Aaron Alpeter of Izba Consulting On How To Reduce E-commerce Logistics Costs

An Interview With Francois Marchand, Editor of The Ecomm Manager

Paying Customers to Waive Return Rights:

Strategy: We’ve utilized Shopify plugins that offer customers a discount if they agree not to return the purchased items.

Success: This approach has reduced the costs associated with handling returns, contributing to overall savings in logistics expenses.

As e-commerce continues to grow and evolve, businesses face increasing challenges in managing logistics costs. Efficient and cost-effective logistics are crucial to remaining competitive in this rapidly changing landscape. In this interview series, we are talking to e-commerce managers, supply chain professionals, logistics experts, and anyone with hands-on experience in the field of e-commerce logistics. As a part of this series, we had the pleasure of interviewing Aaron Alpeter.

Aaron has built a portfolio of supply chain services and supply chain tech companies focused on the startup ecosystem including Izba, Sourcify, Capabl, and the Izba Exchange. Aaron has held leadership positions at companies like Unilever, Hubble Contacts, The Flex Company, & Mirror. He lives in Charlotte, NC with his wife and 3 kids.

Thank you so much for your time! I know that you’re super busy. Before diving in, our readers would like to get to know you. Can you tell us a bit about your backstory and how you grew up?

Growing up in Columbus, Ohio, my family was very much middle-class. My parents were hardworking and instilled in us values like diligence, faith, and gratitude. My dad was in the picture frame business, and my mom managed to juggle two or three jobs while taking care of me and my four younger siblings. They both ran Cross Country and Track at Otterbein College, so running was a big part of our family culture.

They taught us that if you want something, you’ve got to work for it. So, I found myself doing various jobs like cutting grass, washing cars, and chopping wood to earn money for college or other goals. We didn’t have a lot, but we were content and happy with what we had. Looking back, I appreciate those experiences and wouldn’t change a thing. It shaped who I am today.

What led you to this specific career path? Can you share the most exciting story that has happened to you since you began at your company?

Choosing just one experience is tough, but I’d have to highlight the time during the early days of Covid when I was supporting three distinct supply chains as a fractional COO — one in London, one in New York, and another in Los Angeles. It was quite the ride. Each business was unique and faced Covid’s challenges in different ways.

Imagine playing a game of whack-a-mole with information constantly changing — countries shutting down, outbreaks happening, suppliers being classified as essential, and demand shifting like the wind. In the span of just two months, we must have gone through 15 or 20 different strategies and adaptations. It was a wild time, but it taught me a lot about agility and resilience in the face of unprecedented challenges.

What are some of the most interesting or exciting projects you are working on now? How do you think that might help people?

Yes, we’re actually making some exciting moves on the Izba front. We’ve recently launched an invoice auditing service specifically for fulfillment center invoices. While there are plenty of services that handle the parcel side, we saw a gap in the market for fulfillment centers. And guess what? The early results are promising. We’ve already gotten back hundreds of thousands of dollars in incorrect billings from 3PLs on behalf of our clients.

Another exciting project is the relaunch of the Izba Exchange (www.izba.co/fulfillment-exchange). It’s the internet’s largest open database of 3PLs and we are releasing some major enhancements. We have over 2000 3PLs and will be sharing an innovative way to search and be matched with potential providers.

You’re a successful business leader. What are three traits about yourself that you feel helped fuel your success? Can you share a story or example for each?

Curiosity: I’ve got this insatiable desire to learn from anyone and anywhere. For me, visiting factories is like going on vacation, and I’m the guy with a thousand questions. I never try to act like I know it all; instead, I want to dig into why things are done the way they are and how everything operates.

Humanity: Treating people as people is something I strive for every day. Whether it’s a tough conversation or an uncomfortable situation, I try to recognize when things are beyond someone’s control. Sometimes, even when people give their all and still fall short, it’s essential to be objective, value their efforts, and hold them accountable without crossing a line. In dealing with vendors, I aim to be the kind of customer that others not only have to work with but want to work with.

Creativity: I firmly believe there’s always a solution. A few years back, our factory line went down because of screws — yes, screws! The UPS shipment was days away, and we had a backlog. Instead of throwing in the towel, I called every hardware shop in Arizona until I found enough screws. I even hired an Uber to pick them up and drive them to the border. As a result, we minimized downtime. It’s all about thinking outside the box and finding creative ways to overcome challenges.

Excellent, thanks so much for sharing that. I want to shift gears and talk about e-commerce. What was the original vision for your e-commerce business? What pain point(s) were you trying to solve for your customers?

When I first envisioned our e-commerce business, I saw a glaring need in the startup world. Many startups were in desperate need of operational assistance, but hiring a full-time expert who had been through the trenches before was often out of reach. It was a problem that needed solving, and I wanted to be the one to do it.

The specific pain points we aimed to address were multifaceted:

• Understanding the Essentials: Many founders were struggling to grasp what needed to be done. They were facing operational challenges without a clear roadmap.
• Triage and Troubleshooting: Startups were dealing with immediate crises, or “fires,” that needed urgent attention. They needed someone who could step in and handle these situations efficiently.
• Improving Cash Flow and Profit: The heart of the matter was often the supply chain. By fixing underlying supply chain issues, we could help startups enhance their cash flow and profitability.

As we’ve grown and refined our offerings, we’ve honed in on a singular mantra that encapsulates our mission: helping founders start, scale, and exit their businesses. It’s more than just a slogan; it’s the guiding principle that drives everything we do.

What are some of the biggest challenges you currently face regarding e-commerce logistics costs?

E-commerce logistics costs are a complex and ever-changing landscape, and we’re definitely feeling some challenges in that area. Let me break down some of the biggest hurdles we’re currently facing:

• Upward Pressure: Whether it’s the latest UPS contract or the broader inflationary trends, costs seem to be on an upward trajectory. It’s something that’s affecting the industry across the board, and we’re certainly not immune to it.
• Volatility: This is a big one. The fluctuations in costs can be staggering. Take ocean rates, for example; they were around $20,000 just 18 months ago and have now plummeted to close to $2,000. Then there’s the inconsistency in China’s manufacturing output, which adds another layer of uncertainty.
• Global Events: Even factors that might seem unrelated can have an impact. The conflict in Ukraine, for instance, is affecting trade flows, and we’re feeling those ripples even without direct exposure to the region.

So, as you can see, the challenges are multifaceted and require constant vigilance and adaptability. It’s a bit like navigating a ship through stormy seas; you’ve got to be on your toes and ready to adjust course at a moment’s notice.

What role do technology and automation play in reducing e-commerce logistics costs, and what specific tools or solutions have you found most effective in achieving this?

Technology and automation are playing an increasingly vital role in reducing e-commerce logistics costs, and it’s a trend that’s only gaining momentum. Let’s dive into some of the specifics:

• Robotics and Automation: With labor costs on the rise and the continuous advancement of technology (thanks to Moore’s Law), the economics of robotics are becoming more and more attractive. It’s not just about cutting costs; it’s about efficiency, accuracy, and scalability.
• Optimization Tools: There’s some really cool tech out there focusing on optimizing box sizes, weights, and managing returns flows. These tools can make a significant difference in reducing waste and improving overall efficiency.
• Supply Chain Visibility: This is an area where we’ve seen dramatic improvements. Even startup applications commonly offer ocean container tracking from day one. Just five years ago, this was a unique selling point, but now it’s almost a given. The transparency and real-time insights provided by these tools are game-changers in managing logistics costs.

So, in a nutshell, technology and automation are not just buzzwords in our industry; they’re essential tools that are reshaping how we approach e-commerce logistics. By leveraging these innovations, we’re able to navigate the complexities of the supply chain with more agility and precision.

How do you ensure that your logistics providers deliver the highest quality of service at the lowest possible cost, and what metrics do you use to measure their performance?

At one of the brands I was managing I instituted what I called the sushi rule. The backstory is this; my favorite restaurant in New Jersey was an all you could each sushi restaurant. For $25 you could get as much as you wanted, but there was a catch. If you didn’t finish what was on your plate they charged you for the full roll. This had the effect of allowing patrons to eat as much as they wanted without wasting food.

Providers are generally always chasing revenue, and I noticed that some were very bad at saying “no” and very good at saying “I’m sorry” when things messed up. Taking a cue from my sushi restaurant I asked each provider how much volume they could handle at a specific price and then gave them very clear performance metrics. When they fell short I cut their volume almost automatically. This ensured that they only agreed to things that they felt they could service well.

What are some of the key factors that influence your decisions when selecting logistics providers, and what advice would you give to other e-commerce professionals looking to make similar choices?

Selecting logistics providers is a critical decision in the e-commerce world, and there are several key factors that guide my choices. Here’s a breakdown, along with some advice for others in the field:

• Geography, Cost, and Volume: I always take a close look at the geography to ensure it aligns with our needs, and of course, cost is a significant consideration. But I also want to see examples of the provider handling similar volumes to ours. It’s about finding that sweet spot where location, price, and capacity align.
• Understanding Specific Needs: It’s crucial for brands to invest the time to really understand what their specific logistics needs are. It’s not a one-size-fits-all situation. Finding a provider that fits those unique needs well can make all the difference in the world.
• Beware of Mismatched Recommendations: Just because a big brand had a great experience with a provider doesn’t mean you’ll have the same success, especially if your size and needs are different. It’s essential to evaluate providers based on how well they align with your specific situation, not just their reputation with other companies.

So, my advice to other e-commerce professionals would be to approach this decision with a clear understanding of your unique needs and a willingness to dig deep into the details. Look beyond the surface and the big-name recommendations, and find the provider that truly fits your business

Ok super. Here is the central question of our interview. Can you please share five innovative or unconventional strategies that you’ve employed to reduce e-commerce logistics costs? Please share how each has been successful in achieving your goals.

1 . Paying Customers to Waive Return Rights:

Strategy: We’ve utilized Shopify plugins that offer customers a discount if they agree not to return the purchased items.

Success: This approach has reduced the costs associated with handling returns, contributing to overall savings in logistics expenses.

2 . Exploring Alternative Delivery Locations:

Strategy: By partnering with locations like Walgreens and CVS as collection points for FedEx & UPS, customers can opt for delivery there, allowing us to access B2B pricing instead of residential rates.

Success: This has led to significant cost reductions in shipping, making it a win-win for both us and our customers.

3 . Prioritizing Regional Carriers:

Strategy: Through universal APIs, we’ve been able to mimic the coverage of national carriers while benefiting from the cost structure of regional carriers.

Success: This has allowed us to maintain extensive coverage without the hefty price tag, optimizing our shipping expenses.

4 . Investing in BOPIS (Buy Online Pick Up In Store):

Strategy: Even without our own stores, we’ve collaborated with retailers who may offer discounts or incentives if we drive traffic or new types of consumers to them.

Success: This strategy has not only enhanced customer experience but also created new revenue streams and reduced shipping costs.

5 . Positioning Fulfillment Centers Close to Factories:

Strategy: By placing a 3PL (Third-Party Logistics) in locations like China, we can ship globally from day one, improve responsiveness, and reduce inventory holding. A domestic returns center is also essential.

Success: This approach has streamlined our supply chain, reduced shipping times, and minimized inventory costs, contributing to overall efficiency and cost savings.

Looking ahead, what are the biggest challenges and opportunities in reducing ecommerce logistics costs, and how do you plan to address them in the coming years?

Looking ahead, the landscape of reducing e-commerce logistics costs presents both challenges and opportunities. It’s a dynamic field, and here’s how I see things shaping up in the coming years:

• Potential Headwinds: We might face some challenges in the form of regulatory reform, such as changes to the 321 parcel program, or geopolitical tensions that force a recalibration of sourcing strategies. These factors can add complexity and require us to be more agile and responsive in our approach.
• Volatility and Consolidation: Given the current volatility in the market and the broader economic landscape, we may see some providers consolidate, go out of business, or reduce capacity. This mirrors what’s happening with ocean carriers right now and could reshape the provider landscape.
• Blurring Online and Offline: On the positive side, I see a growing opportunity in blending the online and offline experience. As people become more accustomed to alternative delivery options and offerings, we can create more seamless and cost-effective logistics solutions.

So, how do we plan to address these challenges and opportunities? It’s all about staying ahead of the curve, being adaptable, and leveraging technology and innovation. We’ll need to keep a close eye on regulatory changes, be prepared to navigate provider shifts, and continue to explore new ways to connect the online and offline worlds.

It’s an exciting time, with plenty of twists and turns ahead, but I believe that with the right strategy and a forward-thinking approach, we can turn these challenges into opportunities for growth and efficiency.

You are a person of significant influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

I strongly advocate for engaging with and understanding people who differ from us. Often, we find ourselves confined to digital and physical spaces where everyone shares similar worldviews, backgrounds, or socioeconomic statuses. This trend is not only regrettable but verges on being perilous. It’s vital that we learn to communicate and find common ground with those who hold opinions and goals different from our own. The current discourse and behaviors seem to reflect a “winner takes all” mindset, but I believe this doesn’t have to be the case. We can foster a more inclusive and empathetic approach.

How can our readers further follow your work online?

I’m on linkedin at https://www.linkedin.com/in/aaron-alpeter/ and on Twitter at @akalpeter

I want to thank you so much for your time and for sharing your expertise with us. I wish you continued success!

About The Interviewer: Francois Marchand is the editor of The Ecomm Manager. Throughout his 20+ years in journalism, communications, and marketing, Francois has created and managed high-value content for Postmedia, Vancouver Film School, and Unbounce. He loves helping business leaders grow their skillsets and knowledge base to stay ahead of the competition. Visit The Ecomm Manager: theecommmanager.com