How TCHO and Cancelled Plans are working through supply chain challengesLaura Leiva
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From brands starting in ecommerce (or doubling down on building ecommerce departments from the ground up to remain competitive), it’s been anything but a smooth ride.
Now, there’s even more for brand owners and ecommerce managers to consider: port congestion, shipping container, and equipment shortages, and snarled supply chains.
While retail brands are trying to figure things out as they go, direct-to-consumer brands have had an equally stressful time trying to keep products in the hands of their customers.
How are brands working through these issues and what does the future hold? I recently connected with Josh Mohr of TCHO and Spencer Findlay of Cancelled Plans to see how they were managing this new challenge (and what they can expect in the coming months).
It’s a waiting game for Cancelled Plans
For small-batch candle company, Cancelled Plans, the supply chain crisis and port congestion have created issues far beyond just waiting for materials to arrive.
Along with his wife Kenzie, founder Spencer Findlay created a line of clean-burning candles that tap into the general mood of everything going on around us. From I Miss High Fives to Student Loans, this is a brand that’s connected deeply with what resonates with customers.
Like most owners right now, Findlay is experiencing firsthand how shortages and delays are impacting the daily operations of his business.
For outsiders looking in, one of the most common recommendations to get through current supply chain issues is to plan ahead and order goods or materials in well in advance – but that’s not always easy for smaller or cash-strapped brands to do, as Findlay explains.
“The supply chain crisis has been so difficult to navigate,” he says. “As a small, bootstrapped team who makes our own product, we simply don’t have the flexibility or cash to be ordering months in advance and holding inventory.”
Supply shortages are one thing, but brands like Cancelled Plans are also adding the congestion at the ports, as well as delays in moving raw goods and materials, to the list of hurdles.
“Over the past year, we’ve independently had every piece of raw material suddenly become unavailable or delayed for months,” Findlay shares. “It’s been so debilitating for our production capabilities and has slowed our growth because we simply don’t have a product to ship. When a material is finally available, we have to play catch up on the thousands of back-ordered units so we’re never really able to scale effectively. By the time we get moving again, another raw material is unavailable.”
Logistic companies, hired to help transport goods from ports to warehouses and especially those based out of Los Angeles, are also having a hard time finding enough equipment and drivers to move things from the port. Without the proper equipment like chassis, truck drivers and dispatch offices are left with their hands tied.
It’s not just a localized issue at the ports, either. Beyond the ports and respective operations, freight movement across the United States has slowed drastically.
“Over the past few months, we’ve been hit with a number of delays and have even had to limit some of our production runs to 10% of what we’d like to be doing,” Findlay explains. “The supply shortages aren’t the only problem though. Once we’re able to secure material, moving anything by freight throughout the United States has been a nightmare.
Time is an important factor for ecomm and DTC businesses. Customers aren’t used to waiting around for days or weeks when they’ve gotten spoiled with Amazon-like shipping that arrives within a matter of days.
“A west coast route that previously took two to three days is now taking two weeks,” Findlay says. “We don’t have weeks to wait as a small business and nothing is reliable. We’re so tight on time – [last month] I flew from Seattle to Los Angeles, rented a U-Haul, picked up our raw materials, and drove them back 1,100 miles myself within 36 hours.”
Instead of waiting around for a second time, Findlay plans on making a second trip to get the materials he needs to move his brand forward.
“I have another trip planned to pick up materials in Los Angeles, rent another truck and drive back myself. Freight is so backed up and we have to take matters into our own hands in order to deliver to our customers. Thankfully our customers are so kind and understanding.”
Brands are needing to make quick decisions about how to proceed while keeping the current environment in mind, but they’re also keeping future changes and issues in mind. For Cancelled Plans, Findlay says early planning during the summer months was key, but it still impacted the busiest time of year – the holiday shopping season.
“Our BFCM plan this year [was] more limited in the window that we [were] having our offer available,” he said. “We would have liked to open the offer earlier, but instead were choosing to extend it longer due to late supply and productions run. We have been working since late summer to secure supplies for additional inventory for the holiday season.”
Sourcing raw materials and goods have been even more challenging for TCHO
In San Francisco, chocolate maker brand TCHO also experienced a crunch across different parts of the business. Josh Mohr, VP of Marketing at TCHO, sees the added supply chain issues compound with what the brand was already dealing with in 2020.
“The supply chain crisis is a daily punch in the face for our business,” Mohr says.
For a brand like TCHO, which relies on raw goods and materials that come from a variety of sources and locations to create products, it makes things even harder.
“All year we've had issues with goods being held up at port (cocoa beans coming from South America and Africa, sugar from Indonesia, etc.), we've had paper shortage issues which have delayed innovation plans, and price increase letters from vendors are a common occurrence,” says Mohr. “While we haven't had any issues delivering a product to our customers, it has eaten into our margins the way the pandemic impacted our topline revenue in 2020.”
In the midst of current struggles, there’s a growing connection between businesses and suppliers. Like others, TCHO has looked at alternative options as a way to get goods and raw materials into the warehouse.
“We have great relationships with our ingredient suppliers and packaging vendors, and there's a true "we're all in this together" shared mentality,” Mohr explains.
Mohr touches on the challenges faced by brands being on both the receiving end of shipping issues and then turning around and having additional costs associated with getting products into the hands of customers.
“One of the largest changes is that we are getting materials and equipment air shipped for the first time as opposed to by sea. It's wild air [shipping] is actually more cost-effective and timely than sea, but it is,” says Mohr. “Then it's one thing to get ingredients into our Berkeley chocolate factory, and an entirely other challenge getting finished goods shipped domestically. One of the largest challenges is seeing freight costs just skyrocket, knowing there's not much we can do about it other than take the hit to our bottom line. There are consistently 20 container loads to every one driver in the weekly forecasts we get from our freight partners.”
The backup at the ports is just a cog in the wheel that’s the entire supply chain – and nearly every checkpoint is affected. There’s a delay in getting containers off ships, only to sit on land because there aren’t enough drivers or logistics equipment to get loads from one point to the next. Warehouse space is limited, too.
For TCHO, navigating busy seasons – especially as the holidays ramped up – had to change for a few reasons.
Mohr shares this: “We had to delay the launch of some key innovation to post BFCM because of the paper shortage going on now and delays in printing. Print houses are jam-packed, and everything is taking double the normal time to get done - and that's if you can buy the paper needed to print.”
Where do brands go from here?
While every brand is different and needs to approach supply chain issues independently, some strategies prove helpful in strengthening customer relationships as things get ironed out:
- It’s time to be transparent. At this point, supply chain issues and shortages have become a main talking point in the news – but not all your customers might be aware of just how deep the issue goes or how it’s impacting your brand.
Keep customers updated with any delays or shortages you’re facing.
- Option for new SKU ideas? DTC brands – or brands with limited SKUs – are finding the supply chain issue to be especially hard to manage because these missing items make up a bulk of the inventory.
While bringing new SKUs into the brand might not be an option for everyone, this is a good opportunity to tap into your market and discover more about what your customer likes or wants – these ideas could translate into new product offerings sooner rather than later.
- Consider bundling products. If rates are going up due to shipping costs, one way to recoup some of that money is through increasing prices. Because this is a sticky subject for both brands and customers, one way around it is through bundling or recommending additional products during checkout to increase the average order value (AOV) without going so far as to raise product prices directly.
This strategy worked particularly well for Jason Wong of Doe Lashes, as he shares in a conversation with CartHook. In addition to bundling or upselling, Wong says there are other ways to get customers shopping.
“When we talk about AOV, the main goal is to sell. Everyone thinks that you just need to upsell or cross-sell them. And while that may be true, there are other ways too. You can give them better incentives, like free shipping offers, or give them free gifts at a certain threshold.” Wong continues with this piece of advice: “If you were to go with the upsell or cross-sell method, one of the best methods I’ve found is on the product page itself. You provide variants of bundles, rather than a click-add-to cart upsell.”
- Gift cards are an option. Depending on forecasting, promoting gift cards might be a good way to go this holiday season. It allows the brand to make sales during critical holiday shopping and reduces demand on already-stressed inventories.
While the current landscape might feel unique to most of us, it goes to show how many moving parts there are in the supply chain. To keep things running smoothly, everything has to work just right. But how long can we expect to last until the next snare?
What does the future hold for ecomm? Expect it to happen again.
Brands have discovered a lot during the current shipping crisis, but there’s still a lot to learn. It’s also not likely to be the last time this type of congestion will occur.
This is a great time to take a look at the infrastructure of your brand and see where improvements can be made. Creating a system for predicting and forecasting demand is helpful in reaching customers any time of year – and being ready when demand is high.
What happens when you spend the better part of two years trying to manage shutdowns, delays in production because of a limited workforce, and increased costs (for both labor and materials)? It’s exhausting for even the most weathered business owner.