What is e-commerce logistics?
E-commerce logistics refers to all processes along the logistics chain in the area of online retail. This includes incoming goods, control, storage, input into the ERP system, picking, goods removal, preparation for shipment, shipping, shipment tracking, returns if necessary, as well as the management of the overall process.
Rising sales figures in B2C and B2B e-commerce
A seamless e-commerce logistics process is becoming increasingly important, as the volume of orders via the internet is increasing steadily, year on year. In 2022, UK online sales saw their highest annual growth since 2007, with sales increasing by 36% - and e-commerce revenues in the UK are predicted to have an annual average growth rate of 12.6% by 2025.
According to UK government statistics, online shopping accounts for 26.7% of all retail sales, 28.1% of textile, clothing and footwear sales and 27.1% of household goods sales. B2B e-commerce revenue is also increasing. A recent Mintel report showed that 69% of the entire market in 2021 was accounted for by B2B e-commerce, with 96% of businesses having some kind of digital exposure. Additionally, a 2023 research report commissioned by e-commerce provider BigCommerce revealed that of 1,006 B2B buyers in the UK, US and Australia, 74% used online platforms to make purchases, with 15% using them every day and 50% using them more than once a week. For B2B customers, inaccurate pricing and shipping costs were reported as the biggest ‘pain point’ in online purchasing: 40% cited this as the most frustrating aspect of the online checkout process.
Logistics: challenges and solutions in e-commerce
The growing number of orders poses numerous challenges for logistics in e-commerce. On the one hand, goods should be available immediately; on the other, they should not incur unnecessary storage costs. Delivery must be fast and reliable, and any returns should be handled quickly and efficiently. It’s therefore essential to keep track of orders and inventory. Online shop operators should also respond promptly and satisfactorily to customer enquiries.
Let’s take a look at the basic logistics strategy:
- Online shops can handle all requirements themselves, managing all segments of the supply chain independently. This option is particularly advantageous for smaller online shops, as it allows the owner to keep track of the process. This method also delivers the highest profit margin, as no royalties go to affiliates.
- Cooperation with shipping partners simplifies the delivery of goods. It saves on journeys and consequently also on costs for vehicles, equipment and staff. However, due to the costs of the parcel service, the profit margin is reduced.
- Using fulfilment services outsources almost the entire logistics. Not only is shipping handled by third-party providers, but so are storage, picking and returns. But in addition to the costs of this service, online shop owners also give up some control over their business – if the supply chain does not function satisfactorily, the performance of the online shop, or of marketplace sales, often suffers.
What’s special about B2B e-commerce logistics?
E-commerce in the B2B segment differs from the B2C sector in many ways, since certain processes within the logistics chain are more relevant for business customers than for consumers. Here are some things to keep in mind:
- B2B transactions usually have high order volumes and/or larger volumes of goods. According to various surveys, the average order value in the B2B market is about seven times higher than in the B2C market. However, the number of orders is usually lower than in the B2C segment. This means that both movement of goods in the warehouse and order picking activities are lower, but can be more complex due to the order quantities and any additional work such as pre-assembly or packaging of the goods.
- B2B buyers attach greater importance to delivery and service conditions, as their own business processes depend heavily on procedures running smoothly. This makes it all the more important to support the buyer during all stages of the process, even if the purchase has already been completed.
- For larger orders, such as those common in B2B, the delivery time is usually less onerous than the shipping costs. While consumers expect goods within a few days, delivery times of several weeks are not uncommon in B2B. Therefore, greater emphasis should be placed on the safety and cost-effectiveness of transport, rather than on speed.