e-commerce sales

What are logistics aggregators and why are e-commerce companies moving away from them

Post By : Guest Contributor
Post Date : March 22, 2021
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Reading Time: 4 minutes

Running an e-commerce firm is not simple. To get it going and give it a decent push forward takes planning, time, and devotion. Once a product is ready to ship it’s a daunting task for the team to ensure that the package arrives at customers protected and on time. The logistics of completing deliveries, especially when volumes increase, is not something a company may be equipped to handle. There are few companies like Flipkart and Amazon that can handle the delivery process internally. However, for most e-commerce firms, the best option is a 3rd party logistics partner.

Statista reported that India’s e-commerce CAGR is going to reach 23 per cent from 2016 to 2021. This statistic implies that the country is probably going to ship five times the orders it is shipping currently. This is where aggregators and 3PL partners come into the picture. They’re here to make e-commerce shipping easier and better. 

What are 3PL Shipping Partners?

The companies that handle end-to-end logistics for other e-commerce companies are 3rd party logistics partners. 3PL service providers help companies with the total process of manifestation from the moment an order is placed till delivery.

These companies work on both per shipments basis and on independent contracts covering a certain volume of orders. The rates typically depend on the average size and weight of deliveries. Different carriers cover a variety of services, like handling COD orders, managing Non-Delivery Reports, providing insurance for high-value orders, and even more specialized services like temperature-controlled transit.

What are Logistics Aggregators?

Aggregators are essentially companies that are integrated with multiple carrier agents that an e-commerce firm can tie-up with. Aggregators provide a uniform and streamlined platform to monitor shipping orders and communication with multiple courier partners. The major problems faced by e-commerce firms, especially in times of immediate or sudden growth are managing larger volumes of orders and integrating quickly with multiple courier partners. When the volume of orders experiences sudden growth, typically between 1000 to 2000 orders per month, aggregators tackle these obstacles for an e-commerce firm.

An aggregator provides easy and quick integration with specified courier partners through pre-existing contracts. However, when that same volume climbs up to numbers over 2000, an aggregator, while still helpful, may not be the ideal partner for further expansions. Growth requires targeted strikes on specific problems and that requires an independently built relationship with courier partners which working with an aggregator lacks.

Using Logistics Aggregators vs dealing directly with 3PL partners?

Both logistics aggregators and 3PL concepts are essential and becoming more relevant to the global industrial maps. However, some elements can differentiate between the two concepts:

  1. Speed of Implementation:

Since logistics integrators have existing relationships with multiple courier partners, the process of integrating with multiple courier partners is easy. The e-commerce firm simply has to determine which courier partners are within the scope of serviceability (in terms of volume of orders and pin code range) and the aggregator will handle the process of integration. On the other hand, opting for a 3PL partner alone is not difficult, the case becomes complicated when multiple courier partners are involved. First comes the search to determine which shipping companies are right for an e-commerce firm. After that, terms must be independently negotiated with each before being integrated with them.

2. Customer Experience:

Logistics aggregators make tracking and monitoring orders convenient but communication more difficult. As they act as a middle man, they essentially add one more layer of communication between the company and its customers. When an order is delayed, the ecommerce company becomes entirely dependent on the aggregator for the updates around the issues. This leads to impatience and frustration in customers dealing with delayed deliveries.

When e-commerce companies work directly with courier partners, communication becomes a faster and easier process. When shoppers raise escalations due to delayed delivery or delivery exceptions, the company is able to directly communicate with the courier partner to understand why the issue occurred and solve it. 3PL provides transparency when dealing with escalations and customer complaints allowing individual issues to be addressed much faster.

3. Ease of Implementing NDR Management:

Many logistics aggregators have fully-implemented NDR management systems in place. These help to deal with delivery exceptions and in ensuring smooth return operations. However, logistics aggregators limit the transparency a company would have in NDRs, as an aggregator may not want to highlight multiple misses during delivery exceptions. However, aggregators allow NDRs to be managed from a single platform.

3PL partners have their own NDR management system and e-commerce companies have to communicate with each of them separately to address the issue, either through their respective platform, their dashboards or through emails. This essentially means that the e-commerce firm has to repeat the process multiple times with each of the courier partners just so they can effectively handle RTOs arising out of NDRs and delivery exceptions.

4. Value-Added Services:

NDR management, returns management and COD coverage are often seen as additional services that may result in you incurring hidden costs. While some aggregators are equipped to handle these major services, few are enabled to offer services like temperature-control, specialized handling, security and insurance.

3PL partners deal with different courier service providers and offer a wide array of options from payment, pricing and services. While aggregators contract with large and reputed courier companies, it may be the more niche shipping partners that provide the value-added services you need, like same-day delivery, hyperlocal delivery, or specified instructions for handling orders.

Conclusion

When the volumes are relatively small (less than 3000 orders a month), it’s a good idea to use shipping aggregators since they provide quick and easy access to multiple shipping partners and help you scale up without too many hassles.

However, when your volumes cross 3000 orders a month, you must start tying up with courier partners directly since that would improve the shipping experience for your customers and also provide you complete visibility of courier partner performance.

Therefore, many e-commerce companies start with courier aggregators and then switch to direct courier partners as their volumes increase.


This article has been authored by Ankita Singh, GCC Ecommerce Logistics Expert, ClickPost

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