With the holidays upon us, eCommerce companies are battling for the minds and wallets of a consumer base that’s larger than ever due to the COVID-19 pandemic. Chief among the weaponry these combatants are using are claims of fast shipping, typically 2-day ground shipping. Can your shipping speed keep up with your competitors’ offerings? A better question may be: do you need them to? In this article, we’ll look at 2-day shipping, examine if it’s necessary for your brand, and tell you how to get to nationwide 2-day delivery if that is your goal.
Just how important is 2-day ground shipping?
A November 2019 study found that cost was the most important shipping factor to 64.3% of online customers, while delivery speed was the most important factor to 18.7%. Importantly, the number of people to whom speed was most important doubled from the previous year. So, shipping cost still outweighs delivery speed, but speed is increasing in importance in the minds of consumers.
There are other factors that can help determine how important shipping speed is to your specific business.
For instance, if you’re selling products that consumers can’t buy elsewhere, then shipping speed becomes less important as the consumer can’t get the same items quicker anywhere else. If, however, you’re selling products that consumers can easily purchase from your competitors, speed becomes more of a factor. Putting yourself in the customer’s shoes, if you can buy the same item from 10 different sellers, you’re likely going to buy from the one that offers the cheapest and quickest shipping option.
Shipping speed may also be less important if you have a well-established brand with a loyal customer base.
Making 2-day ground shipping a reality for your company
Let’s say that your company determines that 2-day nationwide shipping is important. Let’s also assume that you are currently fulfilling eCommerce orders from a single warehouse. You have two basic options:
- Keep one fulfillment center but pay for expedited service for parcels heading to zones outside a 2-day reach.
- Expand your fulfillment center network to two or more facilities.
For most companies, the first option isn’t really much of a possibility. The larger transportation costs associated with this model are prohibitive.
That leaves us with option #2: expanding your fulfillment network. You can add an additional fulfillment center (or more than one) in a new location(s) that can deliver within 2 days to customers that are currently outside of your 2-day ground window. Your optimal network size (i.e., number of fulfillment centers) will depend on a number of factors, chief among them the location of your customers.
If your current fulfillment network is struggling to reach customers in several disparate parts of the country in 2 days, then a network of three or even four warehouses may be required – provided that you have the volumes to warrant such a large network.
With the expansion approach, you will have higher inventory costs as you need to spread out your products across multiple facilities. For example, let’s say you sell 1,000 units of Item X each month from your current location. Once you add a new facility, you’ll need to increase that inventory to 1,100 or 1,200 and spread it out over both facilities to ensure that you have adequate stock to handle orders coming into each. Once you multiply this increased inventory by multiple products, the cost can add up. So, it’s important that you have the order volumes to justify expanding your network.
Even with the increased inventory costs, however, network expansion can be a very cost-effective move. In our experience, the parcel savings associated with a second facility − minus added facility, inventory and labor costs − can result in a 5%–10% savings. Adding a third facility can bring the savings up substantially – again, because of the reduced parcel costs associated with being closer to customers.
Before you can enjoy those fulfillment savings, however, you’ll also need to decide whether you’re going to build or lease the new facility yourself or partner with a third-party logistics (3PL) provider that is located where you want to be.
With the DIY model, you’ll need to choose your new region, find a building, negotiate a lease, buy racking and material handling equipment, hire workers, expand your warehouse management system (WMS), and get everything up and running. Are you ready to take on this work while still serving your expanding customer base?
As the answer to this question is often “no,” most brands choose to engage with a 3PL. An asset-based 3PL will have the necessary infrastructure, technology and people already in place. This enables you to avoid capital investments in these items yourself. It also enables you to get up and running (and shipping) quickly as your operation basically plugs in to your 3PL’s existing infrastructure.
Perhaps best of all, most 3PLs have scalable shared warehousing models in which you only pay for the space and services you need. So, whether you’re at peak volumes or encountering a slow period, you’ll only pay for what you use.
Amware Fulfillment is once such 3PL. We have a network of fulfillment centers in 6 major markets across the U.S., with a reach that enables 1-2 day ground shipping to 95% of the U.S. population. To learn more about our fulfillment services and how we can help you expand your operations, contact us today.
