How can e-commerce logistics influence KPIs?

There's an old saying:

"If you can't measure it, you can't improve it."

In this article we refer to cross border e-commerce KPIs. However, the metrics do not differ from national e-commerce.

We want to explain in detail how and why your e-commerce logistics setup influences your KPIs. We’ll also clarify whether the influence is direct or indirect and whether it is significant.

In order to make the whole thing more tangible, we want to make the background clear using a concrete example of cross-border e-commerce. Let’s assume a cross-border sale from Germany to Switzerland.

Logistics and e-commerce: background

Your service as a cross-border e-commerce merchant, i.e. the distribution of a product across a border, consists largely of logistics. In the largest expansion stage, the logistics value chain looks as follows.

The example refers to a sale of goods from Germany to Switzerland:

1. Fulfillment in Germany
2. Preliminary collection - the transport from Germany to Switzerland
3. Export customs clearance (Germany)
4. Import customs clearance (Switzerland)
5. Handling in Switzerland
6. Delivery (last mile) to your webshop customer in Switzerland
7. Return of the product (first mile) to a Swiss returns centre
8. Returns management in the Swiss returns centre
9. Consolidation in the Swiss returns centre
10. Duty drawback (reimbursement of customs duties paid on imports)
11. Export customs clearance (Switzerland)
12. Import customs clearance (Germany)
13. Return transport from Switzerland to your German hub
14. Re-storage in your German warehouse

These 14 logistical elements (we have simplified the customs clearance processes here) in turn have a decisive influence:

• Delivery possible YES/NO - so whether your goods will be delivered at all
• Delivery time - how long your customers have to wait for your goods
• Delivery method - how your goods are handed over by the delivery agent
• Cost - how much the cost of delivery of your goods will be
• Effort (shopper) - are there additional expenses for the shopper
• Trust - is there an impact on trust

In this table you can see on which factors the 14 elements mentioned above have an influence:

Note that we’re not going to go into the details of the value chain described above in this blog post.

To help you develop a deeper understanding of this, we recommend the following article: Factors you should consider in the cross-border e-commerce chain and how to optimise it.

Want to take a shortcut? Our optimiser creates an individual analysis for you and shows you what your optimal e-commerce logistics setup will look like.

An improvement or deterioration of these factors has a positive or negative impact on your e-commerce KPIs. We will explain how these are achieved in the following chapters.

How does logistics influence the conversion rate?

Influence of logistics: Direct

Relevance of logistics: High

What is a conversion rate?

Source:https://www.smartinsights.com/E-Commerce/E-Commerce-analytics/E-Commerce-conversion-rates/

The conversion rate is the percentage of users who perform a desired action. For e-commerce, the most important conversion rate is the percentage of website visitors who buy something on the website.

The average conversion rate varies by industry, country, traffic source, season, device, economy, etc. Furthermore, different studies come to different results.

According to Growcode, an international agency specialising in conversion optimisation, the global average e-commerce conversion rate, across all sectors, is 2.27%. This figure is an average of 15 studies and so a fairly good benchmark.

Logistical background to the KPI conversion rate

Swiss people buy much more per capita abroad than German shoppers, for example, because of the lower prices and greater availability.

Concerned about the possibility of a negative customer experience, Swiss consumers are typically much more informed about the e-commerce logistics process before purchasing.

If information or gaps in information (e.g. under "Terms of Delivery" or in the General Terms and Conditions) indicate that one of the following four scenarios could occur, the probability of conversion decreases rapidly:

1. 1. Shipments that are not cleared by the dealer but by the respective delivery agent for the last mile trigger a so-called COD procedure. COD stands for Cash on Delivery and means that customs duties, taxes and customs clearance fees are "collected" by the deliverer. The shopper must therefore be at home and usually pay cash at the front door. This is inconvenient and also creates uncertainty about the level of costs. Everything about the customs regulations of Switzerland can be found in our blog.
   
2. The procedure described in point 1. can also lead to considerably longer delivery times.
   
3. Some retailers require their customers to return the products directly to the country of origin. As a result, Swiss shoppers have to fill out customs forms. If he has to advance the return costs or even pay them himself, these are dramatically higher than if he sends them to a Swiss returns centre. With the latter option he would not have to fill in customs documents either. You want to optimize your returns process? Then read our blog post.😀
   
   
4. You must be aware that your "home delivery service providers are very strongly represented in their home markets. However, this is not necessarily true for other destinations. For example, a Swiss customer who has received his goods through a foreign service provider may well have to travel long distances to return his order. So the Swiss customer prefers delivery by the local hero - Swiss Post.

Here you can see an excerpt of a large scale study which underlines the importance of avoiding the above experience.

Source: IPC CROSS-BORDER E-COMMERCE SHOPPER SURVEY 2023, International Post Corporation

• "Sub-optimal returns management hinders growth in cross-border e-commerce. In particular, uncertainties in dealing with returns and the associated costs are some of the main reasons why online shoppers avoid cross-border transactions. Cross border e-commerce merchants underestimate returns management even though returns are an integral part of their customers' customer journey."
• You can find out what the optimal returns management process looks like in our blog: Optimized processes for your returns.

Source: European Commission; 2019; Development of Cross-border E-commerce through Parcel Delivery Study for the European Commission, Directorate-General for Internal Market, InDustry, Entrepreneurship and SMEs

How can the international retailer now use its logistics to push the conversion rate in e-commerce?

Use your investment in a customer-friendly logistics setup to increase your conversion rate.

Various touchpoints can be used to proactively point out that your customers can expect a logistics experience that is much better than if they ordered from a neighbouring location 😉.

Here is an example:

We recommend you read the following blog. Here you will find practical examples of how you can market your seamless logistics setup.

How does logistics influence the size of your shopping basket?

Imagine that something negative happens when you as a shopper exceed a certain shopping limit. This is exactly what many retailers impose on their customers without knowing it. We are not talking about the marital dispute because the Christmas money was squandered...

• We're talking about your shoppers not getting their goods on the first delivery.
• We're talking about your shoppers having to pay a second time in cash at the door.
• We are talking about your shoppers having to pay 11.50 CHF plus 3 % of the value of the goods ON TOP.
• We are talking about your shoppers having to pay 50.00 CHF for special clarifications.

If you know about such consequences as a shopper, you will want to avoid them. So what are the limits that lead to such consequences? That's right, limits.

In Switzerland you have an exemption limit of 200.00 CHF for articles with a VAT rate of 2.5% and an exemption limit of 65.00 CHF for articles with a VAT rate of 7.7%. 

How does logistics influence customer service costs?

Influence of logistics: Direct

Relevance of logistics: High

Unfortunately, sometimes something goes wrong or information is misunderstood. What does the customer do then? It’s likely they’re going to want more information, or complain to your customer service team😟. 

Regardless of whether the complaint is received by email, chat or telephone, it incurs costs.

This is particularly the case in cross-border e-commerce. Why? Quite simply - the inconvenience it causes!

Shipments detained by customs, slow delivery times or unexpected charges at the door are a real nuisance to your valued customers.

The result - he picks up the phone.

Reduce customer service costs with DDP Logistics

These high costs don’t need to be incurred by the customer.

If you set up your logistics in such a way that your goods arrive quickly, reliably and without customs, VAT and postal customs clearance fees, as if they were being shipped from a neighbouring town, your Swiss customers will be jumping for joy. As a result, your customer service costs are massively reduced.

Instead of complaints, customers will be calling you wondering why they don’t have to pay at the front door anymore. Furthermore, your repurchase rate is also likely to increase 😉.

How does logistics influence the click-through rate?

Influence of logistics: Direct

Relevance of logistics: High

In online advertising, click-through rate (CTR) is the percentage of people who visit a web page and click on a particular ad on the page. The click rate measures how successful an ad has been in attracting the interest of users.

Would you like to read about the conversion rate again?

You should communicate your quality e-commerce logistics process at different stages of the buyer’s journey, helping to overcome the fear of the consumer. Make it as clear as possible. Instead of explaining the specific logistics process on your website, simply explain they have nothing to worry about! For example: "customs duties and value added tax are already included".

You can display this message at the beginning of the customer journey, which may look like this for a Google Ad:

How does logistics influence the important e-commerce KPI: Recommendation rate?

Influence of logistics: Direct

Relevance of logistics: High

Various studies have investigated the different types and effects of the recommendation rate. In some cases they also come to significantly different results.

However, they have one thing in common: they conclude that recommendations have by far the greatest influence on purchasing behaviour:

• McKinsey assumes that recommendations are the primary factor in 20-50% of all purchase decisions.
• Boston Consulting Group found that personal recommendations were 2-10 times more likely to buy than paid advertising.
• Ogilvy claims that 74% of all respondents in their survey said that personal recommendations are the main trigger for their purchasing decisions.

The conversion rate for potential new customers is based on an expected experience. Based on the information available to him, the webshop visitor anticipates his customer journey. If his expectation is positive, he buys, if it is vague or negative, he does not.

It's different with the recommendation rate. This KPI is not based on an anticipated customer journey, but on an actual one.

So, if you want to maximise your referral rate, you should make the customer journey simple and smooth for every customer.

Points 1-8 in the chapter:”Logistics and E-Commerce: Background” are crucial for you to create the basis for maximising the number of customers recommending your shop to others.

How does logistics influence the repurchase rate?

Influence of logistics: Direct

Relevance of logistics: High

The repurchase rate measures the percentage of your customers who return for another purchase.

In most studies, the average return rate for e-commerce companies is between 20 and 40%. Alex Schultz, VP of Growth at Facebook, says, "When you get 20 to 30% of your customers, they're doing well."

According to Shopify, the repurchase rate of first-time customers is 27%.

Here's the good news: according to Shopify, the probability that a customer will buy again increases to 45% when they return for the second time. The fourth time a customer returns, the probability increases to as much as 56%!

Source: 12 Powerful Strategies to Increase Your Repeat Purchase Rate, by IVAN L, 2022

Just like the recommendation rate, repurchase rate is influenced by a real customer journey. As the name implies, the customer has already purchased a product from your shop, so their decision to buy again is influenced by that original experience.

Therefore, your product should meet or even exceed the expected quality, and you should perform or even overperform their expectations in terms of logistics.

How does logistics influence website traffic?

Influence of logistics: Indirect

Relevance of logistics: Less high

The logistic setup only has an indirect influence on your website traffic, but why?

Shoppers who are enthusiastic about your product and service will recommend you. This recommendation can be generated by a simple link. Even better, from the perspective of the cross-border e-commerce merchant, is a positive testimonial on other platforms (including a link to his webshop), which in turn generates traffic.

You saw earlier how long the logistics e-commerce value chain is. If it works perfectly, but the product is defective, the customer journey will not be the best.

If your product is great, but it arrived late or your Swiss customer had to pay expensive customs fees at the front door, there will be recommendation.

Therefore, both your product and your logistics process must meet the expectations of the customer. This is how recommendations you generate more online recommendations and, as a result, more web traffic.

Interested in finding out more? Contact us.

Summary: how you can optimise your e-commerce KPIs with logistics

Cross border e-commerce is complex, and this is especially true for destinations relevant for customs clearance, such as Switzerland.

While this may sound strange, these challenges are good news for retailers (who can overcome them😉)!

Why is that?

The expectations of customers in national e-commerce are extremely high. Extremely simple payment options, ever shorter delivery times, ever smaller delivery time windows and, preferably, sustainable delivery options.

In cross-border e-commerce, the demands are not quite as high. In addition, many merchants in cross-border e-commerce are not yet ready due to the complexity. This means you can stand out with an above-average service.

If you manage to set up great logistics, you must not forget to market your efforts profitably.

Based on good customer experiences and efficient marketing you will be able to improve your KPIs sustainably!

Experienced traders can confirm that high-performance logistics leads to positive effects. Here’s a little motivation:

„The only questions that come up in our service center come from customers who cannot believe that all fees are actually paid when they pay for the order.“ - Joana from iHerb

„After the changeover, customers even wrote to us to tell us that the new delivery service would be great" - Alexander from MaKe WeBo AB