what the clients they work with are currently dealing with, and how agencies can help merchants solve supply chain issues.
The Global Supply Chain Playbook
The impact of the global shipping crisis
“We heard all kinds of stories from our clients,” Chris Pointer, founder and CEO of Shopify design and development firm Pointer Creative, explains. “Some had products that were totally hung up overseas, and they were considering desperate measures to sell them, like turning to marketplaces like Amazon, because they just couldn’t get them to North America to distribute through their direct-to-consumer channel. This approach dilutes sales but especially if you have seasonal products at least you can get them moved.”
Shipping container shortages have caused prices to soar. In 2019 it cost less than $2,000 to transport goods from Asia to the United States in a 40-foot container. By October 2021, the same service cost around $10,000—or even up to $25,000 if an importer paid for the luxury of “on-time delivery,” a cost that’s invariably passed down to merchants.
The container shortage has led to bizarre situations at ports. Even if there was a container, there was no guarantee that a merchant’s products would actually make it onto the ship. “Some companies hired staff on the ground to monitor shipping containers,” Robert Befumo, head of ecommerce strategy atParkfield Commerce, recalls. “They were there to make sure that their goods were not being moved off a container and replaced with cargo from another business. It’s like the floor of the stock market in some ports, the container goes to the highest bidder. So while you may be able to follow your supply chain logistically and think that it’s shipping, in reality it might actually not be.”
Container prices have started to come down over the past six months, but because supply is still limited and COVID-19 still causing shutdowns around the world, prices are not expected to approach pre-pandemic rates again until 2023 at the earliest.
Even once systems do normalize, the events of the last couple of years have exposed significant global logistic network vulnerabilities to political instability, natural disasters, and regulatory changes. In fact, according to McKinsey supply chain disruptions now occur every 3.7 years on average.
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How to respond to increased customer expectations
One solution is to invest in domestic production but it’s costly and takes time to set up. Bigger brands also take matters into their own hands by chartering their own ships to avoid shipping container backlogs, but these approaches are not suitable for every merchant, especially small- to midsize companies.
“Ecommerce merchants with reliable supply chains currently enjoy an advantage over under-supplied competitors, while brands that can afford to use air freight enjoy an advantage over brands that ship by sea,” explains David Wagoner, co-founder and CMO offull-service ecommerce agency P3 Media.
He continues: “Merchants facing supply issues that can’t be ameliorated with a transfer air freight need to prepare for additional shipping delays by building out clear communication touchpoints around fulfillment, and emphasizing pre-orders online.”
While certainly challenging, shipping disruptions are also an opportunity to improve and get creative with how you communicate and solve supply chain issues. Brands that can innovate in this area and keep their customers in the loop have a big competitive differentiator. As a result they are going to see better conversion rates and lower return rates.
Just offering free delivery isn’t enough anymore. If brands aren’t able to fulfill their delivery promise, or aren’t clear around shipping, customers will simply walk away. According to a study conducted for Shopify’s Future of Commerce report, 32 percent of customers abandoned their carts in 2021 because “the estimated shipping time was too long,” and 23 percent because “there was no guaranteed delivery date.”
Five future-proof best practices for smoother fulfillment
We asked P3 Media’s Wagoner how partners can support their clients while reducing the stress of fulfillment and safeguarding their supply chains for the future. Here he recommends five fulfillment-focused best practices that merchants can employ to maximize sales and engagement:
1. Build additional customer touchpoints around fulfillment delays
In 2021, consumers all over the world got accustomed to waiting longer to receive their online orders. And with production, shipping, and on-shore transportation all in flux, shoppers have also learned to tolerate more “out of stock” notifications.
However, Wagoner warns that shoppers haven’t grown accustomed to placing an order and then waiting weeks or months for a simple update. Uncertainty is much worse than being aware of a delay. “To keep waiting customers happier, brands need to introduce clear, timely messaging around delays that informs customers when they can expect to receive their goods, and gives them the opportunity to modify or cancel their orders,” he advises.
Effective channels for distributing transparent fulfillment updates include:
- The homepage promo bar
- Transactional email flows
- SMS campaigns
Automating order notification emails and text messages, for example, make it easy for customers to track their orders, so they know when they have been received, packaged, and sent out for delivery. Customers can also use the Shop app to access up-to-the-minute tracking information for their order, and anticipate or mitigate delays.
Shopify’s Online Store then enables you to add sections to the product page that clearly articulate shipping and return policies, which makes it easy to set delivery expectations from the moment the customer starts browsing straight through to checkout.
Meanwhile, providing shipping speeds helps create transparent checkout experiences that improve the customer experience and reduce shopping cart abandonment.
2. Leverage pre-order and “notify when available” functionality
Wagoner believes that brands experiencing significant product delays will benefit from setting up pre-order functionality or using a third-party restock app to add “notify me when available” email and SMS collection fields directly to the product detail page.
“Transforming ‘out of stock’ messaging into a pre-order opportunity allows brands to continue generating monthly recurring revenue around core products that often go out of stock, accurately gauge demand for significantly delayed goods, or grow anticipation around a new release,” Wagoner points out.
Restock notification apps function similarly, but instead of collecting customers’ credit card information, they collect customer emails and phone numbers. Wagoner says that restock apps can be particularly useful to merchants interested in building contact lists of qualified prospects.
“But be sure not to send any campaign messages to the prospects on these lists without collecting their consent first,” he cautions. “Signing up for a restock notification is not the same as signing up to receive marketing communications, and you’ll need explicit permission if you want to use the personal information collected through a restock app for marketing purposes.”
3. Offer blended fulfillment options and bring inventory closer to customers
Ongoing supply chain woes and exorbitant shipping costs mean it’s taking longer for most brands to on-shore goods. While merchants can’t do much to fix the global supply chain, Wagoner suggests any merchant with a brick-and-mortar presence can offer accelerated local fulfillment options that will differentiate them from competitors.
On Shopify, brands with physical stores or local stockists can now leverage these in-real-life outposts to make last-mile fulfillment much more convenient. Two great ways to do this are to set up blended local checkout options like buy online, pick up in store (BOPIS), or to transform physical locations into shipping hubs by setting up simple local delivery programs. Both are fully integrated within the Shopify admin and the Shopify POS app.
“In essence, use your brick and mortar stores as fulfillment centers,” Wagoner recommends. “It can be a real competitive differentiator for direct-to-consumer and digitally native brands.”
Jason Wong, founder of cruelty-free beauty brand Doe Lashes, meanwhile suggests also analyzing the customer data to figure out where customers are placing their orders from. “We responded to the data by placing our inventory near the key cities we uncovered, which reduces the miles our packages need to travel,” he explains. “If you only fulfill from one facility, a single order could travel thousands of miles to reach its destination. That’s a huge carbon footprint. So we send a large shipment to New York, for example, because that’s where we have a lot of customers, and another one to California. As a result, products travel a shorter distance, there are fewer carbon emissions, and the cost is lower for both our business and the consumers.”
One option is to outsource inventory management and fulfillment. The Shopify Fulfillment Network, for example, takes care of picking, packing, and shipping orders for merchants, so they can spend more time managing their business. You can also optimize order management with the Shopify Fulfillment Orders API to create a better fulfillment experience for your clients, no matter how or where they fulfill orders.
You might also like: Supply Chain Issues? How Going Local Can Help.
4. Automate fulfillment logic
If your clients manage orders manually, you can return hundreds of hours to them and vastly improve their customer experience just by using Shopify Flow.
The platform allows merchants to automate workflow rules around customer tagging, order payments, inventory alerts like low-stock notifications, and fraud detection. Automating order-related processes minimizes purchase fraud and returns while accelerating fulfillment. On the flipside, you can also use automations to stop campaigns promoting out-of-stock products.
“With its intuitive interface and robust app integrations, Flow can empower your clients to streamline their online operations with no coding required,” Wagoner says. “Plus, automation frees up valuable time for the team to focus on creative and strategic areas of the business instead.”
You might also like: Automate Everything with Shopify Flow.
5. Set up cross-border selling
Over Black Friday/Cyber Monday 2021, 15 percent of sales were cross-border. That figure is only expected to rise as online shoppers continue exploring ways to source products difficult to obtain from on-shore retailers.
“Well-supplied brands currently have a chance to maximize their stock advantage by entering markets where demand for their wares is heaviest, but as with all arbitrage opportunities, time is of the essence,” Wagoner points out. He recommends Shopify Plus merchants tap Shopify Markets and their nine included expansion stores to expand to global markets quickly while maintaining control over their customer relationships.
Expansion stores can be managed centrally from Shopify’s “organization admin” view, while stores set up using Markets can handle currency conversion, translation, duty and tax management, and price lists automatically. The ability to use a brand’s existing ecommerce logistics and web experience to build a fully functional international storefront greatly reduces time to launch, and streamlines the tasks of store management.
You might also like: Shopify Markets: Everything You Need to Sell Worldwide.
Support your clients in adapting to constant change
Don’t wait for things to go back to “normal.” Some things have changed for good. A shift towards increased domestic and more sustainable production now seems inevitable, for example. The global disruption to supply chain issues has also shown that it’s now more important than ever to help merchants streamline their logistics, for the short- and the long term. At the same time, as customer expectations have risen significantly, it’s essential to manage them both by being more transparent and by offering more fulfillment options as a competitive differentiator.
Merchants have to deal with a lot of uncertainty around the shipping of their products, and the more partner agencies can take that weight off them, the more merchants can adapt and continue to serve their customers. Follow the best practices outlined in this article, and you’ll be well prepared to support your clients for current and future fulfillment challenges.
Learn more: Check out Shopify’s report on The Future of Shipping and Logistics for more trends, insights, and advice you need to succeed in 2022.