Bigger Orders, Smaller Margins?
We all want big orders. High average basket value. That’s the Holy Grail of e-commerce marketing, isn’t it?
But I’ve been looking at the numbers in my warehouse, and I’m finding something disturbing. Sometimes, the bigger orders are the ones killing us.
The Complexity Tax
It seems counter-intuitive. Surely, picking 10 items for one customer is faster than picking 1 item for 10 customers? Yes, but not as much as you think. And the risk profile changes completely.
- Substitution Risk: A 20-item order has 20 chances to have an out-of-stock item. One missing item stops the whole order. The box sits on a bench, taking up space, waiting for a decision. That downtime costs money.
- Packaging Tetris: Packing 2 items is easy. Packing 50 items of different shapes and sizes? That’s a puzzle. It takes an experienced packer (who costs more) significantly longer to do it safely.
- Error Probability: The more lines on a ticket, the higher the chance of a mis-pick. A mis-pick means a return, a complaint, and a resend. The cost of fixing a mistake is often 5x the cost of shipping the original order.
I’m not saying we should turn away big orders. But we need to look at the Contribution of these orders. Is the extra margin from the product sales actually covering the extra operational headache? Sometimes, surprisingly, the answer is no.