Month: March 2023
The psychology behind social commerce (and why it works)
Social commerce is the integration of social media and eCommerce and has been on the rise in recent years. It allows businesses to sell their products directly through social media platforms, making it easier for consumers to discover and purchase items they see on their feeds. As social media continues to gain prominence in our daily lives, the popularity of social commerce is expected to grow with it.
However, the success of social commerce is about more than convenience or the novelty of purchasing products through social media; there’s a deeper psychological aspect at play that businesses need to understand to leverage the power of this type of commerce effectively. The psychology behind social commerce is ultimately what drives customers to make purchasing decisions, and businesses that tap into these factors can accomplish greater results in this increasingly competitive space.
In this article, we’ll explore the psychology behind social commerce and why it works. We’ll examine the influence of social proof, the power of community, the role of emotions, particularly trust and credibility, and the importance of personalization in social commerce. By understanding these key factors, you can create more effective social commerce strategies and build stronger connections with your customers.
What are social commerce, social influence, and social proof?
Social commerce refers to the use of social media platforms or networks, such as Facebook, Instagram, or Pinterest, to facilitate the buying and selling of products or services. It allows businesses to integrate their eCommerce activities with social media to create a seamless shopping experience for customers. Social commerce often involves the use of social media influencers, customer reviews and recommendations, and community building to promote products and drive sales.
Social influence is a powerful factor that impacts our decision-making processes. When we see others doing something, we’re more likely to try it ourselves, especially when we perceive others as similar to us or as authority figures. This influence is particularly strong when it comes to purchasing decisions, as we often look to others to help us decide what products to buy.
Social proof is a phenomenon that leverages social influence to persuade customers to make a purchase. It serves as evidence that other people have already purchased and enjoyed a particular product and can take many forms, including customer reviews, ratings, and recommendations from friends or influencers.
Social proof is used extensively in social commerce, with businesses capitalizing on customer reviews and social media influencers to help convince potential buyers to make a purchase. For example, a clothing brand may showcase photos of customers wearing their clothes on social media, accompanied by glowing reviews and comments from other customers. This creates a sense of community and social proof around the brand, which makes shoppers feel more comfortable about buying.
You can also display customer ratings and reviews on platforms like Amazon. These demonstrate that a product is high quality and worth buying, which is why customers often use them to decide where or not to purchase.
By understanding the psychological power of social influence and social proof, you can wield them strategically to drive more sales and build stronger relationships with your customers.
The power of community
Social commerce and community are a highly fruitful combination. Creating a sense of community around a brand or product fosters customer loyalty, drives sales, and generates positive word-of-mouth advertising. Two powerful ways to achieve this are:
- Social media groups and communities: These groups bring together people with shared interests and can be used to promote products, answer questions, and provide customer support. By creating a space where customers can interact with each other and the brand, you nurture a sense of belonging and develop a loyal customer base.
- Social media influencers: Internet celebrities have large followings on social media, and their product endorsements can have a significant impact on sales. Influencers cultivate a sense of community around their brand, using their platform to share their experiences with their followers and strengthen their audience relationship.
Brands like Glossier and Outdoor Voices provide successful examples of community-based social commerce in action. These companies have cultivated strong communities around their brands by using social media to engage with customers and build a sense of shared values and interests. As a resu;t, they generated significant buzz around their products and built a loyal customer base that returns again and again.
Community and social commerce naturally go hand in hand. By fostering a sense of community around your brand, your business can augment its loyal customer base and increase sales through positive word-of-mouth advertising.
The role of emotions and FOMO
Emotions play a significant role in shoppers’ purchasing decisions. They influence their perceptions of a product’s value and can motivate people to buy based on how the product makes them feel.
Social commerce leverages emotions in a number of ways to drive sales. For example, implementing imagery and language that elicit positive emotions like happiness or excitement makes your products more appealing to customers. This can be particularly effective on social media, where visual content and emotional appeals are crucial to standing out in crowded feeds.
A frequently employed emotional tactic in social commerce is FOMO (fear of missing out). FOMO is a feeling of anxiety or unease that arises when we believe others are enjoying experiences or opportunities that we aren’t. Social commerce leverages this phenomenon by inducing a sense of urgency around products so customers feel they need to act quickly to avoid missing out on something special.
Run limited-time promotions, flash sales, or generate scarcity around products to create urgency and FOMO. For instance, you could produce a limited edition product that’s only available for a short time or use language that suggests a product is selling out quickly.
Brands like Apple and Nike successfully capitalize on emotional appeals through the use of powerful imagery and storytelling to establish emotional connections with their customers. By tapping into emotions like inspiration, excitement, or even nostalgia, these companies foster strong bonds with their shoppers and drive more sales.
The importance of personalization in social commerce
Businesses rely on personalization to tailor their marketing messages and product offerings to individual customers. In social commerce, personalization can enhance the consumer experience and increase conversions through several means:
- Targeted advertising: This strategy relies on data from customers’ browsing and purchase history to help businesses create targeted ads that are more likely to resonate with individuals. This gives the impression that the products being offered are tailored specifically to each customer’s interests and needs.
- Personalized product recommendations: By using algorithms to analyze a customer’s past purchases and browsing behavior, you can provide personalized recommendations for products that are likely to interest the customer. This contributes to a more personalized shopping experience and encourages sales.
- Tailored customer service and product customization: These options produce a more engaging and memorable experience for customers, which in turn, increases customer satisfaction and loyalty.
You can see personalization in action through the efforts of Spotify and Netflix, which use personalized recommendations to suggest music and viewing entertainment to individual customers based on their past search behavior. That personalized experience keeps customers engaged and coming back for more.
How trust and credibility grow through social commerce
Trust and credibility are crucial to the success of social commerce. Customers need to feel confident that the products they’re purchasing are of high quality and that the businesses selling them are trustworthy. You can effectively build trust and credibility using tactics such as:
- Customer reviews and ratings: When customers share their experiences with a product, they provide social proof that the items are of high quality and worth purchasing. Shoppers are more likely to believe feedback from other buyers than from brands, so this type of user-generated content (UGC) is highly beneficial for conversions.
- Emphasizing transparency and openness in your business: With ethical considerations becoming more influential among buyers, being honest about your processes, such as your sourcing or manufacturing practices, strengthens trust. Shoppers prefer to support businesses that are responsive and communicative with their customers, so foster a culture of transparency within your own to foster buying confidence in your consumers.
- Leveraging social commerce platforms that prioritize trust and credibility: The marketplace Etsy, for example, focuses on handmade and unique products, while clothing site Poshmark emphasizes community and peer-to-peer selling; as a result, both platforms have developed a strong reputation for trustworthiness and credibility among their user bases.
Wrapping up — Social commerce is a mind game
Social commerce is a rapidly expanding industry that leverages social media to facilitate the buying and selling of products. Its success greatly hinges on the psychology behind consumers’ decision-making, including factors such as social proof, emotions, community, personalization, trust, and credibility.
Understanding that psychological influence and leveraging it correctly is crucial for businesses to profit from social commerce. By incorporating these factors, you can create more effective marketing strategies and build stronger connections with your customers.
As social media continues to gain prominence in our daily lives, businesses that are able to capitalize on social commerce will enjoy a significant advantage in the marketplace.
Seller Survey Insights 2023: Navigating Industry Changes and Meeting Evolving Consumer Demands
Over the last three years, millions of online businesses have displayed resilience in the face of the unexpected.
The COVID-19 pandemic accelerated the adoption and innovation of digital commerce, with online shopping increasing by 77% year over year in a matter of months.
By the end of 2023, eCommerce sales will make up one-fifth of all retail sales globally.
However, after years of lockdowns and restrictions, people crave meaningful connections across all aspects of their lives, including commerce. Physical spaces foster online and offline relationships between merchants and customers.
Now, brands must be flexible and responsive to challenges, adding flexibility to their products, strategies, and policies. To help you stay ahead of the curve, MyFBAPrep conducted a seller survey that sought to include eCommerce business owners across all channels and industries.
Our findings shed light on eCommerce merchants’ current priorities and challenges and highlight their priorities as they drive their businesses forward in 2023.
Join us as we explore the new eCommerce landscape and discover where it’s headed this year.
Where are retailers selling?
eCommerce merchants are selling their products and services in a variety of online marketplaces, including established marketplaces such as Amazon (47%), eBay (50%), Walmart (27%), and Etsy (33%).
Other merchants sell through their custom websites (14%) or on platforms such as Shopify (37%) and BigCommerce (12%).
According to our respondents, the top three sales channels are eBay, Amazon Marketplace, and Shopify. This clearly indicates that marketplaces are still thriving, but direct-to-consumer (DTC) sales are also gaining significant popularity.
Statistics reveal 43% of Amazon sellers generate between 25% and 50% of their revenue through Amazon sales, while 35% of DTC sellers generate a similar percentage. These numbers suggest that most merchants have transitioned to a multi-channel approach, leveraging a combination of marketplaces and DTC sales to drive revenue.
Where do retailers want to sell next?
As eCommerce continues to evolve, merchants are constantly searching for new sales channels to expand their reach and grow their businesses.
According to our survey, many sellers (39%) have their sights set on Amazon Marketplace as their next step forward.
For those already selling on Amazon though, the picture takes on a darker hue: Almost 30% are concerned about Amazon’s white labeling and potential competition with their products. It’s a valid worry that closely aligns with the second-most popular concern, which is a decrease in listing visibility or unfavorable algorithm treatment.
While Amazon is a powerful sales channel, these worries highlight the importance of diversifying sales channels, rather than relying solely on one platform.
Embracing a multi-channel approach
Amazon isn’t the only platform capturing the attention of growth-focused merchants; 31% of merchants also want to expand to Shopify. This shows an interesting exchange wherein retail and DTC sellers are interested in exploring Amazon, while retail and Amazon sellers are keen to pursue DTC sales.
These trends display how eCommerce is increasingly moving towards a multi-channel approach, with retailers utilizing a mix of sales channels to reach their customers. As a result, merchants can mitigate risk and take advantage of each channel’s unique strengths to further their business.
What is their average order value?
The data shows most merchants have an average order value (AOV) of $10–$50, with the second-most common AOV falling between $50 and $100.
If your cart sizes are smaller than this, consider employing AOV-boosting tactics to increase the value of each sale. These could include upselling and cross-selling, offering volume discounts, or creating product bundles. By focusing on boosting AOV, merchants can maximize revenue and improve profitability.
Which seller tools are merchants using?
Today’s eCommerce merchants use a multitude of seller tools to streamline their operations, improve efficiency, and enhance the customer experience. Some of the most popular tools include:
- AMZScout (15%): AMZScout is a suite of tools designed for Amazon sellers to research and analyze data related to item sales, competition, and profitability. It provides a range of features and functionalities to help Amazon sellers make informed decisions about their products and business.
- CedCommerce (15.6%): This multi-channel solutions provider offers various tools and services to help merchants sell their products online. CredCommerce boasts integration solutions for eCommerce platforms such as Magento, Shopify, WooCommerce, and BigCommerce, as well as marketplaces like Amazon, eBay, and Walmart.
- Channel Advisor (15.6%): A cloud-based platform, ChannelAdvisor can integrate with popular eCommerce marketplaces including Amazon, eBay, Walmart, and Alibaba, as well as social media channels like Facebook, Instagram, and Google.
- Ecomdash (11.2%): Ecomdash is a cloud-based inventory management software designed for small to medium-sized businesses. It helps merchants streamline inventory management, order fulfillment, and shipping processes across multiple sales channels.
- GeekSeller (16.2%): This comprehensive eCommerce management platform provides a range of customization options that enable merchants to tailor it to their specific needs. They can customize their workflows and automate repetitive tasks, freeing up time to focus on other aspects of their business.
- GoDataFeed (9.8%): Another cloud-based platform, GoDataFeed enables merchants to manage and optimize their product feeds for multiple sales channels. It automates the creation and updating of product feeds for marketplaces like Amazon, eBay, and Walmart, as well as shopping carts like Shopify and Magento.
- Custom-built software (28.8%): One of the most noteworthy statistics to come out of our survey is the number of merchants using custom-built software. Custom software can give merchants a competitive advantage by providing unique and innovative features and functionalities unavailable in off-the-shelf solutions.
Which newsletters and podcasts do merchants subscribe to?
Staying current with the latest trends is essential in the evolving eCommerce industry. With so many resources available, like top marketing blogs and intriguing podcasts, there’s no shortage of in-depth topics and trends to explore.
Below are our results on the most popular podcasts and newsletters merchants are following:
- Shopify Retail Radar: With nearly 1.7 million merchants selling their products through Shopify, it’s no wonder the platform’s newsletter is full of valuable resources and inspiring success stories. Subscribe to the free Shopify Retail Radar newsletter and receive monthly news about eCommerce updates, thought-leader interviews, and advice from industry experts. Whether you already run an online store on Shopify or are considering launching one, this newsletter is a must-read for anyone looking to stay ahead of the game.
- Digital Commerce 360: Digital Commerce 360 is a leading research and media organization that provides objective B2B news, eCommerce analyses, and in-depth market research. When you sign up for their newsletter, you can choose to receive either retail or B2B news (or both) according to your interests. Both options will give you daily news and insights (Monday to Wednesday) about eCommerce trends and strategies from top experts in the field.
- Ecommerce Playbook: Hosted by Andrew Faris, former CEO of an eCommerce aggregator and current VP of growth for an eCommerce growth agency, the Ecommerce Playbook podcast is packed with valuable insights and firsthand experiences. Andrew shares his personal journey, including both recent successes and past failures, with listeners. He also invites fellow entrepreneurs to join the conversation and recount their own eCommerce stories.
MyFBAPrep curates the best news in shipping and operations every other week. Subscribe to our newsletter to stay on top of the market and join over 3,000 fulfillment experts who enjoy the industry’s most relevant news.
What are the top acquisition channels?
The top acquisition channels for eCommerce vary depending on the specific business and industry. Here are our respondents’ top acquisition channels:
- Social media (62.2%)
- Amazon ads (36.6%)
- Referrals/Affiliates (30.4%)
- Videos (25.4%)
- Email outreach (27.4%)
- Paid social ads (28.2%)
- Influencer marketing (21.8%)
- Paid search ads (21.2%)
- Brand partnerships (16.2%)
- Content marketing/SEO (14.8%)
Looking toward social commerce
With social media coming in at number one, today’s merchants are obviously focusing more on social commerce.
Social media platforms like Instagram, Facebook, and Pinterest have introduced features to support social commerce, including shoppable posts and tags, buy buttons, and in-app checkout. These features allow users to browse and purchase products directly from their social media feeds without having to navigate to a separate website.
Social commerce sales in the U.S. are projected to grow by 34.4% this year, reaching $53.1 billion. Retailers who are able to overcome the trust gap will reap the rewards, attracting a wave of new shoppers and inspiring existing customers to spend more.
Capitalizing on Amazon ads and referral marketing
Amazon ads and referrals take second and third place, respectively. This underscores the large number of merchants utilizing Amazon as a key sales and acquisition channel, as well as the effectiveness of referral marketing.
Amazon ads are a powerful avenue for showcasing your products to potential customers. You can ensure your ads reach the right audience by using a range of targeting options like keywords, interests, and demographics.
Referral marketing is another highly effective acquisition channel for eCommerce businesses. By incentivizing current customers to refer their friends and family to your brand, you can tap into a network of new leads who are already interested in what you offer.
Implementing a loyalty rewards program is a savvy strategy for boosting customer lifetime value (CLV). Learn how to launch a successful referral program.
How are online retailers fulfilling orders in 2023?
The following are the most popular fulfillment methods for today’s merchants:
- In-house (60%)
- Amazon FBA (33.2%)
- Amazon multi-channel (27.4%)
- Third-party logistics (3PL) provider (21.4%)
- Dropship (17%)
Identifying logistics concerns
After years of digital transformation, unprecedented growth in eCommerce, and supply chain challenges, the industry experienced a significant shift in 2022. Rising costs and concerns about a potential recession contributed to a slowing of its upward trajectory.
This year, merchants are focusing on anticipating the changes that’ll shape the sector and identifying new opportunities. Their most pressing concerns include:
- Shipping mistakes (42%)
- Expensive shipping (37.2%)
- Lack of services (23.2%)
- Inventory loss, theft, or breakage (27.2%)
- Poor communication (28.2%)
- Inaccurate receiving (20%)
- Unreliable manufacturers (18.8%)
- Unreported damages (17.8%)
- Long prep turnaround time (15.2%)
- Limited visibility or no inventory reports (14.8%)
- Geographic constraints/Limited warehouse locations (13.2%)
- Backlogs and no SLAs (12.6%)
- Unfamiliarity with FBA standards (11.2%)
- Containers sitting idle (10%)
- No reverse logistics processes (7.2%)
Overall, merchants need to pay close attention to logistical concerns to ensure their operations are efficient, cost-effective, and sustainable while also meeting their customers expectations.
Top 3PL providers
For those merchants using 3PLs, their most commonly used partners are:
- FedEx (58.9%)
- UPS (43.9%)
- Amazon Multi-Channel Fulfillment (35.5%)
- USPS (28.9%)
- eFulfillment Service (23.4%)
An overwhelming majority of our respondents found their 3PL through social media (39%), with friends or family (15%) coming in second.
When choosing a 3PL, these online retailers consider price (56%) and delivery speed (46%) to be the most influential factors, with reliability (45%), ease of use (40%), and customer service (33%) closely following.
What are merchants prioritizing in 2023?
In 2023, eCommerce merchants are prioritizing a range of strategies to remain competitive and meet evolving consumer demands.
Increasing customer retention (32%), growing teams (32%), and content marketing (29%) are top points of focus for retailers this year. These goals are in line with experts’ predictions for the coming year.
The emphasis on retaining existing customers is based on the statistical probability of selling to an existing customer versus a new prospect: While the likelihood of selling to an existing customer is 60%–70%, the chances lower to just 5%–20% for new prospects. This underscores the importance of building strong customer relationships and providing exceptional experiences that keep customers coming back.
Wondering how to optimize your post-purchase experience to boost customer retention? Our blog explains how to deliver a memorable experience for your customers.
Other priorities for merchants in 2023 include building brand awareness (26%), optimizing fulfillment (25%), and catalog expansion (21%).
Wrapping up — The only constant in eCommerce is change
Our Seller Insights survey highlights the significant shifts and challenges that the eCommerce industry has experienced in recent years. From changing consumer expectations to supply chain disruptions, merchants have had to adapt quickly to remain competitive.
Looking ahead, sellers are prioritizing strategies like customer retention, multi-channel selling, brand awareness, and data-driven decision-making to optimize their operations and meet evolving consumer demands.
By staying informed and agile in the face of these ongoing fluctuations, eCommerce merchants can weather the storm and continue to drive growth and success in their businesses for years to come.
How to use email marketing to drive conversions
In eCommerce, having a solid marketing mix helps your brand stand out from the competition and remain at the forefront of your current and prospective customers’ minds. One of the most impactful marketing channels eCommerce businesses can leverage is also one of the most traditional: email. Email subscribers are already invested in your business because they’ve opted in to your communications. They’ve probably purchased from your company as well and so can be reengaged for future sales.
A successful email marketing strategy can expand your reach, grow your revenue, and develop your brand image. In this article, we’ll explore what email marketing is, how email can support your other marketing channels, and effective ways to leverage this method of communication.
What is email marketing?
Email marketing provides a direct line of communication between businesses and their customers. It’s a cost-effective way to reach a large audience and is valuable for building customer relationships, promoting products and services, and generating sales.
An effective email marketing strategy begins with a well-defined target audience. This allows businesses to tailor their messages to the interests and needs of their consumers. Then, companies can craft a series of targeted and personalized emails that deliver value to the recipient.
Your communications can take various forms, from simple, text-based letters to more sophisticated designs with images and graphics. Email marketing platforms like Mailchimp, Constant Contact, and Campaign Monitor make it easy for businesses to craft and send emails, as well as manage their mailing lists.
Diversify your sales channels and add new revenue streams by embracing email marketing. It’s an effective strategy that allows you to reach your audience on a personal level through customized messages.
What to push with email marketing
An appealing advantage of email marketing is the ability to include clear calls-to-action (CTAs) with links that send your audience to a specific place. That decision depends on what you want to highlight and the desired action you want your recipients to take. We’ve listed some top places and events to push via email marketing to maximize your campaigns’ return on investment (ROI).
New sales channels
If you’re scaling your business and adding new sales channels, a targeted email blast is a great way to announce it to your existing customer base. Expanding to a marketplace like Amazon or Walmart makes for especially enticing email copy, as customers will be excited to shop diverse products and sellers in the same place.
To maximize this type of email communication, it’s critical to include a clear CTA that brings email recipients directly to the new channel and communicates what action they should take (e.g., “log in” or “sign up”). Additionally, highlight any perks such as coupons or savings upon their first purchases through this channel to sweeten the deal.
A common strategy in eCommerce email marketing is to transport recipients to your business’s website, Amazon shop, or another online store. Doing so increases traffic to your website and, with the right promotions and timing, even sales.
Event registrations, demo sign-ups, and related surveys
Email marketing paves the way for savvy businesses to deliver an incredible customer experience and build relationships, so you shouldn’t limit its reach to typical pages.
From live shopping on social media to webinars or in-person, invite-only events, leverage emails to encourage your audience to register for events and sign up for demos. Further, you can send surveys to capture feedback on their experience and understand what kinds of products, services, and events they’d like to see from you.
Product landing pages
Pushing your email audience to a product page reduces the number of clicks it takes for customers to reach the final purchase stage of their journey. CTAs that direct to a particular product page are also a great way to promote a new product or highlight special promotions.
Launch a separate newsletter with tips and tricks or other valuable information. Newsletters can effectively build brand loyalty and provide greater value to your customers without running the risk of sales spam. Invite your customers to sign up for it in your next product marketing email.
How email marketing supports your overall strategy
Businesses both eCommerce and not must constantly vye for customers’ attention. As such, email marketing provides a targeted and cost-effective opportunity to reach potential customers and retain existing ones. It offers several benefits that prove it’s an essential addition to your marketing mix.
Direct, personalized communication
Email marketing brings a level of personalization that’s difficult to achieve through other marketing channels. With the help of customer data, you can create targeted campaigns that speak to recipients, providing them with relevant information, offers, and promotions that encourage them to buy. This helps build strong relationships with your customers, increase brand loyalty, and, ultimately, drive sales.
Another advantage is the ability to reach a large audience with minimal costs. Unlike other marketing channels that can be expensive, email marketing allows you to communicate with thousands of customers at a fraction of the price. For small businesses especially, it’s a cost-effective way to compete with larger companies.
Email marketing also makes it easy to track and measure your campaigns. This data provides valuable insights into their effectiveness and can inform decisions about future marketing strategies. Track metrics like open rate, click-through rate, and conversions to fine-tune your campaigns, achieve better results, and increase your ROI.
Even more appealing, you can automate email marketing campaigns to send personalized messages to customers at the right time — no manual intervention necessary. Set up automated communications such as welcome emails, abandoned cart reminders, and birthday greetings with triggers based on specific actions or events. This saves time and resources and ensures consistent and engaging communication with customers.
Supports multi-channel marketing efforts
Based on the longstanding Rule of Seven, an eCommerce customer needs to hear (or see) a brand’s messaging an average of seven times before they make a decision to buy. With this in mind, you can use email marketing to support your multi-channel marketing efforts.
It might start with a pay-per-click ad on Google, then a Meta ad delivered on Facebook or Instagram. Then TikTok. Back to Meta. An email. A trip to your website. Retargeting, and so on. The digital shopping journey can be lengthy, but email helps you target your customers at each stage with relevant messaging and products.
Drives customers to your physical locations
In part due to Covid-19 restrictions being lifted around the world, in-person shopping experiences are on the rise, with customers seeking unique experiential opportunities to engage with their favorite brands. Promote these physical sales channels through emails for fruitful results, highlighting aspects like location, hours, special promotions, and other perks for:
- In-store shopping at brick-and-mortar stores
- Pop-ups at other locations like gyms or markets
- Experiential shopping opportunities, such as Sip and Shop or Try Before You Buy events
Different ways to use email marketing
We’ve explored ways to drive your audience to other sales channels, but you can leverage email marketing in other ways to grow your brand, which we discuss below.
Launch a newsletter (that doesn’t focus on sales messaging)
One of the most effective email marketing tactics to grow your brand is to launch a newsletter. This regularly scheduled email should include a variety of content, such as company updates, industry news, and educational articles.
The key to a successful newsletter is to avoid focusing on sales messaging. Instead, feature valuable content your subscribers will find useful and interesting. This builds trust with your audience and positions yourself as an expert in your industry.
Also, include a clear CTA that encourages subscribers to engage with your brand. For example, you could ask them to follow you on social media, leave a review of your product, or share your newsletter with their friends.
Send informative emails
Another approach that yields lucrative results is to send informative emails that focus on how customers can get the most out of your product. These communications should provide tips, tricks, and best practices for using your product and be tailored to your audience’s needs.
By offering helpful information that enables your customers to thrive, you’ll increase their satisfaction with your product and strengthen their loyalty to your brand. You’ll also position yourself as a company that cares about its customers and is committed to their success.
When crafting these emails, employ a friendly, conversational tone that resonates with your audience. You should also include plenty of visuals, such as screenshots and videos, to illustrate your points and make your content more engaging.
Highlight your customers, suppliers, or your team
Email marketing offers a prime opportunity to highlight your customers, suppliers, or team. Showcasing the people who make your company successful creates a more personal connection with your audience.
You could send an email that features a customer success story, highlighting how your product helped them achieve their goals. Or, you could spotlight a supplier who provides high-quality materials for your product. You could even feature a member of your team and detail their expertise or experience.
By placing these people front and center, you’ll show your audience that your brand is more than just a product — it’s a community of people who are passionate about what they do.
Offer an email course
A less common but equally effective use of email marketing is to offer an email course. This is a series of emails sent over a period of time that are designed to teach your audience a specific skill or concept.
An email course is great for positioning yourself as an expert in your industry and providing a valuable education to your audience. This increases trust and credibility among them and can help drive sales by showcasing the advantages of your product.
When creating an email course, make sure to choose a topic that’s relevant to your audience’s needs and interests. You should also break your content into bite-sized pieces and make it easy to consume. By doing this, you’ll increase engagement and make it more likely that your audience will complete the course.
Tactics to try
Beyond the applications we’ve covered in this article, you can employ other tactics to gain the most out of your email marketing efforts. Give the following strategies a try to help your brand stand out from the competition.
Alert your subscribers to social “live” sales
Send alerts to make your subscribers aware of social “live” sales and achieve maximum exposure. Social media platforms like Facebook and Instagram now offer live sales that allow businesses to showcase their products in real time and interact with customers in a more personal way.
By sending an email to your subscribers before a live sale, you’ll increase the likelihood of people tuning in and making a purchase. Include all relevant details, such as the date and time of the sale, the products you’ll feature, and any special discounts or promotions.
Want to really sweeten the deal? Offer a special email-only discount code!
Include “tell your friends” buttons for easy sharing
Make it simple for subscribers to share your emails by incorporating share buttons in your correspondences. This is a small but powerful way to increase your reach and attract new customers.
Include clear and compelling CTAs that encourage subscribers to share your content with friends, family, and their social network. You could even offer a reward, such as a discount or free shipping, for every new customer they refer to your business.
Leverage CTAs strategically
CTAs are the backbone of your emails. These buttons (or links) nudge subscribers to take a specific action, such as making a purchase or signing up for your newsletter.
To craft successful CTAs, make sure they’re clear, compelling, and relevant to the content of your email. For example, if you’re showcasing a new product in your communication, you should feature a CTA that encourages subscribers to learn more or buy.
Experiment with different types as well, such as offering limited-time promotions or free shipping. Make sure to track the results of your CTAs and adjust your strategy based on what works best on your audience.
Wrapping up — Capitalize on digital communications for greater conversions
Email marketing is a powerful and cost-effective avenue for eCommerce businesses to reach their target audience, build strong relationships, and increase sales. By crafting targeted and personalized emails that deliver value to your subscribers, you can expand your reach and grow your revenue.
At MyFBAPrep, we understand the impact of a successful email marketing strategy and we’re here to help you make the most of this channel. Enjoy streamlined operations, reduced costs, and greater business growth with our suite of services. Contact us today to learn more about our comprehensive eCommerce solutions and how we can help you achieve your goals.
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How To Calculate Revenue And Profit Margins
The eCommerce industry provides countless opportunities to grow your online business, expand your reach, and build a powerhouse brand, but you have to monitor several elements to realize this potential. While there are many metrics business owners must track to determine and expand their success, one of the most important is revenue — the fuel of a company. It’s key for evaluating your business’s performance and growth, as well as measuring the efficiency of your marketing and sales strategies, so you need to have precise numbers to make strategic decisions.
In this article, we’ll explore what revenue is, how it’s calculated, and dig into one of its most influential factors, profit margins. We’ll also discuss how to pinpoint your unique profit margins using manual and automated methods.
Is your online business growing quickly? Get the right fulfillment solutions for the journey.
What is revenue?
Revenue is the income a business generates through the sale of goods or services. It’s a crucial metric for any eCommerce professional, as it’s the lifeblood of any business, be it online or physical. Understanding revenue and how to increase it is important to achieve success.
A few key factors impact revenue:
- Product pricing: Setting the right price for your products is essential to maximize revenue. This entails understanding the cost of goods and the value your products offer to customers. You also need to look at your competition and price your products accordingly (more on that later).
- Product availability: Ensure your products are in stock and readily available to customers. That requires a reliable supply chain and inventory management system.
- Marketing and advertising: Identify and target the right customer segments, develop effective marketing campaigns, and leverage social media and other digital channels to reach potential customers.
- Customer service: Provide excellent customer service, which includes being responsive to customer inquiries and complaints and fostering a sense of loyalty among your consumers.
To calculate revenue, multiply the number of units sold by the price of each unit. For example, if a business sells 100 units of a product at $20 each, its revenue would be $2,000.
An alternative method is to sum up all of the individual sales made within a specific period of time. It’s important to track revenue regularly to monitor your business performance and make informed decisions about pricing, marketing, and other key aspects.
What are profit margins?
Profit margins, on the other hand, refer to the amount of money left over after all expenses have been taken into account. To calculate profit margins, businesses subtract their cost of goods sold (COGS) from their revenue. COGS includes the cost of materials and labor needed to produce the product, as well as any other expenses related to the product, such as shipping and handling.
Many factors can impact profit margins. Take the last couple of years, for example. The Covid-19 pandemic caused labor stoppages and shortages with manufacturing grinding to a halt due to outbreaks. This spurred a shortage of goods and materials, driving up the prices of goods. Merchants saw their profit margins shrinking as a result of higher acquisition costs.
If fixed overhead expenses like the cost of warehousing space, insurance, admin salaries, utilities, and licensing or permits (among other things) change due to inflation, needing a bigger space, or hiring new employees, will also impact your profit margins.
And, of course, there are other factors like taxes and financing or interest costs. With inflation currently on the increase, keeping an eye on your profit margins should be of the highest priority.
Generally, a good target profit margin for eCommerce businesses is around 20%. This means a business should aim to make 20 cents in profit for every dollar of revenue. However, margins can vary widely depending on the industry and the individual business. For example, businesses selling low-cost items may have lower margins, while businesses selling luxury goods might enjoy higher margins.
Ensure your pricing is competitive but still profitable
eCommerce professionals face a delicate balance between offering competitive pricing without sacrificing profits. However, with a few key strategies and a bit of negotiation, it’s possible to achieve this harmony and drive more sales for your business.
Negotiate costs with suppliers
One of the most effective ways to keep costs down and maintain competitive prices is to negotiate with suppliers. By building strong relationships with your product sources, you can secure lower prices for bulk orders, early payment discounts, and other incentives. Additionally, you can seek longer payment terms, which improves your cash flow and reduces your overall costs.
Minimize fulfillment costs
Lowering your shipping and fulfillment expenses can keep costs down significantly. Bundling items together, for example, makes shipping more cost-efficient by reducing the number of packages you have to ship. Also, explore alternative shipping options such as using ground shipping instead of air, or partnering with a third-party fulfillment service.
Leverage upselling and cross-selling
By offering complementary products or upgrades, you can increase your customer’s average order value and drive more revenue for your business. Consider discounts and promotions as well to encourage customers to buy more items or make repeat purchases.
Additionally, look into implementing a dynamic pricing strategy that allows you to adjust your prices based on market conditions, supply and demand, and other factors. This will help you to be competitive as well as maximize your profits.
Most importantly, review your costs and pricing regularly to ensure you remain competitive and profitable. By keeping an eye on your expenses and adjusting your prices as necessary, you’ll easily strike that balance between reasonable pricing and a healthy profit margin.
How to calculate your target profit margin
To find your unique profit margin, first, determine your revenue. This is the total amount of money you bring in from sales. Then, sum up your costs, including both fixed and variable expenses. Fixed expenses are those that remain the same regardless of the level of sales, such as rent and salaries. Variable expenses, on the other hand, fluctuate based on sales volumes, such as the cost of goods sold and shipping costs.
Once you know your revenue and costs, you can calculate your profit margin by dividing the net profit (revenue minus costs) by the revenue, then multiplying by 100. For example, if your revenue is $100,000 and your costs are $80,000, your net profit would be $20,000 and your profit margin would be 20% — which, as mentioned above, is a great percentage to aim for.
Translate the numbers
You need a profit margin that’s high enough to cover your expenses and provide a reasonable return on investment. The exact number will depend on the specifics of your business and the level of competition in your market. However, a profit margin of at least 10% is considered to be the minimum for most businesses.
Another impactful factor in your profit margin calculation is the industry you’re in. Some have higher profit margins than others. For example, businesses in the technology and software sector tend to have higher profit margins than those in the retail industry.
Keep in mind, though, that a high-profit margin doesn’t always equate to success; other factors, such as customer satisfaction and market share, also play important roles. Even if a business has high margins, it shouldn’t fall into a false sense of security, as the market and competition can change quickly. Monitor and adjust your business strategy continuously to maintain healthy gains.
Consider tools to handle the math
The traditional method of calculating revenue and profit margins usually involves spreadsheets, calculators, and good old-fashioned mathematics. This is a viable solution for smaller companies with straightforward calculations. However, manually crunching numbers can be time-consuming and cumbersome, if your business needs require you to look at various potential outcomes based on pricing changes or sales boom or bust cycles.
When it’s no longer feasible to calculate your revenue manually, look to tools for support. Many options are available, and businesses frequently take advantage of them because they’re:
- Fast and easily accessible: Tools take care of the heavy lifting of mathematics for you with just a few clicks. Solutions like revenue or profit margin calculators easily enable you to better manage your business goals and planning to push you toward success and sales growth.
- More cost-effective than outsourcing: You could hire an accountant or business analyst to look at your books and create projections. However, hourly rates add up and will, unfortunately, cut into those profit margins you’re trying to grow. In addition, outsourcing these activities impacts your ability to make fast decisions, as it can take time for a professional to run the numbers.
- Able to show possible outcomes: By comparing your revenue against your profit margins, you can optimize your business activities. This can mean cutting business costs, raising prices, changing suppliers, and more.
Tools let you plug in numbers quickly and easily, then the algorithm does the work so you can determine the best way forward for your unique eCommerce needs. Most accounting software will include profit margin calculations that you can use to understand your unique business’ margins and the factors that impact them. You can also select one of the many bespoke options, ranging from high-cost to no-cost online.
Omni Margin Calculator
The Omni Margin Calculator will generate your gross margins based on the numbers you input. This free tool is available online and takes only a few moments to plug in your data. Better still, it has additional features/calculators that can break down GST, VAT, Sales tax, and more.
Oberlo Profit Margin Calculator
Similar to the Omni mentioned above, Oberlo offers an always-free calculator for profit margin calculations. Simply input the data to calculate your margins and use the information to set prices.
MyFBAPrep Profit Margin Calculator
A quick Google Search for “profit margin tools” uncovers more than one hundred thousand results! It can feel overwhelming with so many tooling options available. Make it easy on yourself and look into the MyFBAPrep Profit Margin Calculator. This free tool quickly calculates your profit margins so you understand how to grow your business. It reduces the risk of human error by automating processes and even provides a ready-made, fool-proof template for calculations.
The template allows you to work faster and reuse formulas for quick calculations with little additional effort. It also maintains consistency between calculations for different possibilities, such as higher or lower price points, fluctuating business costs, or a combination of minor tweaks. Simply fill out the tool and let the Profit Margin Calculator do all the work. Unlike the tools above, you can keep your calculations to reflect back on if things change for easy comparisons.
Revenue and profit margins are important metrics (among others) for measuring the performance and growth of an eCommerce business. While 20% is a good base target for eCommerce businesses, ultimately, your industry and specific business makeup will determine the margin you should aim for.
Both front- and back-end factors affect these metrics, from your marketing and advertising to your supplier relationships. Gather relevant data and run the numbers, using either manual methods or a tool like MyFBAPrep’s Profit Margin Calculator, to see where your business performs well and where it has room to improve. By relying on accurate calculations, you’ll steer your company on course toward growth and greater profitability.
The Amazon sellers guide to boosting revenue
eCommerce is one of the most potentially lucrative business opportunities of the 21st century. This is evidenced in the success of online marketplaces like Amazon, the third-largest company by revenue in the world, boasting over 300 million customers and $121.23 billion in Q2 2022 alone.
The eCommerce titan’s ready-made buying audience, next-level insights, and nearly infinite selling opportunities allow many vendors to realize big wins online.
However, both newbies and veteran Amazon sellers alike can easily overlook important tasks that don’t seem urgent but generate the lifeblood of their business — cash.
So, how do you nab a bigger slice of the Amazon revenue pie?
We’ve observed successful Amazon sellers take a few key steps, including delegation and outsourcing, sharing user-generated content, and upgrading their fulfillment strategies. Now, we’ll teach you how to do the same for your business.
In this guide, we’ll cover:
- The growing trends impacting the Amazon selling landscape and how this will affect your business strategies
- Key focus areas to accelerate sales and boost return on investment when selling on Amazon
- Tips to gain traction in your Amazon store optimization
How to prevent customer churn amidst a recession
As the economy faces a potential recession in 2023, businesses across many industries contend with retaining their customers amid financial uncertainties. For eCommerce brands, customer churn can be a significant threat as consumers tighten their budgets and cut back on discretionary spending.
To prevent turnover, it’s essential to understand its causes in eCommerce. Common factors include poor customer experience, uncompetitive pricing, lack of relevant product offerings, and insufficient support, which can be exacerbated during a recession. In this post, we’ll dive deeper into these issues, then explore strategies for reducing eCommerce customer churn in a recession.
What is customer churn?
In eCommerce, customer churn is a critical metric that indicates the percentage of customers who stop purchasing from a business over a given period. It’s an important factor that impacts business revenue, profitability, and long-term sustainability. Pinpointing its underlying causes is essential for eCommerce brands to take steps to mitigate it and increase their customer retention.
What causes consumer churn?
In today’s highly competitive landscape, customers have a wealth of options, and multiple factors, both large and small, can easily drive them to your competitors. We’ve found the main culprits to be:
- A poor customer experience: Customers expect a seamless and enjoyable purchasing process, from the moment they land on your eCommerce website through checkout and delivery. If the site design is confusing, or if the checkout process is lengthy or unreliable, shoppers may abandon their carts and never return. Slow shipping, inaccurate product descriptions, and poor customer support also contribute to a negative experience that can lead to churn.
- Noncompetitive pricing: Consumers are highly price-sensitive and constantly seek out the best deals. Ecommerce businesses that sell their products or services at high prices will likely drive customers away, particularly during times of economic uncertainty. If a recession occurs in 2023, bringing with it a high risk of inflation, eCommerce businesses must be particularly careful about pricing to avoid customer churn.
- Inflation: Inflation leads to higher costs of production and materials, which, in turn, affects the prices of products and services. As a result, eCommerce businesses have to adjust their pricing to keep up with the changing economic landscape, with customers becoming more sensitive to these changes. Inflation can also impact shipping costs and produce longer wait times for customers, and poor delivery experience is a sure-fire way to encourage customer churn.
- Lack of relevant product offerings: Shoppers expect to find products that meet their unique needs and interests, and businesses that fail to deliver on those expectations may lose customers to competitors that do. During a recession though, consumers are all but certain to cut back on discretionary spending, so eCommerce businesses must offer products that are essential and relevant to their customers to avoid churn.
- Insufficient support: Customers expect prompt and responsive customer service when they have questions or issues with their orders. Less-than-satisfactory support often causes customers to feel frustrated and turn to competitors that offer better customer service. In times of economic uncertainty, consumers may be particularly anxious about their purchases, so top-notch support is crucial to prevent frustration and churn.
How does a potential recession impact customer behavior?
The possibility of a recession setting can have a significant influence on eCommerce customer behaviors. As people become more cautious and limit their spending, eCommerce businesses may find themselves facing increased competition, reduced sales, and higher than normal customer churn. Other effects are:
- A shift towards value-based purchasing: Customers become more price-sensitive and look for ways to stretch their budgets further, such as purchasing discounted or clearance items. As such, eCommerce businesses may need to adjust their product offerings and promotions to cater to this shift.
This, in turn, could lead to greater competition, particularly among those that sell essential products or services. Companies that offer the best value and competitive pricing are likely to see an increase in customer traffic and sales.
- Greater emphasis on customer service and support: As customers become more cautious about their purchases, they may seek out businesses that offer responsive and reliable customer support. Investing in customer service and support may thus yield increased customer loyalty and retention. Happy customers are repeat customers!
- Slower shipping and longer delivery times: When faced with economic uncertainty, businesses may need to cut back on their logistics and supply chain expenses, which results in longer shipping times and limited delivery options. This change is likely to anger customers and can contribute to churn. Businesses that maintain fast and reliable shipping and delivery options even during a recession better position themselves for higher customer loyalty and retention.
- Shaken customer trust and confidence: Customers may also be more wary of businesses that have a history of poor customer service, noncompetitive pricing, or inadequate support and choose to avoid them for safer options. So, it’s important to have an established reputation for trustworthiness, reliability, and quality.
Tips to reduce churn
No matter how stellar your offerings or how optimized your operations, some customer churn is to be expected, though the rate varies by industry and product type: For subscription businesses, a 5% monthly churn rate is considered average, while single-purchase businesses (e.g., skin care, fashion, lifestyle, personal products) should expect a much higher churn rate at roughly 75%. This equates to about one in four customers returning.
During times of financial uncertainty, such as a recession, customer and buying behaviors inevitably shift. For eCommerce businesses, this might look like higher than usual rates of customer churn, which impact your customer lifetime value (CLV). Because this metric is important to your profit margins (and because it costs more to attract new customers than to keep existing ones), ensuring you reduce churn is especially crucial. Check out our recommendations below to maintain a healthy consumer base.
Stay in stock
Running out of stock of a particular product is a major contributor to churn in eCommerce. When customers are unable to purchase the products they want, they grow frustrated and are likely to turn to competitors who do have the items in stock.
To avoid this issue, regularly monitor your inventory and ensure you have enough stock of your most popular items. Additionally, communicate with consumers when you restock items; this encourages them to come back and make a purchase.
If you find yourself back-ordered, don’t despair: You have a few options to manage backorders more easily.
Push subscriptions and loyalty benefits
Providing loyalty benefits and rewards incentivizes buyers to remain loyal to your business. By encouraging customers to subscribe to your products or services, you can increase customer retention and reduce churn.
For instance, you could offer a discount or free product to customers who make regular purchases or reach a certain spending threshold. The more shoppers feel appreciated and rewarded for their loyalty, the more likely they are to make repeat purchases with you.
For a great subscription program to copy, check out Amazon Subscribe & Save.
Offer free shipping
High shipping costs can be a significant barrier to entry for customers looking to purchase. Offering free shipping reduces the likelihood of people abandoning their carts due to expensive shipping fees. It also increases customer satisfaction and loyalty, as they feel they’re getting a better deal and thus a more enjoyable shopping experience.
Want to really wow your customers? Offer free returns too.
Highlight value over price
While price is a significant factor in a purchase, highlighting the value of a product or service over its price is also an effective way to reduce churn. Emphasize the quality, benefits, and unique features of your items both to differentiate yourself from your competitors and justify higher prices.
Customers who feel they’ve found a high-quality product that meets their needs and brings additional value stay loyal to a business longer. This avoids having to race to the bottom on pricing and potentially cutting into your profit margins.
Craft unique bundles
Bundles of related products or exclusive items give customers something unique and appealing that they can’t find elsewhere. For example, include an item you don’t sell regularly in your product catalog. This encourages them to make additional purchases and stay loyal to your brand. Bonus: Bundling is a great way to boost your average order value.
Reducing customer churn in eCommerce requires a proactive and customer-centric approach, especially during a recession. You can increase your retention rate by ensuring stock availability, encouraging subscriptions and loyalty, offering free shipping, highlighting value over price, and assembling bundles and exclusive items. Invest in these strategies to nurture a loyal customer base and drive long-term success throughout various economic ups and downs.
Amazon AI: Is ChatGPT running your Amazon business yet?
Seems like you can’t go anywhere online without the people talking about how ChatGPT is the next big thing. I think these are the same folks who were buying LUNA and saying that “NFT’s are here to stay” just a year or two ago. Quite frankly, I’d like to press *MUTE* on all that chatter and get back to work.
That is, UNTIL I saw some of my favorite Amazon software using AI to create new listings or optimize existing ones…in seconds!
Jon Tilley, Co-Founder and CEO of ZonGuru, debuted their tool’s ChatGPT enabled listing creator at the recent Convert More Clicks summit. It blew my mind.
With just a few clicks, you can use your competitor’s ASIN’s as the foundation for a listing. Use their Keywords on Fire tool to upload the relevant keywords from 5 competitor ASINs and then a single click gets a complete AI Generated listing in 30 seconds.
If that sounds too good to be true, wait until you further optimize the listing by adding/subtracting keywords and asking the AI to regenerate the listing…you can raise your Optimization Score and create a better listing than the Page One results for your search term.
SmartScout’s version is called AI Listing Architect and it will take an ASIN and spit out Product Title, Keywords, Bullet Points for the listing, and a Description.
It only takes a quick “copy + paste” of your competitor’s ASIN to get a listing started. From there, all you need to do is finesse it a bit – that’s how Tilley describes the process of re-humanizing the AI’s recommendation.
If you’re skeptical of how easy I’m making this sound, I get it. Watch Scott Needham, SmartScout Founder and CEO, create a listing in under one minute. Better yet, try AI Listing Architect for FREE and no credit card down with code: SMARTAI
Kudos to SmartScout and ZonGuru. Helium10 and Jungle Scout, we’re watching you…
Meet MyFBAPrep at Prosper
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An introduction to cold chain shipping and how it’s revolutionizing the supply chain
This a guest post from Maddie Horton, product marketing manager at Smart Warehousing. She helps brands find the right fulfillment solution through email communication, case studies, and more. Outside of work, she enjoys spending time with her dog and exploring new restaurants.
As more consumers use online ordering to tether themselves to brands, companies are increasingly shipping their products across state and country lines. In the last few years, we’ve seen a large uptick in food subscription boxes and other temperature-sensitive items alone. As the demand for such items grows, so does the need for robust logistics. To keep up with this trend, more and more brands will have to master their cold chain shipping.
What is cold chain shipping?
Cold chain logistics is the transportation of temperature-sensitive products at a consistent temperature and humidity level. It’s an integral part of the distribution of perishable food and supplies to ensure they maintain their quality.
It’s commonly used in the pharmaceutical, food and beverage, and cosmetics industries, as temperature-sensitive goods must remain within a certain temperature range to ensure quality, freshness, and safety.
Often, perishable products require frequent deliveries to locations while avoiding long travel times. As such, a reliable cold chain shipping strategy is essential for maintaining product integrity. In this guide, we’ll walk you through the advantages of cold chain shipping and its impact on supply chains and related technology.
Advantages of cold chain shipping
The rise in global trade and demand for perishable goods has increased the importance of reliable cold chain shipping in recent years. It’s essential to ensure perishable products are delivered safely and on time. Shipping temperature-sensitive goods has a number of advantages over traditional shipping methods, including improved safety, extended shelf life, reduced waste, and, sometimes, cost savings. Most importantly, it reduces the risk of spoilage due to temperature fluctuations, which can cause serious health issues or even product recalls.
By controlling the temperature and humidity of the product environment, cold chain shipping allows items to be transported over longer distances without compromising quality. This helps businesses maintain inventory levels more effectively, as well as ensures products reach their destination on time and in perfect condition.
Typically, the cold chain process operates based on the following aspects:
- Variations in demand: Demand variability considers the product’s arrival time and state upon arrival. If certain goods are in demand, companies may request them as needed.
- Load integrity: Load integrity requires technology to determine and maintain shipment temperatures.
- Transport integrity: Transport integrity requires staff and technology to ensure transportation temperatures.
How cold chain shipping is redefining supply chain management
Shippers and third-party logistics (3PL) providers continuously adapt to consumers, and that includes cold chain shipping: NTT Data’s 2023 27th Annual Third Party Logistics Study found 67% of shippers and 72% of 3PLs are expanding their cold chain capabilities and capacity over the next three years. It’s anticipated that, by 2030, the global chain logistics market will reach about $801.26 billion and grow at a CAGR of 14.07% from 2022 to 2030.
Two increasingly influential industries, grocery delivery and micro-fulfillment, are contributing to this expansion as they broaden their logistical capabilities to include cold chain shipping.
Due to the Covid-19 pandemic, eCommerce and online grocery services have gained a larger share of the cold chain industry. Over the next five years, online grocery sales will see a compound annual growth rate (CAGR) of 11.7%, bumping e-commerce’s share of overall grocery spending from 11.2% in 2022 to 13.6% in 2027. This trend will continue as customers are now used to the convenience and time savings of grocery delivery. Moreover, eCommerce is predicted to account for 20% of the U.S. grocery market by 2026.
While this growth is exciting, grocery retailers feel pressured to deliver products to customers quickly and while meeting increasing demands. To support service deliveries and operations, brick-and-mortar stores now look to cold chain shipping for guaranteed food freshness.
Micro-fulfillment involves establishing smaller-scale warehouses in populous urban or suburban locations. By shortening the physical distance between consumers and goods, businesses reduce their last-mile delivery time. This is especially important to the cold chain, as it improves supply chain efficiency and lowers the costs and risks associated with temperature-sensitive shipments.
Micro-fulfillment centers typically carry enough inventory to last a few days’ worth of orders. They rely heavily on inventory management software and customer-driven analytics to determine what SKUs are most often purchased, by which customers, and in what geographic area. This ensures product availability and eliminates wasted storage and stagnant inventory.
The technology driving change in cold chain logistics
The first documented use of cold chain technology dates back to 1797, with British fishers using ice to preserve their catch. It’s continued to evolve since then, with its present-day incarnation allowing companies to track shipments in real time and guarantee products are stored and transported at optimal temperatures throughout their journey.
Advancements in artificial intelligence and machine learning have led to analytics tools that can dive into data points to deliver actionable insights, like predicted inventory, transportation time, consumer demand, and spoilage probability.
Software products as well can monitor the trailers used during transportation between distribution centers to ensure temperatures remain consistent. Previously, cold chain shipping employed passive temperature sensors. These often battery-powered thermometers would monitor the food containers rather than the trailers. However, new technologies now allow products to ship in ideal temperature conditions as well as provide real-time data on temperature fluctuations.
Adopting Bluetooth Low Energy (BLE) trackers, for example, enables users to monitor the temperature and climate of transportation containers remotely with real-time insights like temperature, humidity, movement, data entry, and analytics. This reveals any issues concerning suboptimal conditions that businesses can improve with GPS, RFID, and barcodes (to track items in real time).
If goods arrive spoiled, it can be difficult to pinpoint where the breakdown occurred without sophisticated software. Advanced tracking systems continuously track temperature and humidity to alert users if pre-configured limits are breached, thus proactively preventing damage. Often, location-based insights like GPS will inform you where the goods are when they’re harmed. This helps you trace the timeline back to ensure accountability and avoid repeating these mistakes.
What are the challenges of cold chain shipping?
Cold chain shipping is a complex process, as you have to maintain the temperature of the product, ensure timely delivery, and manage costs associated with this type of shipping. Perishable goods are sensitive to temperature changes; even the slightest variation can spoil or damage products.
To ensure items remain in good condition and hold steady at a safe temperature, cold chain shipping requires products to have storage units. A storage unit can be anything from a refrigerator to an insulated box and is crucial for transporting these goods at their original temperature.
Cost can be another major challenge for companies, as cold chain logistics is more costly than ambient. Its expenses include specific packaging and some kind of coolant, and you usually have to pay for expedited shipping to ensure the product arrives quickly and doesn’t spoil en route to its destination. All of these elements increase your overall costs, so finding ways to lower them is essential for businesses shipping temperature-sensitive items. One way to do so is to outsource this process to a 3PL.
Cold chain shipping best practices
It’s easy for problems to arise in cold chain shipping. To avoid headaches and ensure well-oiled operations, cold chain shippers must adhere to best practices.
- Packaging: When packaging, include an inner layer and vapor barrier or plastic film to maintain a consistent temperature for products during transportation and to maximize their shelf life. This prevents any outside air, humidity, or environmental factors from sneaking into your containers, as well as protects against leaking. A reliable protective barrier between your packaging and your products avoids outside contamination.
- Coolants: Use the right coolants and in the correct amounts. Once you have your insulated packaging, add gel packs, dry ice, or another coolant to keep your item frozen or cold while it’s transported. How much coolant you need and which type will depend on the distance and length of time the package is traveling and the temperature it needs to maintain throughout its journey. When using dry ice, you also need to be aware of and abide by the restrictions associated with it.
- Transport speed: Fast transportation is another best and necessary practice for businesses that employ cold chain shipping. Most times, you’ll want next-day air or two-day shipping to make sure your product arrives quickly at its destination. Also, avoid shipping your product toward the end of the week or near a holiday; you don’t want it to sit at a shipping center over a (long) weekend. Planning ahead and choosing the fastest shipping option available is imperative for your product to arrive in pristine condition.
Leading solutions and service providers
With cold chain shipping increasing in use, 3PLs are also expanding their cold chain management services. As such, more and more retailers want to outsource their cold chain warehousing and distribution to encourage their business growth. Because it requires specialized labor, warehousing, and transportation, a 3PL with experience and expertise in managing sensitive products can save brands significant costs.
When looking at 3PL providers, it’s important to evaluate:
- Shipping times and on-time deliveries: A 3PL provider must be able to provide one- to two-day shipping to avoid products melting or becoming spoiled in transit.
- Omnichannel capabilities: If you manage multiple channels, you need a 3PL provider that can handle omnichannel selling so you don’t have to worry whether your logistics can keep up with your business growth.
- Nationwide coverage: With nationwide coverage, you can employ a distributed inventory model. This means your products spend less time in last-mile delivery transit.
Wrapping up — Moving forward with cold chain shipping
When you’re ready to scale your brand, first look at what elements are most important to achieve your goals. Which ones can you handle internally and which can you outsource? If your brand’s growth is dependent on incorporating great cold chain shipping, you need to dedicate time and energy into either perfecting your logistics processes or finding a great 3PL partner to handle it for you. Cold chain shipping will continue to corner the market as consumer preferences fluctuate due to the introduction of new products and brands. Take advantage of this growth to expand your brand and achieve greater success (and revenue).