It’s easier than ever to start an ecommerce brand. Off the shelf ecommerce tools like Shopify make it simple to build a webstore and promote products but fulfilling products and growing a loyal customer base is a lot harder.
Brands that ship only direct-to-consumer (DTC) must take certain things into consideration, unlike brands who sell to retail or businesses. DTC ecommerce is all about the customer—giving the customer a great experience through the entire journey from shopping to unboxing.
Here are some real-life examples of the ways high-growth DTC brands can scale to meet their customer’s demands.
Packaging Can Significantly Affect Shipping Costs
When you ship direct-to-consumer you want to make sure specialty packaging isn’t going to leave you overpaying on shipping costs.
Many DTC brands want to stand out from the other brown boxes by adding their own branding and flair. What they don’t understand is that branded packaging and low-cost shipping may be diametrically opposed. Specialty sized boxes will cost more to ship. Any extra weight from special packing materials will cost more to ship.
Brands who want to leave their mark but not pay extra on shipping should avoid custom boxes but investigate shippable cartons.
Another aspect of packaging strategy involves how products are placed in a box, and how many boxes the customers are sent. Take innovative breast pump brand, Willow for example. They pioneered a hands-free breast pump for busy moms on-the-go. They noticed that many customers were buying accessories which meant shipping multiple boxes per order.
When they reconfigured how products fit into the outer carton (also known as kitting) they realized they could fit more accessories into a single box. With a natural postage reduction when you go from two boxes to one, Willow ended up saving 50% in shipping costs.
Know Your Transportation Costs, Including DIMs and Surcharges
The last thing a small business needs is surprise fees. It’s hard enough to manage the cash flow of a new business, if any fees come up that weren’t accounted for it can be detrimental to a small brand.
Shipping costs is a big area where merchants often get hit with surprise fees. The past two years have shown how often carriers can increase rates and add extra charges without much notice.
Two of the biggest places that merchants have been tripped up by transportation costs lately include DIM weights and surcharges.
DIM weight is a pricing technique used by shipping companies to ensure that they don’t lose money on large, lightweight shipments (like a truck full of feathers). Dimensional weight is calculated with a formula using the volume weight of a package based on the dimensions of the box. What many merchants may not realize is how their packaging affects their DIM.
In 2022 DIMs became a factor for more than just the major carriers (UPS and FedEx). As shipping volumes continued to increase smaller carriers wanted to maximize the space on their trucks, planes, and shipping containers, to stay competitive. One way they are doing this is by establishing DIM weights where they didn’t exist before, or by reducing their DIM factors.
Surcharges are additional fees added on top of regular transportation costs. Historically reserved for times of peak volume (the holiday shipping season) surcharges have become a regular occurrence all year long with the increase of online shopping. Fuel surcharges are a big one to look out for, they are applied on top of the regular fuel costs and can add up quickly.
While surcharges aren’t something DTC shippers can avoid, what’s important is to be smart about the shipping services you’re using. Different services incur surcharges differently; it’s best practice to always optimize for low cost and best service for your brand and customers.
Another way DTC brands can save on shipping costs is by fulfilling closer to the customer. By reducing the delivery distance, there is a natural reduction in shipping costs.
Maker of smart golf accessories, DTC brand Arccos saves on shipping by fulfilling out of multiple facilities. Called distributed inventory, it also gives more options for fast delivery times, like two-day, or same-day delivery.
Fulfillment Method Can Make or Break Customer Satisfaction
Most brands start out fulfilling products themselves. With small and sporadic order volume, it’s often easier to do it all in-house. But the name of the game in DTC ecommerce is growth, and with larger order volume customer satisfaction will drop if fulfillment isn’t done right.
Working with a quality and experienced fulfilment provider will ensure your customers are getting exactly what they ordered. Accuracy levels are higher when you outsource to a reputable 3PL. Plus there are customizations you can add to your fulfillment that will give your customers something they can’t get elsewhere.
For example, Magic Spoon was growing quickly. Their new kind of paleo-friendly cereal was a huge hit and they wanted to launch more specialty flavors, seasonally or for short runs. But they could only sell their cereal flavors in packs of four, either a single flavor four pack, or one variety pack that didn’t have all the flavors they offered. It was the biggest customer complaint: “Why can’t I mix and match the flavors in these four-pack boxes?”
The team at Magic Spoon knew they needed a different approach. When DCL Logistics approached them with a new way to bundle products on-the-go, Magic Spoon was on board. It was the perfect fulfilment solution for their customers’ requests.
The new operational procedure is called virtual bundling. In essence virtual bundling is when a seller can assign products to a bundle via inventory management software and the fulfillment provider can fulfill that bundle (and new SKU) as its ordered. This is different than the “old” way to bundle which required pre-kitting products in bundles, storing the bundle as a new SKU and then shipping them out as orders came in.
By bundling products as orders come in, customers can pick whatever cereal flavors they want and add them to the pack. Magic Spoon saw huge DTC sales growth as a result.
- It also helps offset shipping costs by increasing average order value, which leads to greater profits.
- Virtual bundling limits fulfillment and labor costs because no pre-kitting projects are needed.
- Magic Spoon now has more flexibility to release new flavors without worrying how customers can try them.
DTC is challenging because it’s all about individual customer acquisition and retention. What many ecommerce brands don’t realize is how much fulfillment and last-mile logistics affect those things. It’s so important to work with reputable partners. That’s the only way a growing brand can scale and succeed.