Why Supply Chain and Distribution Disruptions Highlight the Need for Owned Marketing | Coronavirus Series

fedex Why Supply Chain and Distribution Disruptions Highlight the Need for Owned Ecommerce

Editor’s Note: This article is part of a series that explores the impact the coronavirus crisis is having on the world of ecommerce. Explore daily insights surrounding the coronavirus crisis or check out these additional resources to help you navigate your marketing strategy during this time.

The global coronavirus crisis has exposed a number of risks to retailers—beyond the obvious public health concerns. From ceding too much control over distribution to marketplaces and other non-owned channels, to lacking a robust ecommerce strategy or plan in place when brick-and-mortar locations shut, to overlooking the importance of planning for supply chain disruptions, the past few months have highlighted areas requiring significant foresight from retailers. 

I recently spoke with Ryan Kelly, vice president, ecommerce marketing, at FedEx, who told me about what he’s been seeing across FedEx customers and the industry generally. 

Read on to learn why Ryan says investing in owned marketing channels is especially important for brands in light of the challenges of the past few months, how FedEx is working with customers to navigate these challenges, and what a couple of brands have been doing recently not only to survive but thrive in this period.

 

Rich Gardner:  You’ve recently written (on LinkedIn) that “the last few months has made it very clear that merchants and brands need to grab greater control through their own branded web store and marketing.” Why do you think that is? What are the risks to a brand of putting “too many eggs in one basket?”

Ryan Kelly: Think non-essential businesses and non-essential products. Non-essential businesses without an online sales mechanism that had to shut down had no way to sell products or services except perhaps over the phone or through a catalog. 

For example, [consider] a small brick-and-mortar boutique that has a store full of stock, some seasonal, that doesn’t move for two or more months due to the closure, versus that same shop with its own branded web store that gives loyal customers a choice of how to shop. 

Or consider the consumer brand manufacturer whose non-essential product sales are down because its retailer partners are shuttered. FedEx can help them set up the operations needed to sell direct-to-consumers. By the way, studies show that more than two-thirds of consumers prefer to buy directly from the brand if given the option. 

Another example is the seller of non-essential goods that only sells on Amazon. What options did they have when Amazon had to emphasize the fulfillment of essential orders, or when the seller’s depleted inventory could not be replaced in Amazon’s fulfillment centers?

Marketplaces are an option that offers some advantages; however, the merchant’s brand can take a backseat to the marketplace’s brand, and you’re playing by someone else’s rules. So, choose that marketplace carefully. Building a branded online store is an investment in a company’s business versus supporting a marketplace.

"Building a branded online store is an investment in a company’s business versus supporting a marketplace."

Ryan Kelly, VP of ecommerce marketing, FedEx

 

Rich: Last year, Fred Smith made the decision to move away from Amazon and invest heavily in ensuring brick-and-mortar’s ecommerce success. What’s the bet? 

Ryan: I don’t want to speak for Mr. Smith, so I’ll give you my perspective. This isn’t about us versus them. It’s about a free, competitive market. FedEx has always put customers first, whether they’re brick-and-mortar retailers, manufacturers, or marketplaces. The point is that ecommerce is growing in more places than one. 

There are many others that are seizing the ecommerce opportunity—mass merchants like Target and Walmart, brand manufacturers, web-centric retailers, small and medium businesses—that want to control their own customer experience and destiny. 

FedEx can and does meet their needs for fast, reliable, cost-competitive last-mile deliveries as well as a comprehensive set of logistics capabilities. We’re about enabling the competitiveness of our customers.

 

Rich: We noted FedEx recently announced an alliance with BigCommerce. What is the vision for that relationship?

Ryan: We are thrilled with our new alliance with BigCommerce. Our joint goal is to get merchants up and operating with their own branded online stores fast and cost-effectively, as sales channel diversification is critical.

 

Rich: There’s a lot of coverage of disrupted supply chains being a major problem during the coronavirus crisis. What steps has FedEx been taking to minimize the impact on merchants trying to get their products to customers? Many believe these supply chain challenges will last through the end of the year. What’s your advice to ecommerce businesses worried about meeting customer demand?

Ryan: Despite COVID-19, FedEx is still delivering. Thanks to the resilience of our team members, we’re still operating around the world where local conditions and restrictions allow us to support the global supply chain. The work we do is an essential service that helps ensure communities and businesses—including healthcare organizations—as well as shoppers have the critical supplies they need.

As to advice, first of all, many merchants only utilize a single location for fulfillment. If a business doesn’t have the ability to self-fulfill, it should consider that as a back-up option. If a business only self-fulfills, it may want to complement its supply chain with a third-party logistics provider in a different part of the country to serve as back-up and also help improve transit times and lower costs.

Make sure you have a business continuity plan. For example, many small businesses don’t have enough of a cash buffer—30 days is not enough. That plan should consider risks across the whole supply chain—from reliance on a single supplier or diversifying sourcing through to sales channels and fulfillment options.

"Make sure you have a business continuity plan. For example, many small businesses don’t have enough of a cash buffer—30 days is not enough. "

Ryan Kelly, VP of ecommerce marketing, FedEx

 

Rich: How are programs such as the Entrepreneur Advisory Board supporting other ecommerce entrepreneurs through the last couple of months?

Ryan: One thing we hear over and over again from our Entrepreneur Advisory Board members is how much they appreciate the interaction and sharing of knowledge amongst themselves. This happens all year long. And I must mention that FedEx benefits greatly from the insights and candid feedback these members provide to us on a regular basis.

At FedEx, we recognize that small-business owners are looking for objective advice on everything from ecommerce platforms to SEO to fulfillment. And, as I said in a recent LinkedIn post, “Instead of telling you who’d we recommend or letting you sift through the hype, we asked our Entrepreneur Advisory Board members to share what’s worked for them. Check out Tech Chat on fedex.com—you’ll even find some discounts (including Klaviyo) for FedEx customers in the company details.” 

 

Rich: Each year, FedEx holds its FedEx Small Business Grant Contest. You just announced the contest winners for this year. Was there anything different about this year’s contest given the coronavirus crisis?  

Ryan: The biggest difference this year was that we required a FedEx account number to show support for our small-business customers. Another difference was that the 15 to 20 FedEx team members who weighed in on the judging practiced social distancing by reviewing the top 100 entries and holding discussions remotely. This year’s winners’ stories, as you can imagine, are even more inspiring due to COVID-19. 

Amanda Wilson, founder of VOXAPOD and recent FedEx Small Business Grant winner, told us that they pivoted their channel strategy plans as a result of the pandemic. Before the outbreak, they were looking to increase their wholesale sales through physical retailers. For the immediate future, that emphasis has switched back to online sales. These small business owners amaze me with their flexibility, inventiveness and positive outlook.

To further show our support during the pandemic, we announced that FedEx is committing to provide an additional $1M in grants to #SupportSmall to help small businesses struggling to stay in business during the COVID-19 pandemic.

 

Rich: I’m sure you’ve had a chance to see a variety of different brands and entrepreneurs innovating and adapting in order to get through this challenging period. Any stories recently that stand out? 

Ryan: I am very impressed with Best Buy, who claims that they retained approximately 70 percent of sales despite closing stores to customer traffic by enhancing their curbside pickup service. 

One young entrepreneur, Kat Samardzija of Locker Lifestyle, who is a former FedEx Small Business Grant winner and now a member of our Entrepreneur Advisory Board, pivoted her product offering to address the changes taking place with COVID-19. She altered an existing headband product and added a button feature to secure face masks. Hundreds were sold within days of the launch. They are also busy filing a patent on a mask idea that will leverage their brand and the Locker Lifestyle concept. 

This is a great example of how businesses are adapting to consumer needs and remaining relevant. We’re seeing this type of ingenuity and innovation from many of our small and medium customers.

 

Rich: We’ve seen in our coronavirus brand survey that brick-and-mortar companies are trying to shift from physical to digital. A lot of them have had to make difficult decisions in closing down their stores. If I’m an entrepreneur asking myself if I should invest in digital, what advice would you give?

Ryan: The advice I would give is to absolutely look at adding a digital, direct-to-consumer channel to their business. Businesses today can launch a digital channel quickly. The key is to think through their business model and evaluate how adding the digital channel will impact the business from inventory, marketing, shipping, costs and service. 

The upside is that the business not only diversifies their sales channels but also expands their customer reach, potentially sees higher margins, and is better prepared for any future unexpected events.

"Businesses today can launch a digital channel quickly. The key is to think through their business model and evaluate how adding the digital channel will impact the business from inventory, marketing, shipping, costs and service. "

Ryan Kelly, VP of ecommerce marketing, FedEx

 

Rich: Ecommerce has been a disruptive and growing force in retail for years. What do you think the impact of this moment will be on ecommerce? How about traditional retail? Put differently, how will the world look different on the other side?

Ryan: It’s really hard to tell at this point. There are too many factors in play. When will people feel less fearful about their health? When will unemployment go back down and spending increase? More than half of US adults were very or somewhat concerned about losing their jobs as of April 5, according to The Harris Poll

Human connection is such a strong need. How much human contact and interaction are we willing to forego? Yes, ecommerce increased during this shelter period, but will it stay at the same level? It is likely consumers will continue to consolidate their physical shopping into fewer trips. I believe there will always be a mix of physical and digital buying. Time will tell what that mix will be.

I also believe that what physical stores look like and provide will continue to change—for example, less space devoted to showcasing product and more space to warehousing and fulfillment. 

And I do believe that this pandemic has clearly shown retailers that it’s not a good idea to rely on a single sales channel. The smartest retailers will test multiple sales channels, measure their sales results against their costs, and determine the best set of channels for them to optimize and grow.

And I think we’ll see more debate about deliveries in terms of fast, free and environmentally friendly. You can’t have it all, and the story isn’t finished on these fronts. Most ecommerce orders aren’t needed fast. Nothing is free. And concern for the environment is increasing. We may see online merchants retraining consumers or consumers changing their habits on their own around receipt of their orders.

"The smartest retailers will test multiple sales channels, measure their sales results against their costs, and determine the best set of channels for them to optimize and grow."

Ryan Kelly, VP of ecommerce marketing, FedEx

Final Thoughts

Not many would have predicted much about what the world has experienced with the coronavirus over the last several months. Some of what we have seen, though, is not new. For example, the importance to a brand of curating the customer experience through owned marketing channels, the relevance of diversified sales distribution (including a robust ecommerce strategy), and the value to a company of managing their supply chain risk in advance, were already known. For many of us, though, the last few months have served as an emphatic reminder of these principles. 

Looking for more information? These resources may be helpful to you as you adjust your marketing strategies to navigate the coronavirus crisis.

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