Every ecommerce entrepreneur dreams of that exhilarating phase of rapid growth—where website traffic surges, orders flood in, and the brand starts making headlines. But with growth comes a set of unique challenges, often masked by the excitement of increasing sales.
For many, this growth unveils a myriad of operational inefficiencies, from inventory mismatches and order fulfillment errors to overwhelmed staff working long hours to keep up. And amidst these mounting pressures, there's a looming decision that every ecommerce business owner dreads: the investment in technology.
It's not just about the financial outlay. The real fear lies in the unknown. Will this new system integrate seamlessly with existing processes? Will the team adapt to it, or will it further complicate operations? And the biggest question of all: Will the return on investment be worth the time, money, and effort spent?
These concerns are valid. However, not addressing these challenges can cost an ecommerce brand far more in the long run, both in tangible costs and missed opportunities.
The Ripple Effects of Order Accuracy: Customer Loyalty and Returns
In the world of ecommerce, where personal interactions are limited, every order delivered is an implicit promise kept. It says, "Trust us, and we'll deliver." But what happens when that trust is broken?
Picture this: A customer eagerly opens their package, only to find the wrong item or perhaps a damaged product. The immediate response? Frustration. Disappointment. Distrust. While they might understand occasional mistakes, for many, it's a direct reflection of the brand's reputation and reliability that will have long-term implications.
- Lost Repeat Business: Acquiring a new customer can cost five times more than retaining an existing one. When an established customer has a negative experience, the chance of them making a repeat purchase drops drastically. Over time, this translates to significant revenue loss.
- Diminished Customer Lifetime Value (CLV): Every customer represents not just a single transaction but a potential stream of purchases over their lifetime. In ecommerce, the average CLV is $168, but a tarnished experience shrinks that, impacting long-term profitability.
Statistics tell a cautionary tale. 72% of consumers state that they'd consider switching to a competing brand after just one unfavorable encounter. When you factor in that 35% of your business likely comes from new customers, the stakes become clear. These are individuals with whom brand loyalty hasn't been firmly established. Every error is not just a logistical misstep but a potential permanent loss of that customer's business.
As order volumes grow with the business's success, even a small percentage of inaccuracies can translate to a significant number of returns or cause customers to look elsewhere to purchase products. The message is clear—order accuracy isn't merely an operational metric. It’s the foundation of driving profitability, trust, and a sustainable business strategy.
Returns likely aren’t a surprise to see here as a challenge for ecommerce brands who experience growing order volumes. At first glance, returns might seem like a simple reversal of a transaction, with the product making its way back to the inventory. But the truth is far more complex and financially damaging. Let's break it down.
Every product that's returned incurs multiple cost components:
- Shipping Costs
- Restocking and Processing
- Potential Damage or Loss
- Operational Disruptions
When you aggregate these costs, industry insights show that the average return can cost a staggering 66% of the product's value. For a growing ecommerce business, where margins are often tight and profitability is paramount, this is a silent yet profound drain on the bottom line.
While a single return might seem manageable, consider the cumulative impact. Let's say an ecommerce brand operates at a 10% profit margin. To recoup the loss from just one $100 returned item (costing the business $66), they'd need to generate an additional $660 in sales. And this doesn't even factor in the acquisition costs for those additional sales.
Labor Inefficiencies: The Hidden Bottleneck
Let’s circle back and take a magnifying glass to the internal operation. As order volumes surge, the strain is felt most acutely by your workforce. This can slow down fulfillment and also be the root cause of errors that result in returns and the loss of customers.
With each order comes the added tasks of processing, picking, packing, and shipping. Without efficient systems in place, scaling can quickly lead to chaos. Overwhelmed employees can make mistakes, orders might be delayed, and customer satisfaction can plummet.
From managing inventory and stock levels to processing orders, using multiple systems requires manual maintenance to keep numbers accurate. This time-consuming, menial task becomes a large problem as you add new sales channels and grow your product catalog. Inside the warehouse, fulfilling orders is another complex workflow where the average picking associate spends 60% of the time mindlessly walking around the warehouse and retracing their steps looking for the right items. It's simply “dead” or wasted time. Unfortunately, these are non-negotiable activities for ecommerce, and someone needs to do it, which is why some businesses end up hiring additional employees to keep up with demand, impacting profitability with higher fixed costs.
But it's not just about the immediate tasks at hand. As businesses grow, key personnel often find themselves entangled in day-to-day operational fires. Instead of strategizing on product development, planning marketing campaigns, or refining inventory strategy, they're drawn into resolving fulfillment issues. Addressing labor inefficiencies is not just about improving today's bottom line—it's about ensuring a sustainable, scalable future.
Technology to the Rescue: Unraveling Order Accuracy and Labor Woes
In an industry as dynamic as ecommerce, relying solely on manual processes can leave a brand trailing behind. As we've seen, the costs of inaccuracies and inefficiencies can mount rapidly. But what if there was a way to turn the tide?
The digital era brings with it tools designed to enhance precision:
Inventory Management – Complete control over all your inventory
It’s the confidence in knowing what you have available and integrating those stock levels with your sales channels to minimize overselling. On the flip side, tracking sales across all channels and inventory levels across all warehouse locations allows you to optimize replenishment and reduce stockouts. As you continue to grow, advanced inventory management tools will be able to help you strategically locate inventory and minimize shipping distances so your orders can be delivered faster.
Order Management – Where you sell and how you manage orders
Consolidating sales channels into a single platform significantly reduces manual upkeep, but more importantly, gives you one place to process orders and oversee fulfillment progress. As orders flow in from various channels, streamline processing with order orchestration rules that apply specific actions based on a variety of criteria. This enables brands to offer customers VIP memberships and flexible shipping options while also routing orders to the nearest warehouse and shopping around for the best shipping rates. More impressively, it can be used to tailor the customer experience with custom packing slips, communications, and more. By employing this level of automation, your brand will minimize human error, improve order accuracy, and enable your operations team to manage order volume at scale.
Warehouse Management – Manage inventory with precision and boost fulfillment productivity
Managing fulfillment through an owned and operated warehouse can be daunting, but barcodes and mobile technology can change the game. By serializing your warehouse and products, every item will have a designated location, and a quick scan will validate a product is stored, picked, and packed accurately. Your inventory accuracy will rise while fulfillment errors fall, and you have fewer returns and frustrated customers. When it comes to navigating the warehouse, guided picking takes the guesswork away from picking associates. Auto-batching and wave picking are two methods to help your warehouse improve productivity when fulfilling orders by grouping SKU’s together and organizing pick lists to guide pickers in the most efficient path. The number of mis-picks and mis-ships will drop while the warehouse team is able to scale daily output.
Recap – Core features to drive ROI:
- Centralized visibility
- Integrations with sales channels and warehouses
- Replenishment alerts
- Order processing automation
- Barcodes and mobile scanning
- Guided picking
Investing in technology to set the business up to be successful now and in the future may seem daunting, but solutions are available and deliver tangible benefits. An important consideration to make is finding a unified platform that enables you to scale as your order volume and needs grow. Extensiv offers a unified fulfillment platform for brands to simplify your business and enable you to grow without growing operational headcount. Our integrated inventory, order, and warehouse management solutions have helped brands scale order volumes 10X and reduce hours of manual labor.
Request a demo today to see how Extensiv can help your brand elevate fulfillment and customer experiences.