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Monthly Archives February 2021

Reduce Churn & Maximize Savings by Outsourcing Your Subscription Box Fulfillment

Outsourcing Your Subscription Box Fulfillment

Subscription ecommerce has exploded in the past decade, and many subscription retailers have seen a boost in sales in the past year with consumers sheltering at home. In this increasingly prevalent business model, subscribers pay a fee to receive a package of selected or surprise items on a regular basis. According to McKinsey, ecommerce subscriptions generally fall into one of three categories:

  • Curation Subscriptions (55%) – The subscriber receives a curated selection of items, such as an assortment of apparel or beauty products. Customers typically don’t know exactly which products they will receive, so this type of subscription is popular for its element of surprise.
  • Replenishment subscriptions (32%) – Regular, recurring deliveries of same or similar items, like razors or vitamins. This type of subscription makes it convenient for consumers to get their essentials.
  • Access Subscriptions (13%) – Membership gives subscribers exclusive access and “VIP” perks. Primary categories are apparel and food.

 

The impact of COVID-19 on retail subscription

The coronavirus pandemic and consumer shift from in-store to online shopping have fueled the growth of subscription box services. For some companies, pivoting to this model has made it possible for them to stay in business after their previous business models were no longer viable (e.g., in-person or event-focused marketplaces). According to Forbes, many U.S. consumers leaned into subscription box services for the first time during the pandemic, and a survey of more than 1,000 shoppers showed that one in five had purchased a subscription box to have products on hand.

Even before the pandemic hit, subscription services had gained wide appeal. McKinsey research shows that in 2018, the subscription ecommerce market had grown by more than 100 percent per year over the previous five years, and fifteen percent of online shoppers had signed up to receive products on a recurring basis. In 2019, Multichannel Merchant data projected that by 2023, as many as 75 percent direct-to-consumer brands would have a subscription-based offering. Now, this percentage could be even higher. Whether it’s vitamin refills or a monthly box of dog chew toys, consumers have responded to the convenience of getting items they want and need without having to leave their homes.

 

How outsourcing fulfillment helps subscription retailers build customer loyalty and maximize savings

While conventional ecommerce involves shipping one-off orders of unique items, subscription box fulfillment often requires sending many of the same product in a tight timeframe. Many entrepreneurs who start their own subscription box businesses begin fulfilling orders themselves and then outsource to a 3PL when it becomes too costly and labor-intensive to perform these services in house.

Outsourcing fulfillment helps subscription box companies mitigate these challenges as well as one of the biggest that the industry faces: churn. Word of mouth is a key trigger for consumers to sign up with a subscription service, especially in the curation and access categories, but they are quick to cancel their service if expectations aren’t met. They are also less likely to recommend a brand after a bad delivery experience. So how can outsourcing your fulfillment help? We’re breaking down the top four ways that partnering with a 3PL helps subscription retailers minimize churn and increase savings.

1) 3PLs can help subscription businesses scale efficiently—without the major capital investment
For many subscription retailers, orders are processed in a peak period once a month, which creates significant fluctuations in volume. Having the flexibility and infrastructure to scale with demand is critical, but doing so efficiently requires resources like space, labor and systems that become expensive—quickly.

Retailers performing in-house kitting need space and labor, but often just for a few days to a week each month. For the rest of the month, that labor and space may not be needed. When you outsource to a 3PL with a shared-space fulfillment center, that labor can be redeployed to perform other warehousing activities. Plus, you don’t have the overhead investment of running your own facility or the burden of paying for space you don’t need. Partnering with a 3PL that can scale efficiently to accommodate volume fluctuations and all your company’s stages of growth will help you save money—and retain clients—in the long run.

2) Packaging done right improves your customer’s experience—and your bottom line

When it comes to returns in the subscription box business, a mistake may not just cost you one order—it could cost you a long-term subscription. Receiving an incorrect or damaged order leaves customers feeling frustrated while also affecting your bottom line in costly returns and replacements.

When you outsource to a fulfillment partner, you’re supported by a team dedicated to accurate picking and packing and trained on how to package orders properly to guarantee safe delivery. There is a detailed process in place strictly followed by employees to ensure an identical, accurate and safely delivered package to each customer.

While the right packaging is critical to prevent damage, it is also a reflection of the brand. Having a professional team that goes the extra mile to uphold a high standard of care when packing your orders can make a huge difference in the customer’s overall experience. A fulfillment partner can also add in marketing materials like inserts and other special packaging touches to help your brand stand out and create a memorable unboxing experience.

Check out our Packaging page to learn how Visible helps clients optimize their packaging, including size, materials and design.

3) Tech-enabled 3PLs deliver greater efficiency, visibility and profitability

One of the most crucial components of an optimized fulfillment operation is the technology driving it. However, purchasing a Warehouse Management System (WMS)—then learning and implementing it—is a significant investment of time and financial resources. Instead, subscription retailers have the option to partner with a professional who already has technology in place specifically designed to manage this type of business.

The platform used to manage your inventory and orders should have built-in automation and integration capabilities for accurate and efficient fulfillment. Systems with these capabilities not only help subscription retailers keep customers satisfied, but also eliminate waste throughout the supply chain and increase profitability. An efficient operation allows you to invest your time in impactful activities that grow your business rather than spend it on activities like manual data upkeep and spreadsheet manipulation. Additionally, the ideal system comes with an integrated web portal and robust reporting capabilities, so you have the transparency and control you need to manage your business and forecast properly.

It isn’t enough simply to have the technology, however. A fulfillment partner must have the technical knowledge and resources required to maximize the system’s capabilities and tailor them to meet your needs. Visible’s WMS delivers expert inventory and order management with the full transparency and reporting customers need to make intelligent business decisions. We are also integrated with more than 40 ecommerce software and shopping cart platforms to make the fulfillment process seamless.

4) Subscription retailers can leverage their partners’ buying power and facility locations for fast, affordable shipping options

Whether subscription retailers have a pre-established monthly delivery date, or customers are able to select their own, it is critical for the order to deliver when expected, especially if they are replenishing a daily necessity. A 3PL should have a strong network of carriers that provides not only high on-time performance but also a multitude of shipping options. Visible has partnerships with the nation’s top carriers, and we leverage our volumes to provide the most affordable pricing possible to clients for every shipping option.

If your customers are geographically diverse, it is recommended that you distribute your inventory across multiple, strategically fulfillment centers. Bringing your product closer to your customers reduces shipping fees and transit times and improves overall efficiency. Learn more about the benefits of having multiple fulfillment centers here.

 

Fulfillment is best left to the experts

Fulfillment, while necessary, isn’t typically where subscription retailers want to spend most of their focus—especially when there are companies that specialize in these services. Professional fulfillment providers like Visible have the staff, technology and resources in place to process orders as efficiently as possible, so customers can concentrate on growing their business with the peace of mind that the logistics are handled. A well-oiled fulfillment machine not only creates savings in the long run but also boosts customer loyalty by delivering accurate, properly packed and timely orders.

 

Fulfillment Audit

 

When the time comes to outsource, keep in mind that many 3PLs are optimized for just-in-time fulfillment rather than the subscription box model, so it’s important to choose a partner with expertise specifically in subscription fulfillment. Visible SCM delivers effective solutions to help subscription retailers meet customer expectations, scale efficiently and minimize churn. To speak with one of our experts, fill out our contact form or give us a call at 877.728.5328.

 

 

The COVID-19 Domino Effect on Supply Chains: What’s Happening, What’s Expected and What You Can Do

covid impact on supply chains

At the Port of Los Angeles, cargo volume was up 50% in the second half of 2020 compared with the first half of the year, a reflection of the pandemic-driven shift in consumer spending from services to goods. The surge of imports—plus COVID-19 infections and shortages of containers and chassis—has created bottlenecks throughout the entire supply chain, leaving shippers to contend with delays and soaring fees.

So when will the situation improve, and what can be done in the meantime? We’re breaking down the challenges shippers are facing, if/when relief is expected and tips for mitigating the impact.

West Coast port congestion sends ripples throughout the supply chain

The word “unprecedented” has been used a lot over the past year, and it’s now being used to describe congestion at the Ports of L.A. and Long Beach brought by surging imports, labor shortages and the rush to get goods in before Chinese New Year.

Although the country’s busiest import gateway has dealt with gridlocks before, this is the first time since 2004 that “drift zones” have been used to manage traffic into neighboring ports. Cargo ships are bigger now and take longer to unload, and for queued ships, the wait appears to range from several days to nearly two weeks.

At the terminals, operators are stacking containers higher and wider in container yards, delaying the release of containers from the complex to distribution centers and rail ramps. As a result, shippers face mounting detention and demurrage charges as well as higher spot rates and surcharges by rail carriers.

Port congestion, now spreading north to Oakland, has been exacerbated by labor shortages brought by COVID-19. Coronavirus infection rates among Los Angeles/Long Beach dockworkers have been called “catastrophic,” as nearly 700 dockworkers have contracted the virus and hundreds more have taken virus-related leaves.

“It’s impossible for dockworkers to ride in shuttle buses between terminals and work together to load and unload ships without having contact with hundreds of people per shift,” said ILWU Coast Committeeman Frank Ponce De Leon. “The rate of infection is growing quickly.”

Outlook: According to Maritime Executive, analysts foresee “little letup” in bottlenecks and port congestion. Volumes are expected to remain strong as the ecommerce explosion continues, and we may even see another surge during the summer months. Fees and delays are likely to remain as the influx of import containers grows and ports continue to operate with limited labor and split shifts due to COVID-19.

To ease congestion at Los Angeles/Long Beach, the Federal Maritime Commission is recommending that shippers import their freight into Tacoma and Seattle, which means warehouse capacity in the Pacific Northwest is likely to tighten. Visible’s 250,000-square-foot facility in Fife, WA has capacity if you need space for storage/distribution or transload support to get your freight moving inland. Please contact your Visible representative to secure space while it is available.

Shippers “priced out of the market” as costs skyrocket amid container shortage

In addition to congestion and COVID-19 outbreaks, the Port of Los Angeles is dealing with a container shortage, leading to soaring shipping costs and delays of goods purchased from China. In order to get space on containers, shippers are paying historically high rates; in fact, demand has pushed rates from China to the U.S. West Coast beyond $4,000 per container. The container shortage and resulting premiums are forcing retailers to decide whether to push back delivery or pay the premium and absorb these costs or pass them onto customers.

“Carriers in their pricing behavior have prioritized short-term profitability over customer relationships,” said Sea-Intelligence CEO Alan Murphy. “For shippers with low-value commodities, the development is nothing short of a disaster, as they are effectively being priced out of the market.”

Not only are shippers paying record-high rates, but they are also getting “sub-standard” service. In December, 44.6% of vessels arrived on time, down from 76.3% a year earlier and the lowest level in a decade.

The container shortage is not just affecting importers. Shipping lines are rushing containers back to China empty rather than waiting for them to travel inland to reach exporters and return to the coast, creating equipment shortages for U.S. exporters. In October and November, carriers rejected U.S. agricultural export containers worth hundreds of millions of dollars and sent empty containers back to China to be filled with more profitable Chinese exports.

Outlook: Container xChange predicts further volatility in coming weeks “with every element of the transpacific ocean freight supply chain under unprecedented pressure.”

“Shippers have options to pay the priority premium for bookings and equipment, but no guarantees,” said Karen Koide, Visible director and global trade compliance expert. “Our team is closely monitoring the situation at the ports and working with our agents to secure the best bookings available.”

While the container shortage isn’t necessarily new, it has reached critical levels and is driving the need for more flexible shipping options. Demand for less-than-container load (LCL) service is likely to grow as shippers attempt to secure space but wish to avoid exorbitant air freight costs. To explore LCL as an option for your business, contact your Visible representative and we will connect you with our team of ocean freight experts.

Congestion, chassis shortages causing further delays as freight moves inland

When COVID-19 first took hold, rail experienced a rapid decline in volume followed by a significant volume rebound. The surge in intermodal volumes between the Southwest and Midwest is challenging inland operations, and an ongoing chassis shortage is causing delays in cargo getting onto the rail.

Chicago, the largest U.S. interior rail hub, is facing record-breaking container volumes and increased dwell times due to the constrained chassis supply. This disruption has spread to St. Paul, Minnesota, where containers have had to idle in BNSF Railway’s St. Paul terminal until chassis become available.

Intermodal carrier J.B. Hunt Transport Services said costs will rise for intermodal service to support investment in new containers, drivers and other equipment needed to mitigate congestion challenges.

Outlook: Even when congestion eases in Southern California, shippers will see contract rates rise to offset the costs of higher container dwell times. While rail service providers are working together to find capacity and equipment solutions, the industry also faces a drayage shortage that is likely to continue. As noted by the Journal of Commerce, COVID-19 has slowed the training of new drivers, as social distancing and other health restrictions limit the number of trainees in a cab with a trainer.

Barge and feeder services are suspended in South China, tightening truck capacity in the Pearl River Delta

To control the spread of the coronavirus ahead of Chinese New Year, the Chinese government is suspending feeder services in South China lasting through February. This creates further supply chain disruption for shippers, as these feeder vessel services allow for containers to move from the smaller ports to central container terminals where they can be loaded onto larger vessels. While trucking may be an alternative, capacity is limited. A shortage of truck drivers lasting longer than normal is expected due to quarantine rules for those who travel during the holiday.

If you have suppliers located in the Pearl River Delta, please work with them as well as your Visible representatives to find alternative routing and/or transportation methods for cargo.

Air is an option, but space remains tight out of China

Due to port/rail congestion and the global container shortage, some companies are opting to pay for faster shipping options like air cargo. Air freight space remains tight from China, and flights to the U.S. will be in greater demand closer to Chinese New Year. As a result, air freight rates are increasing daily and even by the hour.

Globally, rates are more than double, and they are 2.5 times higher from China to Europe and the U.S. than a year ago. According to World ACD, rates soared 80% in December, from $1.80 per kilogram to $3.27, before tapering off 10% going into January.

Outlook: Experts predict the air cargo market will be back to pre-pandemic levels by the end of March due to the strong demand. The passenger side of the airline industry, on the other hand, is expected to remain “depressed” until vaccinations become more widespread in Q3 and Q4. International travel is likely to return slowly, which means fewer aircraft to assist with long-haul trade. Airline industry officials say they don’t expect a full recovery until 2024.

What can shippers do to mitigate these challenges?

Although supply chain challenges are expected to worsen before they get better, we’ve compiled a list of tips and strategies to help mitigate the impact:

  1. Get orders in as soon as possible—ideally six weeks in advance of the vessel leaving. Early orders mean greater access to bookings and better rates.
  2. The difference between long-term contract rates and spot rates is “unprecedented,” but shippers can limit the damage by accurately predicting volumes. According to Flexport, “predicting the volumes you are going to ship has never been as important as it is this year.”
  3. Diversify your ocean freight suppliers.
  4. Have emergency stock on hand so you can wait longer between bookings if needed.
  5. Transload freight to get goods to regional markets more quickly.
  6. Bring freight into alternate ports. Although there is some congestion in the Ports of Tacoma and Seattle, the situation is less severe than in the Ports of Long Beach and Los Angeles.
  7. Postpone bookings until after Chinese New Year if possible.
  8. Keep in mind that air freight is still an option. Book as early as possible and jump on good rates if/when you can get them.

It is also important to have a supply chain partner with a strong global network of agents and carriers for a better chance of securing space and getting your freight moving as soon as possible. As COVID-19 continues its streak of supply chain disruption, having an experienced and agile partner you can count on is a serious competitive advantage. Visible has trusted agents all over the world, strong carrier relationships and fulfillment centers across the country to get product to your customers as efficiently as possible.

Our comprehensive suite of supply chain services includes:

  • Ocean/air freight solutions
  • Domestic transportation
  • In-house customs brokerage
  • Fulfillment
  • Parcel
  • Packaging

Check out our video to learn more about our solutions and how Visible helps customers overcome supply chain challenges: Tackle Supply Chain Challenges with Visible SCM – YouTube

Visible is here to get your freight moving. For more information about our services, contact our experts at 877.728.5328 or fill out our contact form today.