In Fulfillment, Location Makes a Difference
Fulfillment centers that know how to work direct response campaigns and integrate with customer service and order management functions are essential to a successful DRTV campaign. You can say the same about location. Choosing a fulfillment partner with the right location plays an equally important role in maximizing profits and satisfying your customers.
Rule #1: Be Near Your Customers
The majority of the US population resides east of the Mississippi. In a national direct-to-consumer campaign, you are closer to more customers if you’re on the east coast. Why is this important? The closer the customers, the lower the transportation costs (a penny gained). Shorter transit times create happier customers (a penny earned).
Consider the alternative. If you locate fulfillment in a western state, such as California, the vast majority of your packages (typically 70%-80%) will ship over the Rockies to eastern points. Longer distances mean crossing more freight zones. That translates to higher costs and longer delivery times. The smaller balance of packages stay on the west coast and ship relatively cheaper and faster.
However, if you use a fulfillment partner located in the East, the shipping equation is inverted. The vast majority of packages will now ship shorter distances crossing fewer freight zones. Packages reach customers faster and at a lower cost. You’ll also be able to provide better service to customers who desire expedited delivery via ground shipments. You won’t have to charge expedited shipping fees, so both you and your customers will be happy.
Additional benefits for faster transit times also include:
- Fewer calls to customer service to inquire about orders.
- Less time for customers to experience buyer’s remorse and cancel their orders.
- Lower freight costs for returned and undelivered product – something that is incredibly powerful when combined with a same-day fulfillment.
When shipping close to customers, there are often several freight options, each with a set of characteristics that balance speed with cost. Having more freight options allows you to provide what your customer wants at a price point they are willing to pay – a clear formula for success. When shipping cross country, options are limited.
Nearly every analysis we perform demonstrates the preferred economics of East Coast fulfillment locations. Although some marketers will try to solve this problem by having distribution points on both the east and west coasts. This solution holds merit, but it also introduces many challenges and should be carefully considered.
Rule #2: Ship to the East
In direct-to-consumer marketing, many products are produced in Asia. Therefore, the logical response has been to ship to West Coast ports like Long Beach, California and then to use fulfillment operators on the west coast. This equation is almost always an expensive one. Here’s why:
- West Coast ports are busy and often congested, slowing the unloading process.
- Last year labor unrest created significant issues for marketers.
- The Panama Canal expansion – opening in May 2016 – will lower the cost of shipping goods to east coast ports.
Yes, it will take a few days longer and cost a little more to ship through the Panama Canal to the East Coast. However, the extra shipping costs and time are offset in several ways:
- Warehousing and labor costs are typically much less expensive in the east versus west. Compare states like Georgia to California and you will see what we mean.
- Using California fulfillment partners can subject the marketer to California franchise taxes, which significantly increase costs.
- Shipping to most of your customers will be faster and less expensive.
Watch for additional articles on fulfillment including turnkey operations, the importance of technology, retail distribution and other ways your fulfillment provider can be a real partner.