February 2012 | Commentary | 3PL Line

Dealing With Daily-Deal Sites

Tags: Retail, E-commerce

Tod Yazdi is principal, TAGGlogistics, 866-991-TAGG

New sales channels have enhanced supply chain complexity. Consumers who wish to buy a sweatshirt, for example, can make their purchase from the local mall; a big box retailer such as Walmart or Target; a catalog; a direct-response television ad or shopping network; or a Web site. Shoppers might also receive an email from Groupon, Living Social, or another daily-deal service offering the sweatshirt at a discount.

One sweatshirt, so many options for buying it—and so many different requirements on the supply chain to deliver that sweatshirt to the store or the consumer's home.

Big Sales = Big Demands

The complexity of all these different channels has driven growth in the outsourced fulfillment industry. Product manufacturers and Web retailers must determine how to fill orders for promotional and daily-deal sites.

This new breed of e-commerce can bring huge sales volume in a very short time by reaching a targeted audience with appealing offers. In 2011, Groupon, the largest of the daily-deal companies, sold more than 650,000 holiday deals between Black Friday and Cyber Monday.

All those deals require delivering a product, and need to be fulfilled with the right merchandise getting to the right buyer quickly and efficiently. Instead of a steady daily flow of orders, shippers must handle an explosion of orders that need to be picked, packaged, and delivered—often in as few as 24 hours.

A Fulfilling Partnership

It is critical that the shipper's fulfillment center understands the daily-deal sales channel and can handle the fluctuations without causing another explosion—this time in the supply chain.

Work with your fulfillment partner on the following three points to prepare for the rush of orders a daily-deal site can generate.

  1. Plan ahead. Get your fulfillment center involved early, and stock inventory before running the promotion.
  2. Prepare the product. Let the fulfillment center know how the product will be sold so it can package and prepare it for shipment before the promotion launches. Then, when consumers place orders, the fulfillment center only needs to pick product and apply shipping labels.
  3. Understand volume. Handling volume fluctuations in fulfillment is all about dealing with capacity. Whether you expect 500 or 10,000 shipments, your fulfillment center can schedule the right labor and equipment. The greater challenge is if you forecast 500 sales and end up with 10,000.

Ready to Sell

Daily-deal and promotion sites have been called the biggest thing to hit online retailing since eBay. They are in their infancy, and may shape an entirely new way of shopping online.

When considering using this channel, think about your supply chain. Fulfilling orders from these sites requires planning and flexibility to ensure success.