AGENDA

#PARCEL23NASHVILLE © PARCEL FORUM

507 Achieving eCommerce ROI in 2023 and Beyond: Fast & Flawless Order Fulfillment to Maximize Customer Retention PRESENTER RICHARD MCNISH

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RICHARD MCNISH GENERAL MANAGER, Ecommerce Shipping Focus: ROI, Growth, and Customer Retention Previous Experience: Startups Fortune 500 companies Management Consultant at Big 4 and boutique firms

ABOUT ME

AGENDA TRANSITION

Before we dive into the presentation: Great job, you acquired the customer! How well do you understand your business data? How many of you are familiar with Customer Acquisition Cost? How many of you know the CAC for your business? How many of you know your ratio of new to repeat customers? How many of you know the promises sales/marketing has made to your customers? What is your customer expecting for order fulfillment and delivery? How well are you meeting those expectations?

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SESSION OBJECTIVES What is the #1 threat to ecommerce ROI? What do your customers need? Practical steps to give your business greater control To-do before Peak Season

Goal of today’s session:

Understand where your ROI comes from and what threatens it Explore insights from Descartes consumer sentiment study to identify what your customers need Break it down into practical steps to help your business gain control Give you a game plan to prep for peak season 2024 8

THE #1 THREAT TO ECOMMERCE ROI

Your customers are leaving, and they’re taking your ROI with them.

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THE #1 THREAT TO ECOMMERCE ROI What is ROI? Return on Investment = Customer Lifetime Value – Customer Acquisition Cost – COGS  Descartes Systems Group consumer sentiment study of 8,000 ecommerce customers Delivery Problems: #1 reason ecommerce businesses lose profitability 80% of people ages 18-25 had a delivery problem in the last three months. 21% [of them] did not order from the retailer again.

What is ROI? Total Revenue = Customer Lifetime Value (CLV) Your Investment = Customer Acquisition Cost (CAC) Other Expenses = cost of goods sold (COGS) Return on Investment = CLV – CAC – COGS

- Descartes consumer sentiment study to understand what ecommerce customers need

- You are responsible for keeping your promise to your customers and meeting their delivery expectations.  10

HOW IMPORTANT IS REPEAT BUSINESS? Data Source: Practical Ecommerce

#PARCEL23NASHVILLE Repeat business is the only way ecommerce businesses make any money. On average, new customers are not profitable. New customers cost more now than they did ten years ago. Repeat business is essential to offset losses from CAC. Lead into the example: 100 customers, 80 delivery problems, 17 lost customers. (Richard to look at the study to better understand more details here and to understand if questions are asked.)

This study assumed a gross margin of 40% and ignored customer lifetime value estimates. It accounted for acquisition, fulfillment, and ancillary costs borne by the first purchase. 11

Profits from New and Repeat Customers: 2013 vs. 2022 Pure-play ecommerce merchants: Average profit or loss per customer

2013 New Customers Repeat Customers -9 28 2022 New Customers Repeat Customers -29 38

Example: If you have 100 new ecommerce customers… 12

You already lost $2,900. According to the bar graph we saw a moment ago, each of your 100 new customers just cost the company $29. 13

The good news is, these 100 customers also represent at least $3,800 in potential profit. Each repeat purchase equals $38 in profit. 14

However, our consumer sentiment study showed that 80% of consumers experience delivery problems. 15

When that happens, customers have a negative experience and lose trust in your business. If 80% of this group of 100 is unhappy, that means $3,040 of your profit is at risk. 16

Our study showed that 23% of customers that experience delivery problems do not return. Out of this group, that means 17 people will not become repeat customers. 17

You lost $483 to acquire them, and now there’s no hope of recovering that cost. 18

Further, you also lost at least $646 in the profit you would have made from repeat business. This may not seem like a lot of money, but we’re only looking at a sample of 100 customers. Imagine if your business was much bigger. 19

By the time you have 100,000 new customers, you would be losing 17,000 of them, wasting almost half a million dollars on the acquisition of customers you couldn’t keep. 20

Further, you would lose at least six hundred thousand dollars of potential profit from repeat business. 21

WHAT CAN MY BUSINESS DO?

Internal Control – Eliminate errors and delays in shipping. External Control – Strategically select your carriers. Shape Customer Expectations – Avoid disappointment.

As a business leader, you can prevent delivery problems, increase satisfaction, and keep your customers. By focusing on the things you can control both inside and outside your business, you will build a strong framework for accurate, on-time delivery, repeat business, and ROI. 22

INTERNAL CONTROL: ERRORS & DELAYS

First, let’s look at the factors you can control inside your business. When it comes to delivery, this means shipping the correct order, on time, every time. 23

INTERNAL CONTROL – ELIMINATE ERRORS AND DELAYS Where to Look Inventory/order management Warehouse management Shipping and packaging

Red Flags Paper-based processes, labor-intense Manual data entry, time to ship Labor shortage Start using integrated technology to overcome fulfillment errors and shipping delays.

You run into problems when there is a disconnect between marketing promises and operations delivering on them. If you can’t keep your promise, control the operations within your business. Identify bottlenecks in your fulfillment process that cause delays in shipping. Where to look Once you identify the bottlenecks, start using integrated technology to help.

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HOW CAN I GAIN INTERNAL CONTROL?

#PARCEL23NASHVILLE Integrated technology allows different software programs to talk to each other. Instead of logging into multiple ecommerce sales platforms, carrier programs, etc., the data flows seamlessly from one program to another. Save time and headaches. Automate tedious, manual processes. Eliminate double data entry and keyed entry errors. Do more work with fewer employees. Easily scale operations for peak seasons and growth. We just covered this at a high level. For a deeper dive: Ebook giveaway in your PARCEL Forum app for this session; QR code at end of this deck.

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EXTERNAL CONTROL: CHOOSING CARRIERS

Some delivery problems happen outside of your business The carriers you use affect the delivery experience and customer satisfaction Let’s talk about how carrier selection impacts repeat business 26

Don’t step over dollars to pick up pennies. By sacrificing quality to save money, you may lose repeat business and profits. 27

#PARCEL23NASHVILLE - What happens if your carrier can’t keep your delivery promise to your customer? - Richard’s Instagram purchase story. 28

WHAT TO LOOK FOR IN CARRIER PARTNERS Security 81% of consumers rated security as quite/extremely important. 22% of consumers prefer a precise delivery window; speed is less important. Low-Cost 39% of consumers want lowest-cost shipping; speed is less important. Diversify Your Services/Carriers Using multiple carriers allows you to rate shop. Avoid dependency on a single source. Consider budget-friendly regional/last-mile carriers for local orders.

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SHAPE CUSTOMER EXPECTATIONS

There’s no way we can control every single internal and external factor all the time. Things will go wrong, so how can you minimize the impact? 30

AVOID DISAPPOINTMENT Only promise what you can consistently deliver. Test and troubleshoot your customer experience. Clearly communicate delivery options and shipping costs upfront so there are no surprises at checkout. Immediately send branded communications with tracking information for each order. Use carriers that send updates to the customer when a delivery is delayed. Offer a live customer support channel (phone or chat).

- Disappointment comes from unmet expectations. 31

TO-DO BEFORE PEAK SEASON

It's one thing to listen and learn about these things; what will you do about it?

We've put together some resources to help you create real change in your business ahead of peak season 2024. 32

ACTION ITEMS FOR YOUR BUSINESS Giveaway #1: Get the To-Do Checklist Scan the QR code with your mobile device. Download the “Ecommerce Business To-Do Before Peak Season 2024” checklist. Develop your strategy to get it done.

The first giveaway is a pdf of "to-do" checklists containing practical steps based on what you just learned in this session. There's a separate list for small, midsized, and large businesses. Printable, easy to see what needs to be done, and you can plan your strategy for the upcoming year. By this time next year, you will be in a better place than you are right now. 33

LEARN MORE ABOUT INTEGRATED TECHNOLOGY Giveaway #2: Get the “Tech Stack” eBook Scan the QR code with your mobile device. Download the guide “Build an Ecommerce Tech Stack for Fast & Flawless Order Fulfillment.” Learn how integrated technology can solve your business problems.

Second giveaway is an ebook called "Build an Ecommerce Tech Stack for Fast & Flawless Order Fulfillment" Deep dive on different types of technology solutions that impact fulfillment and delivery Helps you identify which solutions your business needs and how they fit together 34

TAKEAWAYS TRANSITION

What have we learned today? 35

KEY TAKEAWAYS Customer retention is the #1 way to protect ROI and ecommerce profitability.​ Customers leave because of delivery problems and unmet expectations.​ Control internal and external business factors while shaping customer expectations.​ Use the upcoming year to prepare for flawless order fulfillment in Peak 2024.

Keeping your customers is the only way to achieve profitability. Your customers need you to keep your delivery promise. You must control factors both inside and outside your business to make sure you are consistently meeting your customers' expectations. It starts now. Take something you've learned today and create real change in your business. 36

QUESTIONS TRANSITION

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EMAIL RMCNISH@DESCARTES.COM PHONE 206-665-0005 WEBSITE DESCARTES.COM SOCIAL LINKEDIN.COM/IN/RICHARDMCNISH