E-Commerce Distribution Business Guide 2024

Updated on January 31, 2024 by Jennifer Collins

Are you considering setting up an e-commerce distribution business in 2024? If so, one thing you must know is the fact that e-commerce businesses are increasingly technology-based.

Business owners recognize the positive impact that such technological developments as generative AI and data modeling have had on their daily operations, and 62.8% plan to increase their investments in tech even further.

The strive for operational excellence and optimization of the associated costs shows just how competitive selling things on the internet has become. 

In 2024, the e-commerce industry is expected to grow by 9.4%, once again exceeding the YoY average of 8.3%, showing that the competition is not going to ease in the months to come. 

All of that makes it a challenge to start a new e-commerce distribution business, but, at the same time, it has never been more exciting considering the potential the sector has. And if you manage to avoid the mistakes others made in the past, you will be better positioned to succeed!

In our article, we'll go over what steps you need to take if you want to start your own e-commerce distribution business so that you, too, can succeed online.

Challenges and tech impact on e-commerce distribution in 2024

The e-commerce distribution business is expanding quickly because more and more people are shopping online. Nowadays, nearly everyone has access to the internet and owns a smartphone. 

People who buy things online expect their purchases to be delivered to them promptly and accurately, putting even more pressure on online retailers.

Challenges in the e-commerce distribution landscape

However, the industry faces some key challenges and trends that new entrepreneurs must consider:

1. Profit margins are under pressure
   With heightened competition and increases in advertising as well as supply-chain associated costs, profit margins are narrowing. Businesses must adeptly optimize operations to maintain efficiency.
2. Meeting skyrocketing customer expectations
   Rising customer demands for fast fulfillment and last mile deliveries necessitate strategic location planning and the adoption of cutting-edge technology to accomplish such a goal.
3. Labor shortages straining operations
   Shortages, particularly of truck drivers, pose a challenge. Retention efforts and process automation become critical in this scenario, putting even more pressure on e-commerce operations.
4. Embracing sustainability imperatives
   As environmental awareness grows, businesses are encouraged to adopt eco-friendly packaging, review their product catalogs to prioritize more sustainable goods, and lower pollution across the supply chain. With an increase in consumers supporting sustainable business practices, it becomes harder to stay on the radar

 In the United Kingdom, 80% of consumers prefer environmentally friendly packaging materials. 

Technological transformations in e-commerce distribution

In 2024, new tech will continue changing how online shopping works: 

• Blockchain makes the shipping process safer with security checks.
• Robotization brings automation into warehouses, lowering operating costs and increasing efficiency.
• Generative AI is able to predict consumer behavior, better their experience with automated customer communications, and lower customer acquisition costs with more affective marketing content. 
• The Internet of Things (IoT) helps keep track of products and increase efficiency within the supply chain, informing where resources are needed most at any given moment. 
• Virtual Reality (VR) allows warehouse workers to practice their jobs in a computer world. This helps them get better at their real-world tasks, increasing their efficiency and safety standards. 

Key steps in starting an e-commerce distribution business

For anyone new to e-commerce, it is advisable to take a few extra steps before starting their business. It starts with idea validation via thorough market research, then legal considerations, and the evaluation of the tech stack that can make your business more efficient and, therefore, posed for greater success.

Market research

Learn all about your potential customers, who you want to sell to. Check out what other companies like yours are doing, and discover where your business could stand out. Try understanding such concepts as the total addressable market and serviceable obtainable market to learn how to position your business idea.

Also, consider asking people questions through surveys or small group discussions, and look at industry reports to gather helpful information about the market and your idea’s potential.

Key questions to ask:

• What niches or areas are underserved?
• Who are the major players in the region?
• What delivery routes and locations offer the most potential?
• What are the estimated market size and growth projections?

Legal considerations

Legal considerations

When starting a business, you need to take care of some essential legal steps:

• Decide if you want to run the business independently, with a partner, or set up a more formal company like an LLC or corporation.
• Get all the required licenses from your city, county, and state. Keep in mind that licensing requirements and costs can vary by state. For instance, the cost of an LLC in New York will be higher than in many other states.
• Get insurance that covers any harm your business might cause by accident.
• Find out what taxes you must pay at the federal level, state, and local area. Since you can calculate your quarterly taxes easily online, you don’t need to worry too much about making a misstep with your obligations in this area, but it’s still sensible to get expert advice here to avoid falling foul of regulators early on in the life of your e-commerce distribution business.

Talking with lawyers and accountants who know about businesses is also an excellent idea. They can give you advice so that everything is done correctly.

Technology adoption

Leveraging the right technologies can maximize efficiency and growth for e-commerce delivery businesses:

• Consider route optimization software like Track-POD to streamline delivery planning.
• Research mobile apps that enable real-time tracking and communication.
• Plan how you will be managing your inventory, whether using sheets, an e-commerce platform, or a dedicated software solution.
• Decide on your accounting and POS software needs to manage finances and transactions.
• Research CRM platforms to provide best customer service.

A properly researched and well-chosen tech stack will not only make your business more efficient, but it also make it easy to scale once the time comes.

Role of route planning in e-commerce distribution

Route planning plays a critical role in the success of any e-commerce distribution business. An optimized delivery route can significantly impact efficiency, costs, and customer satisfaction. For e-commerce deliveries, route planning is even more vital due to:

• The need to meet tight delivery windows and service level agreements with minimal delays
• Managing a high volume of deliveries across a wide service area
• Dealing with fluctuating order volumes that affect daily routine
• Adapting to real-time changes like traffic congestion or unexpected delays

People who shop online want their items delivered quickly and when promised. If deliveries are late, customers might not come back. Planning the best delivery routes is essential for this business. Good planning means arranging deliveries so drivers can drop off as many orders as possible on each trip. They should only travel a little bit of time.

Sophisticated route planning considers factors like:

• Current traffic and road conditions
• Delivery vehicle capacity
• Order urgency
• Drop-off location access
• Driver familiarity with the route

Planning delivery routes manually for lots of daily orders is challenging. There's software that can plan these routes all by itself to make sure they're done the best way possible (check out this story of Eagleship, a company that became 4x more efficient when it transitioned from manual to software-based route planning!).

Considering everything necessary, such solutions can quickly determine the best routes for your delivery drivers. This smart way to plan routes right away is super important for doing well in online sales now and in the future.

Introduction to Track-POD's route planning solution

Let's delve into the world of Track-POD's route planning software, a powerful solution designed to streamline delivery logistics for businesses, especially those in the e-commerce distribution sector.

Here's an overview of its key features:

Efficient route optimization:

• Ditch clunky planning: Say goodbye to manual route planning headaches. Track-POD's solution optimizes thousands of deliveries and collections across your fleet in a single day. It doesn't require any development effort.
• Fastest routes: Track-POD finds the shortest possible route for each vehicle, ensuring quicker deliveries.
• Maximum drops: Routes are calibrated to hit as many drop locations as possible, reducing fuel costs and improving overall efficiency.
• Volume Optimization: We effectively spread packages across vehicles to minimize the number of journeys and trucks needed. This optimization reduces the volume of trips and trucks required.

Multi-drop route planner:

• Optimized efficiency: Combine deliveries into routes that maximize efficiency, saving time and money.
• One-click optimization: No need to manually find the fastest routes. With a single click, Track-POD plans and maps out each route clearly for your drivers.
• Real-time updates: As drivers are in transit, the vehicle tracking app provides real-time route adjustments to avoid traffic jams and roadworks.

Flexible fleet support:

• Vehicle types: Track-POD caters to various fleet types, including trucks, cars, motorcycles, and bicycles.
• Comparison options: Optimize routes based on time, distance, or expense, allowing you to choose the best strategy for your electric vehicle (EV) fleet if you have one.

Complete control and data insights:

• Cloud-connected: Track-POD's logistics management solution integrates seamlessly with the driver app, giving you real-time control and access to essential data.
• Driver idling monitoring: Monitor driver idling time through dynamic color changes on the map.

Track-POD's route planning software is your reliable companion. It can help deliver food, courier services, field services, and manufacturing goods. Start optimizing your routes today and make delivery headaches a thing of the past!

Benefits of efficient route planning

Efficient route planning is a game-changer for e-commerce distribution businesses, offering critical advantages in a reader-friendly way:

Cost savings

Planning the best routes for travel can help save money on gas, taking care of vehicles, and paying drivers. Choosing shorter, more direct ways to go means spending less money and making more profit.

Swift deliveries

Creating innovative routes helps drivers take the quickest way between stops to deliver more packages in their workday. This makes deliveries quicker and customers happier.

Improved customer experience

Using faster, more innovative ways to decide which path deliveries should take helps us tell customers exactly when their packages will arrive. This means there are fewer late or missed deliveries, making customers happier.

Software like Track-POD makes figuring out the best delivery paths easier. This can save online stores money and time and keep their customers pleased. Getting these delivery routes right is essential for an online store to make money and run smoothly.

Technology adoption in e-commerce distribution

Technology improvements in e-commerce distribution are more than finding the best way to get customer packages. Businesses must use different tools and methods to work better and faster.

Advanced tracking systems

Tracking systems let you see where your order is and how it's getting delivered as it happens. Using barcodes and unique tags, companies can check on the package at every step until it gets delivered. This information is essential for finding and fixing any delays or problems that might happen along the way.

Cutting-edge inventory management tools

Managing inventory well means always having enough items to send out when customers order them. These systems watch over how many products are stored, tell you if you're about to run out, and help you determine the best time to buy more.

By doing this, companies can make sure they don't run short on goods and can deliver their orders without delay.

AI for demand forecasting

Tools that use AI to predict how much of a product will be needed look at past sales and what's happening in the market. This helps companies keep just enough items in stock, avoid having too many leftovers, and make sure they have what customers want.

Tips for newcomers to overcome e-commerce distribution challenges

When starting in the e-commerce distribution business, there are a few problems you'll have to deal with if you want to do well. Let's look at some important ones:

High initial costs

Starting a new retail business can be challenging. Buying vehicles, creating storage spaces, and getting the right technology costs a lot of money. Significant expenses at the beginning can cause problems with enough cash. They can also make spending on other essential parts of the business challenging and slow down how fast the company grows.

Route optimization complexity

Knowing how to optimize your routes better is tricky and can take a lot of time for people just starting to learn how to do it. If you don't plan your routes well, you might spend more on gas, take longer to deliver things, and make customers unhappy. This could make the business run less smoothly and hurt its good name.

Meeting growing customer demand

When more people start buying from new shops, those shops might need help to give everyone what they want because they need more stuff or workers. If the shop can keep up, customers may have to wait longer for their orders. This can make them unhappy and cost the shop money now and in the future.

Maintaining provider relationships

Building and keeping good relationships with online shopping services can be challenging, especially for new companies. You can get products on time if you talk well or get mixed up with these services. This could cause delays in sending things to customers and harm the new company's name.

Labor shortages

Recruiting and retaining skilled delivery drivers and warehouse staff can be a persistent challenge for new businesses.

Shortages in labor can lead to delayed deliveries and increased work pressure on existing staff. This can cause potential service quality issues. It can affect customer satisfaction and overall business performance.

Regulatory compliance hurdles

Starting an online store can take time and effort. There are many rules and paperwork, like getting the proper licenses and ensuring everything is safe. Your store could get into trouble if you don't follow these rules. You might have to pay money (fines) or even stop working for a while. This could harm how people see your store and whether it can keep going in the long run.

Addressing these challenges requires strategic approaches:

• Explore leasing options and partnerships to manage high initial costs.
• Implement route planning software for efficient navigation and fuel savings.
• Use data analysis to predict and plan for fluctuations in customer demand.
• Focus on transparent communication to build and maintain strong provider relationships.
• Offer competitive pay and benefits to attract and keep skilled labor.
• Stay informed about and follow local regulations through legal guidance.
• Assess and update compliance protocols to avoid regulatory hurdles.

Exploring the future trends shaping e-commerce distribution 

The e-commerce distribution industry is constantly changing because of new tech developments. The key to success is being ready to use new ideas and tools. They make the process faster, more precise, and better for the environment.

Here are 5 main trends that will probably change how things work in the future:

Autonomous vehicles

We might see self-driving delivery trucks and drones. These vehicles can work all day and night, save money on paying drivers, and choose the best paths easily. But first, they need to be officially allowed for widespread use.

Automated warehouses

Robots and artificial intelligence (AI) will help run warehouses with very few people needed. This makes packing and sending out orders faster and more accurate. The tricky part is getting different systems to work together without spending too much money.

Blockchain-based supply chains

Blockchain technology could make supply chains safer by making it easy to see where products come from. It's good at tracking items to stop fake goods from being sold as real ones. To get going globally, everyone must agree on how it should work.

Sustainable delivery models

There are new ways of delivering things that don't harm the environment, like using bikes or packaging you can use again. Companies know customers care about nature, so they're looking into these options more seriously—this includes balancing out any pollution they cause when shipping goods.

Predictive analytics

Analyzing data helps companies guess what people want to buy, which helps them stock up properly and plan their deliveries better; this even allows for suggesting products tailored to consumers' preferences. However, keeping customer information private is still crucial while doing this analysis.

Final words: seamless e-commerce distribution with Track-POD

Starting an e-commerce distribution business takes careful planning and understanding of the challenges you might face. When setting up, new owners need to manage their starting costs. They also need to figure out delivery paths and handle insufficient staff. Despite these issues, technological advances show that there's a lot of potential for success in the future.

People who want to start e-commerce distribution should pay attention to these tech changes. They should also be ready to adapt. Using modern tools is vital for a good start.

Track-POD's route planner can make work more efficient. They streamline tasks and help your business do well overall. As you begin this journey, staying informed, adaptable, and creative is essential because the world of online delivery is constantly evolving.