The Forgotten 30% Of Ecommerce Brands
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- The Rise of 3PLs and Their Limits
- The Forgotten 30% - Industries Left Behind
- The Perfect Storm: Complexity for Small Teams
- Signs You're in the Forgotten 30%
- The Luminous Solution: A More Approachable Option
- Common Questions
The e-commerce landscape is booming, and third-party logistics providers (3PLs) are at the forefront, with an estimated 70% of brands outsourcing their direct-to-consumer fulfillment. But what about the remaining 30%? This post dives into that forgotten segment: e-commerce businesses that 3PLs can't easily serve.
The Rise of 3PLs and Their Limits
The past decade has seen explosive growth in 3PL companies like ShipMonk, Deliverr and Flexport. These companies handle warehousing and order fulfillment for e-commerce businesses, allowing brands to focus on marketing and sales. Outsourcing fulfillment also lets brands put off implementing a full system of record.
However, 3PLs aren't a one-size-fits-all solution. While convenient for many, they struggle to meet the needs of specific industries.
The Forgotten 30% - Industries Left Behind
So, who are these underserved e-commerce businesses? Jared describes them as industries that, number one, emerged as direct-to-consumer during COVID, and number two, can't outsource to a 3PL:
- New Entrants in Perishables & Animal Products: The COVID-19 pandemic forced brands in categories that historically didn't sell direct-to-consumer to adopt DTC models just to survive. Many have grown quickly in the past three to five years and are hitting critical mass now.
- DTC & Wholesale: Many of these companies juggle both DTC and wholesale channels, adding another layer of complexity.
The Perfect Storm: Complexity for Small Teams
Because these businesses can't outsource fulfillment, they get very complex very early. This results in:
- Complex Sourcing & Inventory Management: Managing raw materials, components, finished goods, and DTC/wholesale sales simultaneously requires robust systems.
- Scaling Challenges for Small Teams: With fewer than 10 people, handling this complexity becomes overwhelming. The sweet spot is companies doing $1 million to $20 million in revenue that need a full system of record, but enterprise software like NetSuite is too complicated and too expensive for their size.
Want the full breakdown? Watch Jared Ward's video on YouTube, and see his deeper dive on the non-traditional DTC (perishable goods) archetype.
Signs You're in the Forgotten 30%
- You can't hand fulfillment to a standard 3PL: Your products need cold storage, special handling, or processing steps a typical 3PL doesn't offer.
- You manage raw materials, not just finished goods: You buy components or ingredients and turn them into products.
- You sell DTC and wholesale: Your inventory has to serve online orders and wholesale accounts at the same time.
- Your team is small: Fewer than 10 people are handling sourcing, inventory, fulfillment and sales.
- Spreadsheets are holding things together: You know you need a real system of record, but enterprise ERPs feel out of reach.
The Luminous Solution: A More Approachable Option
Luminous offers a more accessible, scalable alternative to complex enterprise software. Here's why Luminous fits the underserved 30%:
- Disruptive Inventory & Supply Chain Software: Luminous goes up against giants like NetSuite and SAP, with a more accessible and affordable solution.
- The HubSpot Approach: The same way HubSpot entered the market to compete with Salesforce, Luminous offers a more approachable, less intimidating platform that brands can start on while they're small and scale up from there.
- Easy Onboarding & Hands-On Implementation: Luminous is easy to onboard, with budget-friendly implementation that's still hands-on, with full visibility at the end of the process.
Hear more on why a heavyweight ERP isn't always the answer in Implementing NetSuite Would Have Killed My E-comm Business.
Common Questions
Why can't some brands use a 3PL?
Some products, like perishables and animal products, need specialized handling that many 3PLs can't easily provide, so these brands manage fulfillment themselves.
Why do these brands get complex so early?
They're managing sourcing, raw materials, components, finished goods, fulfillment, and both DTC and wholesale sales, often with fewer than 10 people.
Who is Luminous built for in this segment?
Jared points to a sweet spot of companies doing $1 million to $20 million in revenue that need a full system of record but can't justify enterprise ERP cost and complexity.
Ready to join the ranks of fast-growing e-commerce businesses? Book a demo with Luminous today and see a platform that scales alongside your success.
Video transcript
The 30% of E-commerce 3PLs Can't Serve
Did you know 70% of today's e-commerce brands use a 3PL, except for this 30%? And you'll be shocked to know why. My team and I have discovered the forgotten ones of e-commerce: the 30% of the e-commerce market that 3PLs aren't able to service, or at least find really difficult to service.
The 3PL Boom
Now, let's first go over the 3PL industry. It's exploded in the past decade, and this trend of e-commerce brands relying on 3PLs has led to exponential growth for companies like ShipMonk, Deliverr and Flexport.
Why are they growing so quickly? It's estimated that over 70% of companies outsource their direct-to-consumer fulfillment. They do this because they choose not to take on the complexity of running a warehouse and being responsible for all that comes with it. But that delays their need to implement a system of record.
The second trend, of course, is the general growth of e-commerce that everybody's familiar with. Here's a year-over-year chart. Included in this, of course, is the well-known COVID pop in 2020.
Who Are the Forgotten 30%?
With the growth of general e-commerce and massive growth in the 3PL sector, who are these 30%, the forgotten ones being left behind? Here's a quick list of industries that, number one, had a direct-to-consumer emergence during COVID, and number two, couldn't outsource to a 3PL.
Brands like perishables or animal products that historically didn't go direct-to-consumer were forced to go direct-to-consumer during COVID to survive. These categories have popped off in the past three to five years, are experiencing continual growth, and are hitting critical mass right now.
Complex Early, With Tiny Teams
These companies that can't use a 3PL became insanely complex early, because they can't outsource fulfillment. Think about it: they have to manage complex sourcing processes and complex inventory management of raw materials, components and finished goods, and they're typically selling both direct-to-consumer and wholesale. This becomes insanely complex for a team of fewer than 10 people, really fast.
There's a sweet spot in these industries: companies doing between $1 million and $20 million in revenue that need a full system of record, like a NetSuite. But it's just way too complicated for a team of fewer than 10 people, and it's too expensive for their size. The problem is, a system at the price point they need doesn't exist. Or does it?
Luminous: The HubSpot of Inventory and Supply Chain
Luminous is creating disruptive inventory and supply chain software that's going up against NetSuite in our bids, and we're winning. The same way HubSpot entered the market in competition with Salesforce, Luminous is doing that with NetSuite and SAP.
In other words, we've created a more accessible, scalable, approachable, less intimidating platform for brands to jump on while they're still small and scale up from there. It's easy to onboard, and we have budget-friendly implementation that's still hands-on, with full visibility at the end of the process.
So subscribe and follow along as we become the number one inventory and supply chain tool for e-commerce.