Cost increases along the supply chain, reduced customer demand and full warehouses that can only be emptied through discounts: maintaining profitability has never been as challenging for online retailers as it is today. But in many online shops there are still adjustment screws that can be adjusted to save costs. 

Online trading is becoming more and more expensive. In addition to marketing, shipping, returns and customer service eat away at retailers’ tight margins. This makes it all the more important to pay attention to lean processes and possible savings. The start-up Duschbrocken recently reported that it would now make 80,000 euros more profit annually – simply by changing the logistics provider.  

Optimise fulfillment to save on delivery rates 

It makes sense to regularly demand prices from your own shipping partners. But outsourcing all, or parts of, logistics can also help save fixed costs for employees, warehouses or equipment. However, the most important reason for outsourcing logistics services is lower shipping costs. Large fulfillment providers have often negotiated lucrative volume deals with their logistics providers and pass on part of the cost advantages to their customers. Online retailers can also save on international shipping. Many fulfillment service providers operate a network of logistics centers in which the goods are stored closer to the customer. This means retailers only pay local shipping fees instead of international shipping fees. This also means that they can get the products to customers faster and cheaper, thereby gaining a competitive advantage over the competition. 

Returns handling requires automation 

Return shipping is normally even more expensive than shipping the goods. If you want to improve your profitability, you need efficient returns management. Even before purchase, detailed product descriptions and intelligent size advisors help you choose the right products. The online fashion retailer Zalando, for example, recently introduced a new tool that recommends the right size based on photos that customers take of themselves with their own smartphones. 

More and more retailers are also foregoing free returns in order to reduce their costs. The introduction of a returns portal also makes sense. Among other things, retailers can prevent customers from generating return labels after the return period has expired. Using a returns portal, retailers can also define rules about what happens if the cost of the return exceeds the value of the goods. The query and analysis of the reasons for the return can also be carried out in a much more product-specific manner via a returns portal than via an enclosed return form. At Adidas, customers have the choice between a voucher issued immediately and a credit note that lasts several days when registering a return via the portal. Similar projects show that around one in three customers opt for the voucher. 

Those who ship internationally can save costs by working with local return services. The returns are sent to a local address at the local shipping rate and from there are forwarded in large quantities to the central warehouse at regular intervals. Such an approach significantly improves profitability, especially in product categories with high return rates. 

There is also great potential for savings in automating the returns process: It helps to assign an RMA (Return Merchandise Authorization) number to each return, which serves as a reference for the entire return process. In addition, retailers should ensure that item availability in the shop is automatically updated when a return is received. Customers should be automatically notified via email when a return has been received and refunded. The refunds themselves can also be automated based on rules and thus accelerated. 

Customer Care: save costs, improve service 

In customer service there are various ways to cut costs without reducing the provided service to customers. A first step is self-services such as extensive FAQ portals and chatbots. The latter can reduce the burden on classic contact channels such as telephone or email by an average of 30 to 40 percent for recurring questions. Since customers save time when they can easily resolve their own concerns, the acceptance of such services is constantly increasing. The only requirement: They must be easily findable on the website and, above all, easy to use.  

To further improve cost reduction in customer service, the use of artificial intelligence proves a big impact. AI can provide customer service agents with real-time suggestions for specific inquiries and speed up responses to customer concerns. And that is just the beginning, Salesupply has just launched a hybrid AI customer service solution that combines the powerful capabilities of AI with the safety of human control. Because it is integrated with all important company databases, the new customer service solution effectively supports clients all the way from pre-purchase all the way to returns and after sales. This solution can easily reduce customer service inquiries (and this way customer service cost) with 40-50% to start with whilst maintaining the positive customer experience.   

If you want to be available to your customers on weekends or in the evenings or want to offer your customer service in multiple languages, you should calculate carefully whether you want to use internal employees for this or better cover these off-peak times with an external service provider. Outsourcing allows companies to share call center agents with other companies and only pay them for the times they are actually working for them. By flexibly building up and reducing capacities, you can also react quickly to changes and adapt costs variably to demand. 

Regardless of whether it is shipping, returns or customer service: process automation and outsourcing are two relevant levers for greater profitability. Both help retailers to reduce fixed costs and to position themselves lean and agile – for all developments that the future has in store. 

Jonathon Jay Huggett

Jonathon Huggett