The digital world has made us all more impatient. We expect technology to make things faster, and we get frustrated when we have to wait.
This applies particularly to ecommerce customers, who demand speed in everything from online searches to the checkout process to customer service responses.
Savvy customers are also seeking value for money, and they want the lowest shipping rates alongside the shortest delivery time.
In fact, 61 percent of shoppers say they will abandon their cart if shipping rates, taxes, and other fees are too high.
And 43 percent of online shoppers expect their purchases to be at their front door within 24 hours.
You can sell amazing products in your ecommerce store and be brilliant at marketing them – but the whole thing falls apart if you can’t get those products to your customers quickly and efficiently.
The process by which orders reach the customer is known as Ecommerce Fulfilment, and it can be a tricky thing to get right.
But, if done correctly, it should actually increase your revenue by improving conversions and driving sales.
What is Ecommerce Fulfilment?
Ecommerce fulfillment is the process that ensures customer orders can be fulfilled.
Similar to how to manage a small business, this includes management of the supply chain, storage of your stock, “picking and packing” the products, and shipping the orders to the customer.
It’s used in B2B for large-scale orders, and in B2C for individual consumers.
The process can be completed in-house by the ecommerce company itself or outsourced to a third-party provider.
There are multiple elements to the ecommerce order fulfillment process, such as managing stock, planning delivery routes, choosing the best packaging, and training your staff.
And they all need to work seamlessly for a perfect customer experience!
Ecommerce Fulfilment Process
1. Management
Order management involves receiving, keeping track of, and fulfilling customer orders across all your sales channels. Ecommerce businesses should be able to manage all orders in one place, from when they are placed to when they are shipped.
For this to run smoothly, you’ll need ecommerce software and screen sharing software that integrate seamlessly with your platforms and online stores.
Automated systems will alert fulfillment staff as soon as an order is placed so that processing and shipping can take place as quickly as possible.
This technology also provides an important connection between ecommerce stores and fulfillment centers, giving real-time order tracking information, visibility of inventory levels, and forecasting projections.
2. Inventory
For order fulfillment to take place, you need to have the items in stock – this is your inventory. Inventory storage, also known as warehousing, keeps your products secure and allows your operatives to see product availability.
However, a fulfillment center is not a warehouse. Rather, a warehouse is part of the set-up. A fulfillment center is where goods turn around quickly, while a traditional warehouse or storage unit is where you store products that are going to be held for a long time, such as stock for the following Christmas.
Inventory management is an important part of the process, involving monitoring, ordering and restocking, and forecasting.
The best ecommerce software allows you to see at a glance what stock is available, and when to order more. It can even route each order to the fulfillment center closest to the customer.
3. Processing
Processing orders – also known as picking and packing – is when warehouse staff collect the item from storage in crates or pallets and get it ready to ship.
They should be provided with clear instructions on what packaging materials to use, plus packing slips and shipping labels.
Processing may also include “kitting,” when staff needs to assemble multiple components of a product before it is shipped. This can be an expensive and time-consuming service to complete.
4. Shipping
Depending on the size of your operation, packages are either taken to a local post office or collected by a carrier.
It’s important to track all packages and to share the information with the customer. Even if there’s a delay, you should manage customer expectations by keeping them updated using apps like zoom.
If you’re shipping internationally, you’ll need to be aware of the different regulations, tariffs, taxes, and requirements for each country.
5. Returns
When items are returned, they are processed for a refund or an exchange. Returned items can be restocked in your inventory, or disposed of if they are damaged or faulty.
Having the right return policy is vital, as ecommerce has a much higher return rate than bricks-and-mortar retailers. And 79 percent of customers say they won’t purchase from an online store that charges return shipping fees.
Some fulfillment services provide prepaid return labels, and automatically send return and refund updates to customers.
Your returns system needs careful planning and the right people and processes for it to run smoothly.
Ecommerce Fulfilment Services: Pros & Cons
Ecommerce fulfillment services are provided by many companies, offering a wide range of features for convenience and efficiency. Amazon is still the major player, but there are others in the game providing similar services, such as Shopify.
eBay planned to launch its own end-to-end fulfillment service to handle the storage, picking, packing, and shipping of eBay orders, but it hasn’t quite happened yet. However, as the importance of seamless ecommerce fulfillment continues to grow, so will the array of service providers.
If you’re considering outsourcing your ecommerce order fulfillment, choosing which to use can be difficult. Here’s an example of the advantages and disadvantages of two providers.
1. Fulfilment by Amazon (FBA)
FBA is when an Amazon.com seller sends their products directly to Amazon’s own fulfillment centers, where they are stored and orders are fulfilled.
Pros:
- Two-day shipping and other customer engagement strategies will be appealing
- Clear pricing model so you know exactly what you’re paying for
- Extensive worldwide network of fulfillment centers
- Amazon branding lets customers know they’re in the hands of a well-known brand.
Cons:
- It’s the priciest of Amazon’s order fulfillment services
- FBA is only for products with Amazon Prime status
- You can’t use your own branding to help build your identity
- Amazon will get its hands on your customer data.
Amazon also offers Seller-Fulfilled Prime (SFP) and Fulfilled by Merchant (FBM) options, whereby someone other than Amazon fulfills orders placed on the marketplace.
2. Fulfilment by Shopify
Shopify now runs a network of order fulfillment centers in a similar way to the well-known Amazon model. The big difference is that you get to keep your own branding, something that is very important to growing businesses.
Pros:
- Two-day shipping, just like Amazon
- Use your own packaging and retain your brand identity
- Control over your customer data
- Convenience: Orders placed on other ecommerce platforms are forwarded to your Shopify account automatically
- Full visibility of your inventory level with real-time updates.
Cons:
- The premium service and many of the advanced features cost more
- Harder to keep an eye on quality, as Shopify uses various fulfillment providers
- Setting up third-party fulfillment can be complicated
- Not such a well-known brand as Amazon
- It’s a new service, so the network of fulfillment centers is relatively small.
Ecommerce Fulfilment Models
Making the right choice for how you fulfill orders will depend on a range of factors – including your order volume, the type of products you sell, and what you’re willing to manage yourself.
Here are the three most common methods of order fulfillment.
1. In-house fulfillment
Also known as self-fulfillment, this is the DIY option that doesn’t involve a third-party logistics provider. It’s usually used by individual sellers or smaller businesses, who ship from their own homes or small premises.
This method gives you complete control of your inventory, plus processing and shipping. When you’re starting out, this is a low-cost option because you’re doing most of the work yourself and only paying for shipping costs.
In-house fulfillment is suitable for businesses with limited cash flow or limited daily order volume, and highly-specialized businesses.
However, self-fulfillment can become time-consuming for a growing business – you’ll be packing boxes when you could be spending the time on marketing or responding to customers.
Costs will also increase as you begin to require warehousing, specialist equipment, software, and staff, plus higher shipping costs.
When a business has grown to a certain point, a decision must be made on whether to outsource fulfillment or invest in a larger-scale fulfillment infrastructure.
2. Third-party fulfillment
This is where you hand over the management of your distribution infrastructure to a specialist company, which handles the process within its own fulfillment center.
These companies offer logistical expertise and capacity and are able to negotiate discounted bulk shipping rates from carriers. It means you won’t have to worry about or invest in warehouse space, software, or a workforce.
Third-party fulfillment allows you to focus on marketing, enhancing your products, and ultimately attracting more customers. It can also give you expanded reach to sell products across the world.
However, you’ll have to trust someone else with your precious customers and their happiness. The quality of your products and customer service might be compromised when you’re not looking after everything yourself.
Of course, you’ll also have to pay your fulfillment partner’s fees for receiving inventory, storage costs, packing materials, and shipping.
3. Dropshipping
This option means that all the products sold in your online store are produced, stored, and shipped by the manufacturer. The seller never actually holds the products.
When a customer places an order with the seller, the order is forwarded to the manufacturer, who “dropships” the product directly to the customer.
The advantages include easy set-up and no overheads, meaning you can focus on other aspects of business – and also have access to more products to sell.
But it can also mean lower quality control, no option for customization of products, and the logistical headaches of coordination with multiple dropshippers.
Plus, if there’s a problem with the product or the delivery, your customer won’t care that it’s the dropshipper’s fault – the buck still stops with you!
How to Decide on The Right Ecommerce Fulfilment Model For You
Picking the most suitable model for your ecommerce business is crucial, as you can’t afford to get this wrong – if you lose customers as a result of a poor fulfillment experience, they will quickly turn to your competitors. One study shows that 38 percent of customers say they’ll never shop with a retailer again following a negative delivery experience.
The right ecommerce fulfillment model depends on the size and nature of your business. If you are perfectly happy doing everything yourself, and you have the time and space to do so, then in-house fulfillment will work for you.
However, there can be hidden costs with self-fulfillment. For example, if you decide to sell via Amazon, remember that they charge all sellers 15 percent of the product’s selling price on each product sold, regardless of the fulfillment method.
Self-fulfillment may become a burden for a fast-growing business, as you struggle to manage the supply chain, run out of space to store your inventory, and lack the time to complete all the tasks yourself.
If you’ve chosen to go down the third-party logistics route, you should take time to decide which fulfillment partner is the best fit for your business.
It makes sense to pick one with similar industry experience and similar clients to yours, while you should also consider pricing, quality control, and how their technology integrates with your own multichannel ecommerce software.
Some of the best fulfillment company features include seamless integrations, multi-channel fulfillment, multiple fulfillment warehouses, and easy returns management. Of course, you need to ensure your budget can accommodate all the features you desire.
The location of your ecommerce fulfillment center can be crucial to your overall success, as it impacts both the costs of storage and the speed of shipping.
It may seem cheaper to buy or rent premises in a more rural location, but in reality, it may be more difficult for orders to reach the customer – affecting your ability to offer fast shipping options. That’s one reason why urban fulfillment centers are on the rise, as their location in populated areas puts them closer to the customers.
However, choosing the right location depends on the type of business. For instance, large B2B ecommerce orders require much more storage space and shipping time may not be so crucial, so a rural warehouse would be a suitable option. But B2C inventory, going direct to the customer, is better stored in urban locations closer to where most recipients live.
Data analysis can help you choose the best location for your fulfillment center. Look at your order history to see popular shipping destinations and zones, as well as average shipping costs and timings.
Another option is to distribute your inventory to multiple locations. Splitting inventory helps keep your products close to customers in different parts of the country, which reduces the distance each package travels and therefore saves time and money.
Remember that you’ll need to be ready for higher volume sales and shipping in busy periods.
Conclusion
Speed is the key! Customers don’t want to wait a moment longer than they have to for their orders – and if you can’t deliver, they will quickly look elsewhere. Fast shipping options and low fees are the top ways to attract and keep customers.
Choose the ecommerce fulfillment method that best suits your business, whether you’re just starting out or growing exponentially. Be aware that you may need to move to a different fulfillment model as your business changes.
Invest in the best B2C or B2B ecommerce software solutions to ensure efficiency at all times – the aim is to keep the entire process running as smoothly as possible. Automated systems will save time and money, and reduce customer problems or complaints.
A well-planned and well-executed ecommerce fulfillment strategy will ultimately improve conversions, increase revenue and keep customers coming back for more.
Read more: 4 Ecommerce Services Every Digital Entrepreneur Needs To Know About
This article was written for Business 2 Community by John Allen.
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