Why Do 3PL Companies Experience Customer Turnover?

Like any type of organization, 3PL companies experience customer turnover. This lack of retention can be due to typical problems that arise in any client-customer relationship, namely: unkept promises, lack of consistent communication, delayed processes, or no attention to detail. When it comes to 3PLs, customers expect specific and detailed service level agreements, such as strict delivery times, so when 3PLs fail to fulfill these SLAs, that can mean constant churning. Of course, losing customers is never a good sign and can impact a 3PL’s bottom line and reputation. 

So why do competent, well-intentioned 3PL warehouses have problems with customer turnover? We conducted a poll on LinkedIn with the question: Why do 3PLs experience customer turnover? The results were fascinating. The top reason for turnover, with 39% of the vote, was that 3PL technology does not align with a customer’s vertical. With supply chain technology constantly changing and offering new, innovative ways to fulfill orders, it can be difficult for 3PLs to keep up. Below, we’ve outlined what three of the largest verticals that use 3PL warehouse services are looking for in terms of 3PL solutions and surefire ways to keep your customers happy, and how to keep them coming back for more again and again.

3PL Technology and Services by Vertical

Beauty

Many beauty brands experienced e-commerce growth since the pandemic. In fact, Ulta Beauty saw a 90% YoY eCommerce boost in Q3 of 2020 alone. So how can 3PLs help? These types of brands are often looking for technology that aligns with small package direct-to-consumer (D2C) fulfillment since most beauty companies are often shipping orders directly to customers. Automation and robotics are key to keep this vertical happy. In addition to D2C capabilities, business-to-business (B2B) capacity is a must, since so many beauty brands experience rapid growth. Ensure that your warehouse has available space so beauty brand customers can easily expand as needed.

Moreover, a beauty brand that is growing rapidly will expect integrated systems that offer order visibility across shopping carts, marketplaces, and other sales channels, in addition to easy data procurement. Brands will also need to quickly view and monitor inventory levels in real-time.

Finally, a beauty brand is all about packaging. 3PLs looking to grow their beauty customers should have the ability to offer custom branded packaging and kitting capabilities.  3PLs who are able to offer clear and concise pricing on how they can handle online specials such as inserts, one-time gifts, or other offers will be able to win, and keep, lucrative beauty brands from choosing another 3PL provider.

Apparel and Clothing

Apparel brands are keen on customized storage since they want to seamlessly have their goods received and be ripe for selling. Some 3PLs rely on manual processes to make this work due to a lack of access to the latest technology, while others are better equipped with customizable storage to fit carton size, increasing storage capacity, and minimizing any hand sorting of product. Even more important than customized storage is the capability to handle a high SKU count—this is where automated technology for sorting, packing, and tracking is vital.

To handle a high SKU count, apparel brands must invest in accurate order management software that can integrate across sales channels, shopping carts, or their partners’ technology systems such as warehouse and management systems. A robust inventory management system allows brands to extract data across the supply chain and receive real-time alerts on items, so a retailer always knows the status, and stock level, of their many, varying SKUs.

Additionally, a seamless returns process is a must, considering that retail return rates averaged 16.6% in 2021 compared to 10.6% only a year before. Apparel brands will require a 3PL that uses a WMS that easily integrates with any Returns Management Authorization Systems. A 3PL must also have the ability to customize returns due to brand specifications. This commitment to customization leads to happy customers, since each apparel brand’s unique messaging, in this day and age of value-based branding, extends all the way from manufacturing to returns.

Electronics

Electronics brands are focused on a 3PL’s ability to handle a variety of different SKUs, inventory changes, and the security of products. Due to the nature of electronic consumership, products quickly become old news as soon as the latest models are released. For electronics companies, this means a reliance on tracking inventory information, so they never over stock or experience a stock out. Electronic brands will seek out a 3PL partner that can give them this data, and provide vital forecasting.

Similar to other verticals, this need for forecasting and tracking requires investing in inventory and warehouse management software, allowing electronics retailers to view stock updates in real-time and have full visibility of their order and inventory data, all in one place.

Moreover, knowing products are secure can make or break an electronics company’s decision to partner with a 3PL. Having physical security and a dedicated space for electronics storage in the warehouse is one solution. Inventory management that can show, down to the number of SKUs sold in a single day, can also help. Even better, is technology built on blockchain.

Investing in blockchain technology can be a game-changer. The decentralized and distributed ledger systems can enable participants to check and validate the authenticity of a product, activate or validate the product across the global supply chain, and determine fraud. It also maintains the visibility of refurbished products with multiple returns traceability, visibility into the number of changes of hands, and any services. This could be a potential value-added system to track high-end electronics like mobile phones. 

Solutions for Customer Turnover 

So how can you mitigate customer turnover due to your 3PLs technology not accommodating a specific vertical? One surefire solution is to partner with a network of 3PLs. A community of 3PLs can offload poorly-fit customers to other fulfillment centers, while allowing you to still maintain a relationship with them. Conversely, a community of 3PLs can help you attract the customers that do fit your technology, by introducing you to partners who need to offload their clients

Furthermore, Osa offers a proprietary Unified Commerce Platform, including state-of-the-art integration, order, and warehouse management. Upgrade your system with us and enter a new era of supply chain technology with a single platform.