Handling e-commerce logistics in the consumer electronics and white goods industry
Dla biznesu Fulfillment
22 November 2022
Products in the consumer electronics, household appliances and broader electronics categories have held a strong position in e-commerce for years. As in many other industries, the COVID-19 pandemic period influenced the dynamic growth of online sales of this product category. If you want to open your own e-shop with electronic products - check out why you should partner with a logistics service provider.
Consumer electronics and white goods - popular with online shoppers
As in many other industries, the COVID-19 pandemic period has influenced the rapid growth of online sales of electronics. According to CRN Polska, the consumer electronics and white goods industry recorded growth of 15 per cent and a sales value exceeding PLN 36 billion in 2020 [1] .
Despite component availability issues and supply chain disruption, 2021 also proved to be an exceptionally favourable year for electronic sales channels for consumer electronics and white goods. According to CRN, online sales reached 45% of the sales value for the entire category of consumer electronics, household appliances and electronics. According to the Central Statistical Office (CSO), this is almost 18% in total trade [2] .
The post-pandemic thaw in the market, the war situation across the eastern border and inflation have in some ways begun to cool high demand. It is inflation, however, that should continue to keep the unit value of products at a high and rather rising level. According to the Gemius report "E-Commerce in Poland 2022", an average internet user spent on average PLN 1232 on consumer electronics/appliances and PLN 856 on mobile devices bought online every six months [3] .
Sale of electronic equipment - margin
For flagship products - especially in the case of consumer electronics (TVs) and mobile devices (mobile phones), the percentage margins are very low. However, due to the high unit price, the amount margins are paradoxically at quite high levels. This is why the industry is a rather grateful field for outsourcing logistics services and fulfilment operations. The operational (and consequently monetary) cost of storing, packing and shipping a £500 furniture cabinet and a £5,000 TV set are similar.
The average flagship today is in the region of £4-5k, although it takes up as much space on the shelf as a litre of hair shampoo for £40. The factory packaging of a phone is usually of such a high standard that it takes significantly less effort to pack it for safe shipping than shampoo. Therefore, for smaller and medium-sized retailers, using a logistics operator such as InPost Fulfillment can prove to be an excellent solution.
Fulfillment at InPost offers storage and shipping services at fixed and predictable costs, easily comparable to the amount margins achieved on individual products. An average cost of a dozen or so PLN (taking into account the average storage time, it may even be a few PLN) per device worth several thousand PLN seems a reasonable proposition when confronted with the challenge of creating and maintaining one's own warehouse to handle this type of e-commerce.
Outsourcing logistics services - a way to store valuable equipment safely?
The unit value of the devices and the value of the warehouse as a whole are also of considerable importance. A pallet of television sets may cost around PLN 30-50 000, and phones - even a million. It is not uncommon for the value of the stock of small retailers in this category to run into hundreds of thousands of zlotys, and that of medium-sized retailers to run into millions.
The security of a warehouse containing such valuable equipment invariably involves a high cost of insurance, alarm systems and often physical security and risks associated with potential internal theft.
["The average internet user spent an average of £1,232 every six months on consumer electronics/appliances and £856 on mobile devices bought online." [4] .
For many operators, the expense of ensuring stock security can prove disproportionately high in relation to the profits generated from sales. Again, outsourcing logistics services is a solution that can allow some of the costs and risks to be shifted to the fulfilment provider.
Why bet on outsourcing logistics services?
A professional 3PL (Third Party Logistics) service provider usually has a warehouse as standard, which is equipped with access control, advanced CCTV monitoring or even physical security. In addition, external logistics centres and a registration system for vehicles entering and leaving the premises. The logistics operator is directly responsible for any shortage of goods beyond the SLA (Service Level Agreement) agreed in the fulfilment contract, and in addition, for fortuitous events it often has insurance on much better terms than a smaller operator could negotiate on its own. Ensuring the security of stored products can prove to be much cheaper and more achievable when cooperating with a fulfilment service provider than a comparable level of security and risk elimination organised on the e-tailer's own.
Warehousing and shipping bulky white goods - unprofitable for a small e-shop?
For the proper handling of e-commerce in the electronics industry, the physical security of the products stored and delivered to consumers is also extremely important. While in the case of telephones and laptops, packaging is already used at the production stage, which withstands the risks associated with courier delivery very well, any larger items such as televisions, wide-screen monitors, ceramic hobs or large white goods require a specialised approach both in the area of storage and especially at the delivery stage.
Many of the so-called bulky products are not suitable for standard pallet storage, and a large proportion of them (e.g. white goods - fridges, washing machines, etc.) are stored stacked in so-called 'blocks' on the warehouse floor. This type of storage requires specialised equipment - for example, forklift trucks with dedicated attachments.
The same applies to preparing products for shipping. Many of these bulky products are successfully shipped via a courier service or freight forwarding company, which is considerably cheaper than dedicated transport. However, such shipping requires special preparation. Dedicated transport pallets are often involved, and the product must be secured with special strapping using a so-called banding machine.
All of this means that a comprehensive service for the consumer electronics and white goods industry requires a considerable amount of both warehousing and technology, the amortisation of which within a small logistics unit assigned to the e-shop is simply not cost-effective at all.
Cooperation with a logistics service provider - benefits
What's more - even considering purely manual operations - the logistics operator has a greater ability to scale operations quickly. In an era of highly fluctuating costs for both personnel and infrastructure maintenance, it is the fulfilment operator that assumes the risk of maintaining resources and mitigating price spikes.
InPost's own statistics show that nearly 40% of orders are placed in the afternoon. Cooperation with InPost Fulfillment allows the retailer to extend the cut-off-time (the hour by which placed orders leave the warehouse on the same day) even to 8 p.m. For many electronics retailers, this can be an additional competitive advantage, by guaranteeing buyers delivery of the ordered product even after several hours.
For goods such as televisions, fridges or washing machines, this will be an impressive result for the consumer and increase purchase satisfaction - a person buying a fridge at 19:00 can have it home the next day at 11:00, for example!
Cross selling in the electronics industry
E-commerce in electronics and white goods also includes a huge range of add-ons and accessories, which not only allow you to increase the value of your basket, but also significantly increase your margin percentages. From accessories such as phone cases, adapters and cables to batteries or hoover bags, including these types of extras helps to increase both margins and the attractiveness of the offer.
However, the breadth of the offer significantly increases the system requirements for efficient warehouse management and hundreds of stock indexes. Even a narrow category in the form of trade in GSM phones and accessories in practice often requires systems to support warehouse operations - for example, to register the IMEI numbers of phones received in the warehouse and sent to customers.
Implementing a warehousing system that helps to effectively manage a huge number of indexes or record precise data is another barrier to entry for many small and medium-sized entities. This should therefore prompt e-commerce owners to consider working with a professional logistics provider such as InPost Fulfillment, which will meet all technical requirements, security rules and, in addition, allow flexible management of both larger and smaller goods even within a single order.
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