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Distribution Logistics

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Last mile logistic options

Another key element of logistics is that last mile delivery service. This is the general term given to how the product finally gets to the end consumer. And there are different ways of doing this and different considerations.

  • Super-fast couriers: This tends typically to be the most expensive, but the fastest service, and often come with highly tracked services.
  • Inexpensive couriers: You then got inexpensive couriers or carriers, which again, gets the product there, but might not be tracked and might take a little bit longer, but typically costs the person sending it less money.
  • Signature-required option: This means that it is really safe, that the product definitely gets there in the end, because it needs to be signed for by someone. But again, there’s some convenience trade-offs with this, because it does mean that somebody needs to be in to receive the product that might not be the optimum solution for all products.
  • Pick-up points: Consider the blending between traditional retail and e-commerce. And also we’ve spoken about partnership and in the ways that even people that are purely e-commerce businesses can partner up with people who have real-life, brick-and-mortar locations to make sure that there is a safe, secure place where people can pick up the product that they’ve purchased.

Returns policies

Linked to all of this as well, you need to consider the returns policy and the returns process if people choose not to keep what you’ve sent them.

There are two schools of thought on this.

  • One school of thought is that you want to make that process as difficult as possible so that you get as fewer returns as possible.
  • Another school of thought is that you want to make it as slick as possible so that people value the service you gave them as much as possible.

And again, there’s very different costs associated with both of those, both in terms of an upfront cost of how much it costs to deliver those services, but then also there’s cost considerations from a long-term point of view to do with brand health.

So there’s lots of data that supports the fact that if you buy from a business once and it’s difficult for you to return that product, you’re very, very unlikely to buy from them again in the future. So another good example of this in the UK is a retailer called ASOS. If you buy product from them, it’s got an incredibly easy returns process where you just have to check a box for why you’re returning it and you can either repackage it in the package that you’ve been given and pop it into the nearest postbox or you can even arrange a courier to come and collect it from wherever you are at the retailer’s expense.

And so, again, that is a process that makes it very likely that you are going to buy from that retailer and massively helps their conversion that we spoke about earlier, because as you’re making the purchase decision. You might think, “If I like it, great, I’ve got the product I wanted. If I don’t, I can return it with no hassle and no cost.”

Selling digital goods

Now let’s take a quick look at how this process is different when the product you’re selling is actually a digital good.

Let’s look at a couple of examples. So we’re going to look at Netflix and we’re also going to look at a business that sells educational content online.

Content distribution and hosting

So both of these businesses need to create the content and they need to store it somewhere. So in Netflix case, the content creation is partly done by them, but also partly content that they source from other production houses. And then that content will be stored on some central servers and most likely distributed through a Content Display Network. In the case of the online education provider, again, they most likely produce their own content and they will be hosting that somewhere central to then be distributed more widely around the internet.

Scaling of distribution networks

So then, moving on to how they scale the distribution of their business. Again, Netflix are very lucky that they have their own proprietary portal the consumers log into. So their scaling effectively comes from getting that portal on to as many different devices as possible and so that requires lots of partnerships with different device manufacturers and understanding how those platforms work and making sure their user experience on that platform is as optimum as possible. In the example of the online education business, they may well distribute that product through a range of different partner websites, all under different brands, that help get their product in front of as many different people as possible where they can then download that content and get their online learning.

Returns and refunds

The other interesting consideration for these digital products is how you handle returns and refunds. Because, obviously, people get instant access to the product and there’s no tangible good that you can ask them to return. So in the case of Netflix, they handle this by having a monthly subscription and you can view as much as you want during that time that you are paying the subscription. But as soon as you cancel your subscription, your access to the site is no longer available. This is much more difficult in the education example because there’s a good chance that people can download the content, save it elsewhere and then say that it wasn’t what they were hoping for. And so, it’s very difficult to work on that so the risk of that leakage needs to be factored into the commercials of that business plan. So it’s all about being aware of how your product can be used and factoring that into your plan.


Another key thing to consider from a logistical point of view is the seasonality of your business. Basically, this refers to when people come and buy your products.

So in an ideal world, it’ll be brilliant if the same amount of people came week after week, month after month to your site. Or they’d be growing steadily, but it’ll be evenly spread across the year. But in reality, a lot of the time there are certain peak times of the year, where customer numbers are much larger.

The obvious one for this is Christmas. But in our business, the Morphsuits side of our business, the massive peak is around Halloween when people are buying costumes to celebrate that event. And so, we need to make sure that we’ve got the processes in place to deal with much larger customer numbers and much larger sales at that time.

  • Staffing: In our warehouses, we need to make sure that they have the staff on hand to ship significantly higher volumes of packages than they would at any other time of the year. We also need to make sure that we’ve got customer service people on hand to answer inquiries and we’ve got people on hand to process transactions and refunds at that time of the year as well.
  • Stock availability: We need to make sure that we’ve got all the stock in place at the right time so during that peak time of the year, we can maximize sales with as few out of stocks as possible.
  • Accessibility: We need to make sure that people can access the site.

So for an e-commerce business, this is really about having the site hosted in a stable enough way so that when you get these big influxes of traffic and of new visitors, the site is able to sustain that.

In a more traditional retailing example, the same thing happens at Christmas time with all the big retailers that they need to make sure that they’ve got all the staff in place in their stores to make the customer service experience as smooth as possible. We need to make sure that they’ve got the stock in place to sell at Christmas time. And thirdly, in terms of accessibility, because Christmas is often at a cool time of the year and the weather can be pretty extreme, it’s important that they factored that into their plans, so that they don’t lose out on sales at the most important time of the year due to inclement weather.

The other important thing to consider about seasonal businesses is it gives you less time if you’ve got a seasonal peak in your business to course-correct and to optimize your business plan than you would if you’ve got a steadier, year-round business. And that’s another important consideration when you’re working out your business plan and how you’re going to run your business.

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Graeme Smeaton

Graeme Smeaton is the founder of Royal & Awesome. Along with a proven track record in defining and delivering marketing strategies that drive significant growth and create real shareholder value, Graeme is highly commercial. He has extensive experience managing PLs and other key financial statements, while being an operational board director of AFG Media Ltd, and has experience negotiating with suppliers, distributors and licensing partners.

By the end of this topic, you should be able to:

  • Identify the impact of logistics, packaging, purchasing, distribution, and payment options for an e-commerce solution
  • Evaluate e-commerce revenue models and the advantages associated with different e-commerce solutions 
  • Critically appraise the requirements for managing e-commerce customers in accordance with current laws and legal guidelines

    Data protection regulations affect almost all aspects of digital marketing. Therefore, DMI has produced a short course on GDPR for all of our students. If you wish to learn more about GDPR, you can do so here:

    DMI Short Course: GDPR

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