How product bundling and kitting services can increase ecommerce revenue
Customers today expect free and fast shipping, but we know that free shipping is not really free. Ecommerce retailers are burdened with the cost of shipping even though they may be waiving these fees to customers. According to a recent study with top internet retailers conducted by Digital Commerce 360, the average threshold for free shipping was $49.18 per order in 2019.
Finding ways to increase order size and optimize free shipping can be a challenge for ecommerce companies. Utilizing creative strategies like product bundling and value-added fulfillment solutions like kitting can help increase order size and revenue. But you want to be sure that your logistics partner has the proper kitting capabilities to ensure quality. Your product kit should translate into a positive experience for your customer.
We gathered three of our supply chain experts, Rick Sutphin, Manager of Operations, Teri Bowser, Strategic Account Manager, and Saranade Howells, Client Services Representative, to discuss how value-added fulfillment services like kitting can maximize revenue while optimizing your shipping and handling costs.
If you’ve ever bought items bundled together (think of it as buying a whole entertainment system, instead of each component - the speakers, the TV, the shelving - separately), you’ve experienced kitting. “Kitting is the process of taking related items and grouping them together as one SKU,” Rick says. “For example, we bundle multiple skincare products together into gift sets for one of our clients.”
Many ecommerce brands offer multi-packs of their products for a discount. USANA offers gift sets of their specialty skincare and nutrition products. Rodan + Fields sells discounted product sets of skincare and makeup. Kitted or bundled products can lead to higher sales and even help to move products that aren’t selling.
How does kitting impact revenue and handling fees?
When using value-added fulfillment solutions like kitting, your organization can save costs while provide your customers a benefit.
Kitting encourages customers to try a new product, and also provides a solution for items that aren’t selling well on their own.
Bundling items together is a great way to push customers to try new products. Ecommerce retailers may choose to bundle a popular item with one that is not selling well. Or seasonal kits are a great opportunity to drive sales. “During the holidays, customers are looking for gift ideas. Bundling popular items together with specialized packaging draws in the customer. Last holiday, we saw order volumes increase 10xs after assembling gift sets for a skincare client,” says Saranade.
We recommend our clients keep a close eye on their ecommerce data – what’s selling well and what could be selling better – so we can discuss kitting solutions. “We’re always analyzing the product assortment in client kits,” said Saranade. “If there’s a trend on one fragrance line, for example, we can adjust future kit quantities accordingly.
Plus, says Rick, adding products together can have additional cost savings on the fulfillment side: “Instead of three pieces with three line fees, you only get one line fee for those same products bundled as a kit.”
Labor and space-saving benefits
Building kits can be a logistical challenge for ecommerce companies or manufacturers that don’t have the warehouse space or want to utilize the space they do have for other purposes. To build a kit or package items, you need plenty of space for assembly and you want that space to be organized to ensure quality control.
It can also be labor intensive. For efficiency, kit assembly is typically completed in large quantities as a project. This could mean reassigning staff away from other activities to perform the work. Or it may require the time and coordination of temporary staff to complete the project.
A fulfillment partner that has all these resources at the ready can provide huge cost savings and quality control to safeguard your brand’s reputation. When kitting and fulfillment are performed from the same location, there are fewer inventory transfers safeguarding inventory accuracy and reducing shipping costs.
FIDELITONE has a network of strategic warehouse locations and offers nationwide shipping:
- West Coast fulfillment centers – Chandler, AZ and Reno, NV
- East Coast fulfillment centers – Elizabethton, TN and Nashville, TN
- Midwest fulfillment center – Chicago, IL
“We can bring in your items in bulk and build them ahead of time so they are packaged and ready to go when orders come in,” says Teri. “At the end of the day, coordinating all of the individual components, packaging and assembly is time consuming for clients. A wide variety of activities take place to create a kit. You need to have the space for assembly to spread out all the goods. We can organize and store the raw materials, then send them out as a finished good.”
Additional cost savings by working with a partner
In addition to space and labor savings, a partner who is experienced in kitting can provide additional value and savings.
At FIDELITONE, we do time studies to estimate costs for any kitting or rework. It’s important to walk through the scope of work with your partner so they can come back with a time study and make sure they’re spending your money wisely.
“Accurately estimating costs for clients is important so they can then forecast effectively,” explains Teri. This involves getting a sample of the components, packaging and a prototype of the kit from the client. We do a time study that’s based on a dollar per labor hour. We’re able to determine a cost that we submit to our clients so they can include that cost in forecasting and marketing plans.
Speaking of marketing plans...
It’s crucial to bring your partner into the conversation as you’re planning any marketing campaigns - before you launch a new product or have a holiday sale. That way you’ll be able to build any value-added fulfillment services into the budget so you can truly measure the campaign from end-to-end. Your partner should be able to provide advice on how to increase the size of the shopping cart to meet a free shipping threshold.
“It’s more cost efficient to pick one item that has been kitted versus picking three items separately. Picking orders with 10 items versus picking an order with five kits is more time efficient for us and more cost effective for the client,” says Rick.
What should you be looking for in a kitting operation?
- Dedicated space and team: “Each kit has its own individual workstation,” says Saranade. Both quality and efficiency improve as a team becomes more familiar with your merchandise.
- Organization: Go on a tour of the warehouse and ask to see other kitting projects that are taking place. Are supervisors double checking for accuracy? “Clients can see that we stand behind our work once they come into the warehouse,” says Teri.
- Open communication: Teri says, “We have efficiencies built in when we start the job and we can adjust along the way if needed. If there’s a change in the scope after we start a project, we quickly let the client know.” Communication on the front end is important in case a different component comes in from a supplier, for example.
- Technology that creates efficiency: Your partner should have a warehouse management system that tracks inventory and kitting tasks. “Our inventory system takes each component and part number out of inventory levels as we build kits so the inventory remains accurate,” explains Teri.
The end goal: A great fulfillment experience
Bundling not only provides your customers with new ways to experience your product, it can also have an impact on the unboxing experience. Orders with multiple items may shift while in transit. Even when selecting the right box and packing materials, a well-assembled kit tends to travel better than those same items shipped loosely. “Our team builds kits as if they were ordering it and it’s coming to their house,” Rick explains. “Our attention to detail ensures any kitting is done right – with a high level of quality, resulting in a great fulfillment experience.”
Please contact our fulfillment experts with any questions. We are happy to consult with you on how to provide a kitting solution to meet your specific needs.