How LUSH Revamped Global Logistics to Cut Costs
Do you sometimes have the feeling it’s impossible for your niche business to compete with larger corporations? Not to mention all the low-priced product coming in from abroad muddying your market. But don't fret: there are two ways around this problem. The first is to maintain your quality because that is what will ultimately draw your customers in the long term. The second is to make sure your expenses are kept in check so you can weather hard times and profitably grow when your business begins to take off.
One area most businesses can always gain some additional savings on the cost side is through smarter strategies for distribution. This case study shows how a retailer named LUSH dug deep into their distribution to identify opportunities for cost savings. If your business also manages a distribution network, it provides some insights on how you can also dig into your distribution costs to identify areas of opportunity and cost savings.
The LUSH Business Model
LUSH Fresh Handmade Cosmetics is based in Vancouver, Canada. They use all the right words on their website like fresh, sustainable, ethical and handmade to describe their bath and beauty products. They also promise to deliver the “freshest products in the history of cosmetics” made from newly harvested vegetables, fruit, and essential oils used for fragrance.
The core of LUSH's business is distribution via retail outlets in major US and Canadian cities, and it has built a sizeable following on both sides of the border (and abroad). At the time of writing, it also had a well-stocked web shop so it could supply customers in outlying towns and villages.
At first it seemed natural to treat orders individually and ship Internet orders in the fastest possible way. The only problem was the cost of shipping. LUSH couldn't afford to keep shooting individual orders into the US and remain competitive.
When Too Many Internet Orders Became a Problem
Matters came to a head when US orders took off as LUSH's reputation here started to bloom. In a matter of months, web orders from the States dominated and distribution became a major cost factor. LUSH didn't want to lose the business and it knew it had to innovate. It decided it was time to take a second look at how it was shipping and called in a shipping specialist.
What the Shipping Expert Found
Their current method involved handling orders individually, as opposed to the batch mode they used to make their soaps. A clerk made the orders up, prepared manual customs and shipping documents, and dispatched the shipments from Vancouver to each US destination. LUSH picked up the tab for international brokerage and shipping costs. If a customer called to check their order status, they had to call them back after they checked progress with the courier.
How LUSH Rewrote Its Internet Business Model
LUSH converted their internet business model so that it could consolidate its orders at a convenient collection point at the border before sending across to the US as a single shipment with the courier attending to customs requirements. From there, the courier delivered individual orders at domestic rates. This saved them a significant amount of money in terms of brokerage and shipping costs.
Finally, LUSH integrated the courier’s tracking facility into its own inventory and order processing system, so LUSH and its customers could digitally track and trace their orders -- which was yet another improvement on the discarded manual system.
The simple changes LUSH made accelerated delivery while reducing delivery costs. It's logic like this, and the willingness to create partnerships with logistics companies, that keeps retailers competitive and growing.