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How Tight Operations Helps You Lower CAC & Create Repeat Customers

Improving your operations through full visibility has four major business impacts. Here’s the first: Increase NPS while lowering CAC.

Rising customer acquisition costs (CAC) in the direct-to-consumer (DTC) ecommerce space has increased the pressure to create repeat customers. After all, the time, energy, and money your marketing team exhausted to acquire and convert those customers is meaningless if they do not return.

Consider this:

  • Increased competition in the digital space: A 179% increase in US Shopify stores between March 2020 and January 2022 alone make the “cost per eyeballs” more expensive
  • Rising ad costs with lower conversion rates: Cost per thousand impressions (CPM) are up 61% and conversion rates have declined 10% year-over-year, making average order values (AOV) flat
  • Privacy restrictions: Apple’s latest iOS update makes it easier for customers to “opt-out” of tracking, with only 25% allowing themselves to be targeted by marketers

CAC is hurting a DTC brand’s potential to grow, so you need to find a way to improve your customer lifetime value (LTV). A surefire way to do this is to get the post-purchase experience right the first time. 

To be successful, ecommerce brands need to tighten their operations through more efficient inventory management and order fulfillment processes. When orders are fulfilled quickly and accurately, it helps turn a new buyer into a loyal customer. This sounds obvious, but we know there are a multitude of challenges growing ecommerce brands must overcome between the time the customer places an order and the time they receive it. 

TL;DR: These costly CX challenges can be overcome by having visibility and control into your inventory and order data. Avoiding common mistakes (like overselling) and quickly solving customer inquiries (like order edit requests) will ultimately increase your Net Promoter Score (NPS), allowing customers to be that promoter engine for your brand—as opposed to solely relying on cost-prohibitive ads.

Navigating Customer Satisfaction Pains

Short Shipments & Overselling

When customers receive a smaller quantity of products than what they ordered, they are left with a few choices: Wait for the rest of the delayed delivery, return their received items and get a full refund, or cancel the remaining items in their order. This puts a strain on customer trust, leaving your brand vulnerable to an NPS hit in the form of bad reviews and poor ratings. Of course, the same goes for customers not getting their order at all because you accidentally oversold the item!

If you’re working with wholesalers to diversify your product footprint—which brands are doing to increase their brand exposure offline and combat rising CAC—mistakes in allocating and reserving inventory is just as costly. When wholesale orders are inadvertently missed or only partially fulfilled, they may need to be rushed to be filled at an unexpected (and therefore unbudgeted) cost to meet contractual promises.

To understand exactly how much you have left to promise your customers, inventory reserves for wholesale need to be consistently removed from what is made available to customers across your other channels (e.g., your Shopify storefront). This is only truly possible with a single view of all your inventory and order data. Your inventory comes from multiple locations (manufacturer, warehouse(s), returns) in multiple statuses (on hand, on order, committed, reserved, etc.), and you need to be able to see all this information in one central hub to avoid mistakes like overselling.

Inability to Monitor Warehouse & Carrier SLAs

If you work with a third-party logistics (3PL) provider for your warehousing and delivery needs, chances are your brand has limited visibility into what is in that external warehouse management system (WMS). Of course, what is in that WMS is crucial information for your NPS’s sake—whose orders are being held up, which items are almost out of stock, etc.

Without real-time inventory tracking, you relinquish all customer experience control to your 3PL the moment your customer checks out. A great fulfillment experience is a key factor to why a consumer would purchase from you again, so brands should have more control of the post-purchase experience. Rather than ask your 3PL for metrics that live in their WMS, wouldn’t it be better to have your important order information (exceptions, alerts, status, etc.) directly available in-house, alongside information pertaining to your real-time inventory level statuses? Brands need to be aware of where and when a fulfillment mistake occurred so that they can be better at proactively solving the problem. 

Difficulty Supporting Complex Order Logic

At a baseline, brands need to be strategic about fulfilling orders quickly. For example, to ensure speedy delivery to your customer on the east coast, the order should get fulfilled from your Pennsylvania warehouse as opposed to your Denver warehouse. Do you currently control these shipping rules, or does your 3PL make these decisions on your brand’s behalf?

How are you going that extra mile for your customers to ensure they come back? Free shipping or including product samples after spending a certain dollar amount will do wonders for your NPS. Imagine how helpful it would be if you could create a custom rule so that when someone places an order of $75 or more, for example, they automatically have their shipping cost updated or get two or three free samples included with their order.

A lot of warehouse systems are limited in their backend capabilities, making the addition of these value-added services (VAS) difficult. In regards to the packing instructions for the warehouse personnel, some other examples of VAS include Garment on Hanger (GOH) or a return label insertion. When a return happens, it would go a long way for that customer to already have the return label instead of having to print one themselves.

Let your 3PL focus on fulfilling. Your brand should own the fulfillment rules because you know how to make the experience better for your customers.

Unable to Edit Orders

We’ve all been there. Whether it’s ordering the wrong size or choosing the wrong color, sometimes consumers don’t catch mistakes until after they get their order confirmation email. Customers love flexibility, so we’re sure having to tell them ‘no’ on their order change request ticket is painful for both you and them.

Your Support team has a lot on their shoulders. The way they handle customer inquiries can make or break that customer’s decision to order from your brand again—no pressure! Being able to say ‘yes’ on that order edit request would be a great competitive differentiator. 

This can only be accomplished with an agile inventory management platform (sorry, no spreadsheets here). If you can set an Order Edit rule to automatically withhold orders from processing for X amount of time before they get sent to the warehouse, your Support team could edit orders within that specified window. This is as much a cost-saving win as it is a customer satisfaction win… you will save on shipping costs (one shipment instead of three) due to less returns and reorders.

Improve Your Operations & Increase Your Bottom Line

The key is to have an inventory system that can keep up with changing demand. This means having real-time inventory tracking capabilities to achieve the following customer-first metrics:

  • Avoid overselling with automated notifications for low inventory items
  • Ensure you have enough for wholesale and other sales channels
  • Create shipping rules and fulfillment logic that better serve your customers
  • Provide VAS and enable post-purchase order edits

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