Why read this? : We look at how to prepare for the challenges of D2C order processing. Learn how to test your back-end systems to identify and fix issues before you go live. Read this to improve the robustness and reliability of your D2C order processing.
Marc Randolph’s That’ll Never Work tells the story of Netflix from the point of view of its first CEO and co-founder. From the initial idea to its IPO and beyond.
One of the most interesting chapters is when he talks about the day they launched – April 14, 1998.
Though it’s obviously now best known for streaming, it started as an e-Commerce site, renting and selling DVDs by mail. E-Commerce sites and DVDs were relative novelties at that time.
Netflix launch day issues
Their site went live at 9am when he placed the first order. Then, more orders started to come in from the promotional work they’d done to tell interested customers the site was coming.
But 15 minutes later, they had so much site traffic that the server crashed. They had to rush to a nearby electronics store to buy more computers to increase their server capacity.
Their office was also in an old bank, with all their inventory stored in the vault. He talks about how challenging it was to manage orders on that first day. For example, they hadn’t set up an automatic order confirmation email. Someone had to manually send out confirmation emails on every single order.
Plus, they soon found the packaging they’d set up to mail out DVDs was heavier than they’d thought. So mailing costs per order were higher than their original business model. This hit their profitability, particularly as almost all their initial orders were DVD sales rather than rentals. Sales only generated a one-off transaction. Rentals generated repeat income (and so were more profitable) as they could send the same DVD out again and again.
He talks about how stressful and frantic these initial few months were as they sorted out all these unforeseen issues and challenges.
Our D2C back-end launch lessons
While we’ve not launched anything on Netflix’s scale, we have launched many D2C stores. Reading about these issues felt very familiar. The launch and immediate aftermath of D2C is tough.
In fact, it rang so many bells, we felt it worth sharing some lessons from one of our first post-launch reviews on the challenges of D2C order processing.
But here, we’ll look at challenges in the back-end of D2C, focussing on order to delivery. Unless you offer digital services, a D2C order generally has to make something happen in the real world. And that’s much harder to manage than what happens online.
We’ll cover 3 areas :-
- Order processing tests.
- Data management.
- Point of delivery management.
Order processing tests
A big part of setting up your D2C store is testing your store website. For example, you’ll test that product pages load and display correctly, and that customers can navigate their way through placing an order.
Which means you’ll have a working version of your site sitting on a staging server somewhere. A version you and your IT team can access, but which isn’t yet visible to the public.
The testing has to cover what happens after a customer enters their details into the website e.g. their name, how to contact them, what products they want, their card details and the delivery address.
First, you test you can accept payments properly.
Your payment gateway normally gives you testing credentials so you can place dummy orders, and check everything works. You’ll get a username and password to access the system, and dummy credit card details which the gateway will process without making an actual payment.
So, the first part of your order processing testing is to have someone visit your staging website and place an order using these dummy details.
This mimics the experience real customers will get making a payment. You check it tells them the payment’s accepted when they fill in the correct details and check the payment gateway back-end to make sure it registered. You should also check the payment confirmation goes to your order processing system.
Try breaking the payment gateway system
You should also try “breaking” the payment gateway system to see what happens if you use incorrect details, e.g. entering the wrong cardholder name, number, expiry date etc. The payment gateway should reject these. You should also be able to customise the error message customers see in the gateway’s back-end.
Once this is all checked, the next test is placing an order with a real credit card. You’ll need to do this several times to test different payment and delivery scenarios in the order processing process.
For example, say you’ve set limits to prevent multiple orders or delivery to certain locations. You’ll want to test the system by placing those order types to make sure they’re not accepted.
Picking, packing and dispatch testing
Once payment is confirmed, the order moves to order processing in your warehouse. In our example, the company’s accounting and operations system (SAP) handled this. However, this was complicated, expensive and hard to modify.
If we were doing it again, we’d have chosen a simpler order processing system.
However you’ve set it up, details of your test orders should go to your storage area, and be processed.
Test each step
You’ll need to test each step that has to happen from them receiving the order to it being delivered to the customer. For example, as you validate each order payment, does each order then go separately by email to the warehouse? Or are they held, and then sent in batches at regular times throughout the day?
Then, plan out how the person handling the order knows what to pick. Work out how they’ll pack it, and how it’s moved to dispatch. You might be lucky and have warehouse robot automation as big players like Amazon do. But realistically, if you’re new to D2C, much of this will be done manually.
You’ll have to work out how to print labels, for example. How to physically move items around. And how to manage inventory. Both of the products you sell and your packaging materials. When products move off the shelf, you’ll need systems to track how many are left, and to re-order when stocks run low.
It’s much better to smoke out such issues before you launch. You’ll have time to fix them without the stress of angry customers asking where their products are. Your dummy orders should work their way through your systems and eventually be delivered. If not, you look for where the order got stuck and fix the issue.
You make sure the right products go in the right packaging with the right labels before being dispatched.
Try breaking the order processing system
Again, you should try to “break” the system. For example, place orders with obvious gaps or mistakes. Miss out an email address or postcode, for example. Orders with missing details should ask the customer to fix it before they can move forward. Otherwise, they create more work for the order processing team to fix.
You should build a list of “what if” scenarios and spell out what the order processing team should do if they happen. For example, what if you get an unexpected rush of orders? What if you run out of printer ink or labels? What if an item runs out of stock? Or only part of an order is in stock? And of course, what if the wrong item goes in the box for an order?
You won’t be able to predict everything that could go wrong. But the more prepared you are, the less stressed you’ll be when something does go amiss.
The final testing step is the delivery itself. You want an actual (dummy) order to land with a customer. Interestingly, as Randolph and Reed Hastings were first thinking of Netflix, they ran a test to send a CD (Patsy Cline’s Greatest Hits) in the mail to see if it would arrive safely. Luckily, it did, or perhaps Netflix would never have happened.
Before you launch, you need to do the same thing. You want to make sure your packaging is robust enough that the product arrives in good condition.
DVDs and CDs are fairly simple in terms of delivery as they’re small and light. However, some categories will present bigger delivery challenges.
For example, with alcohol delivery, you’d want to check glass bottles didn’t break and that there’s no chance of them being stolen if left on the doorstep. For perishable foods, you’d make sure there was some sort of temperature-controlled packaging to ensure they stay fresh.
Try breaking the delivery system
This is another system you should try to “break” in your testing.
For example, what happens if you enter an address that doesn’t exist? What if it’s a unit in an apartment block, and the front door won’t allow for deliveries? What if the delivery address is a PO Box, and the product is too big to fit?
Some of these questions will also depend on how you define your delivery processes i.e. where, when and how you will and won’t deliver. More on this shortly.
Who does the testing?
This simulates the experience of your future customers who won’t be familiar with how things are “supposed” to work. You’ll spot issues sooner by letting people new to your store place orders.
Give them enough information to place an order, but no more than that.
Watch as they place orders, so you can spot areas that frustrate or confuse. It’s your best chance to see how a “real” customer will experience the store, and identify which parts of your order processing are most likely to break. This gives you time to fix issues before you let real customers place orders.
It’s easy to put off the set-up of managing customer data, both at an individual and business reporting level. It’s not the most exciting sounding of areas, right? But you need it to start working as soon as you launch, otherwise you open yourself up to all sorts of issues.
As we saw with the Netflix example, it resulted in them having to dedicate someone’s time to writing out individual confirmation emails to every customer, because they hadn’t set up the data flow to do this automatically. Our first store launch had a similar issue. We had to manually cut and paste orders from Magento into SAP line by line, as we hadn’t set up the data to flow between the 2 systems.
There are 3 main pain points when you don’t set up your data properly in advance :-
- customer service.
- integration with other marketing activities.
- measurement and reporting.
For that system to work, the team have to be able to easily access data about a specific customer’s order and account. For example, to check if payment’s been accepted. And if not, why not. To check if an item’s out of stock, and when it’ll be back in stock. And once into order processing, to check where the customer’s order is – picked for dispatch, in transit, out for delivery and so on.
These days, most D2C back-end systems make these notifications and status updates automatic. Warehouse workers and delivery drivers will use a scanner to update the progress of an order as it moves through the system.
Before you launch your store though, you should test each of these progress updates actually works when you do test orders. You look at the notifications and updates the customer will get, and test out things which could go wrong e.g. it gets damaged, lost or goes to the wrong address.
To “fix” any of these issues, your customer service team will need a working data system where they can find and modify that order’s details.
Integration with other marketing activities
Collecting and managing customer data is also important if you want to run other marketing activities off the back of an order.
For example, if you want to send follow-up emails as part of a CRM newsletter, you’ll need the customer to give permission and have details of that attached to their account.
If you also want to target customers with personalised or tailored messages, you’ll need to capture data about them to do so.
For example, targeting heavy or light buyers, or those who haven’t bought for a while. You’ll need a workable customer database with the right filters to analyse and target specific segments like this.
Measurement and reporting
Finally, you’ll need to aggregate customer data to help you track how your overall business is going.
You’ll create a D2C dashboard to measure and report on sales trends, the performance of your order processing systems, and flag any ongoing issues.
If you don’t set up the right data systems before you launch, you’ll be running your business blind when you launch.
You’ll be slower to spot issues, leading to worse experiences for customers.
Aim to have a working version of your dashboard ready before you launch. Test it by pushing dummy data through the system to make sure it works. This can be complex as the data will come from multiple sources. For example, from digital media platforms, website analytics, your payment gateway and all your different order processing systems.
In the Netflix example, they had a daily report showing if their top 5-6 measures were on track. How often you report depends on the nature of your business, but you’ll usually want a weekly update as a minimum.
Point of delivery management
The final and critical point in the order to delivery process is when the product arrives with the customer. All your hard work to this point is worthless if this doesn’t go smoothly. So, the more robust and reliable you make the delivery process, the better.
For example, you can add a Permission to Leave checkbox to the order form. This solves many issues. The customer says you can leave their order on the doorstep or at another convenient location (e.g. in a shed, garden, or with a neighbour).
If there’s no Permission to Leave and the customer isn’t home to receive the order, it goes back to the depot. The delivery company have to re-deliver it another time. But you get charged for the failed delivery and the re-delivery. Clearly, you don’t want that.
A good D2C experience encourages online shoppers to help make delivery easier. It’s in their interest to give you clear delivery instructions. For example, delivery to a work address where there’s always someone to receive it or details of where to leave products if they’re not home.
Order delivery confirmation systems
It’s also likely your delivery company will have their own order delivery confirmation systems. For example, some will have the driver photograph the item being left. For more expensive products, they’ll ask for a signature on delivery. Make sure these integrate with your own order processing systems.
You should check how your test orders arrive at their destination. Did they arrive when they were supposed to, for example? Did they arrive in good shape? If there were issues, work these out before you launch to real customers. Problem-fixing like this is always a challenge. But it’s an easier challenge in a practice run, than when you have a real customer calling you up to complain.
Conclusion - Be prepared for D2C order planning
Managing the back end of a D2C store is tricky.
But if you sell products online, customer orders mean actions have to happen in the real world. You have to process payments. Move products from the warehouse to the customer. And resolve issues quickly and efficiently.
This article explored why order processing tests, data management and managing the point of delivery should be part of your pre-launch D2C plan. You won’t be able to predict every challenge. But the more you prepare, the more ready you’ll be to deal with issues after you launch.