An effective ecommerce fulfilment strategy can help keep customers happy while giving your business a competitive edge. With many options to choose from, ranging from in-house fulfilment to Fulfilment by Amazon (FBA)
, it’s important to know which is best suited to your business’ needs. Doing so ensures you can operate efficiently, concentrating your efforts on what matters most to your company, safe in the knowledge that order fulfilment is being taken care of.
Delivery speed can mean the difference between a sale and losing out on revenue. Customers are now seeing even a few days wait as too long, with 43% of those surveyed by Sitel Group saying that just a single bad shopping experience with a company is enough to stop doing business with them entirely.
Offering these delivery options is only possible with a robust ecommerce order fulfilment strategy. Our guide explains how you can use the options at hand to help your business to deliver excellent customer service while expanding your capabilities.
What is ecommerce fulfilment?
Ecommerce fulfilment is the process of getting customers the products they’ve ordered. It is a vital part of ecommerce operations and includes storing inventory, picking and packing orders, shipping, and dealing with returns.
Each step must work in harmony with the other, from the minute a customer completes an order to the moment they unpack their product. Even a minor delay at one stage can result in a customer not receiving their order as they were expecting. Faults in the fulfilment process can also result in damaged goods. If either of these become commonplace, an ecommerce business may be faced with unhappy customers ready to make their complaints known through online reviews. Given that 73% of online shoppers say reviews play a role in choosing where they shop, you may soon feel the knock-on effects of not having a great order fulfilment process in place.
In addition, being able to deliver items as soon as possible, especially if this means they arrive quicker than a competitor can offer, can generate customer loyalty.
To better understand how the entire fulfilment chain works, let’s look at the key aspects.
5 steps of ecommerce fulfilment
Receiving inventory: ordering the products you wish to sell
The first step is to order products to your distribution location. Depending on your chosen approach to order fulfilment, this can be a stockroom at your place of business, an ecommerce warehouse, or a distribution centre. Once inventory is ordered, you then need to consider the best storage option for the products you sell.
Inventory storage: where your products are stored, ready to be sold and shipped
Inventory storage covers how you’ll store the products you sell. The size of a business typically determines which inventory storage option to use. Companies that need to fulfil large order volumes, for example, may use warehousing. Warehousing comes with additional costs but often the only way to effectively store and process a high amount of stock.
On the other hand, those who are just starting out in ecommerce usually store products at their place of business and even at home. This reduces spend at a time when funds are tight, but will need to be reconsidered once order numbers rise.
Order processing: preparing products for shipping to customers
As soon as a transaction is completed, the order can be processed. Once an item is picked and packed, it is ready for shipment. Choosing the correct packaging at this stage is crucial. Doing so prevents products from being damaged during transit, meaning they arrive with customers in great condition.
Shipping: sending products out to customers
Once a product is packaged, it’s ready to be shipped to a customer. Again, a business’ preferred way of doing this usually depends on its size. For small companies, all orders can often be shipped by making a visit to the local post office. Larger ecommerce businesses, however, may have orders shipped directly from their inventory storage location or handled by a fulfilment service.
Returns processing: a normal part of the process that requires expert customer service
Returns are part and parcel of running an ecommerce business, with 49% of UK online shoppers surveyed in the Nielsen Connected Commerce Survey having sent something back in the last year. Whichever fulfilment strategy you use, you’ll need a process in place to efficiently deal with returns. This should also cover replenishing defective products and issuing refunds.
High return rates affect some industries more than others. Selling fashion goods usually generates the highest level of returns, with around 30-40% of items bought online returned. It can therefore pay dividends to have a robust returns process in place from the off if you’re selling goods from an industry like this.
What are the different ecommerce fulfilment options?
Choosing the best method for your business depends on several factors. Usually, these are the size of your business, how many orders you need to handle, the type of products you sell. Below we examine in-house fulfilment, third-party logistics, an ecommerce fulfilment service like FBA, multi-channel fulfilment and dropshipping, to help you decide which may best suit your ecommerce needs.
This is where you handle the entire fulfilment process yourself. Inventory is received, stored, picked, packed, and shipped all under one roof. Often, this can be your place of business or home.
Small-scale or less well-established ecommerce businesses usually opt for in-house fulfilment, as it can help reduce costs and is manageable for lower order volumes. But as your business grows, you may have to move away from in-house fulfilment. This is because fulfilling many orders in this way is time consuming and often impractical. As a result, opting for an ecommerce fulfilment service
or using third-party logistics may be more beneficial as order capacity increases.
Third-party logistics (3PL)
The 3PL approach involves outsourcing some or all the fulfilment process to an outside company. This can be anything from inventory management to the returns process. If every step in the fulfilment process is outsourced, then you can focus purely on selling products.
Choosing 3PL means you can benefit from the kind of expertise that allows customers to receive their products in a timely manner. This all comes without the additional costs of taking on additional employees. Only outsourcing key areas in the fulfilment process also means you can retain control over operations while relying on experts for others. Any outsourcing, however, still brings with it a loss of control. While this is often essential to growth, it is worth considering when adopting a 3PL model.
Due to the upfront costs, 3PL is usually favoured by larger and more well-established businesses, especially as these have the order volume to necessitate outsourcing.
Fulfilment by Amazon (FBA)
FBA is where Amazon picks, packs and ships your orders. First, you package the products you’re selling before sending them to one around 40 Amazon fulfilment centres throughout the UK. After they are sold, they then reach customers via the Amazon logistics network, with Amazon also handling any resulting customer service queries.
Multi-channel fulfilment (MCF)
This operates in the same way as FBA, but includes products not sold through Amazon. If you’re already using FBA, your existing inventory stored at Amazon fulfilment centres is used to serve customers from Amazon
and other sales channels. Orders can be marked as available for MCF in three main ways:
- Quick order creation allows you to manually create fulfilment orders one at a time, meaning it is ideal for those selling partners who want to just test if MCF is right for them.
- Bulk order creation is where multiple fulfilment orders are generated at once, ideal for those who don’t want to use an API integration for MCF or have a customer base with lots of recurring orders.
- API integration removes any manual effort by directly connecting your sales channels with your FBA inventory. It is best suited to selling partners with so many orders that manual creation is not viable and those that sell on multiple online marketplaces.
As a result, ecommerce order fulfilment for any of your sales channels can be supported by Amazon’s logistics network.
When using dropshipping
, a business may never hold stock of any of its products. Instead, you could purchase inventory from the supplier who then directly ships to the customers as and when orders are placed. This means you could solely act as a middleman between supplier and customer, allowing more time to focus on other business operations such as marketing and enhancing product offering.
Dropshipping appeals as a fulfilment method because it can reduce overheads. In addition, many suppliers have ready-made products you can start listing for sale, meaning you might not have to spend any time or money on manufacturing. Dropshipping can also be easy to scale, because even if order volumes increase, the additional workload can be handled by your dropshipping partner.
Conversely, dropshipping, just like 3PL can involve being slightly less personally responsible for your supply chain. This means you might not be able to directly address any customer complaints around key elements such as order speed and returns. Several competitors could be selling the exact products as you, often resulting in a race to the bottom on price to attract sales.
How to help choose the best ecommerce order fulfilment option for your business
Selecting the most appropriate ecommerce fulfilment approach for your business might decide whether your customers are satisfied and want to shop with you again or are disgruntled and might be ready to post a negative review.
In-house fulfilment may be right for businesses that:
- Are just starting out. This is because it can save on outsourcing costs, something that new businesses often might not be able to afford as they look to grow. These businesses also might not have a high number of orders to fulfil, meaning that dealing with them all in-house might become too time consuming.
- Need to heavily customise their orders. If every order needs to be unique to that customer, in-house fulfilment might be a helpful way to achieve this. Outsourcing this might give away control, running the risk of upsetting customers by not providing what they ask.
- Sell highly seasonal products that could result in high storage costs to have on standby all year. If most a business’ yearly deliveries are going to be made in a seasonal window, it might make more sense to skip the storage fees and opt for in-house fulfilment After all, it might not be worth paying for year-round storage of Christmas decorations if almost all your sales will come in the final three months of the year.
Third-party logistics may be ideal for businesses that are:
- Experiencing such high product demands that in-house fulfilment is no longer commercially viable. Handing over some or all of the logistics responsibilities to a third-party can help ensure large order volumes can routinely be met on time and customers are staying happy. In-house fulfilment can be a great initial fulfilment option but might become overwhelming as businesses scale. You can help to avoid this through outsourcing, freeing up your time to focus on higher value tasks.
- Starting to see negative customer feedback. Growing order numbers can soon get too much for in-house fulfilment methods. If this becomes the case, it might be time to look at a 3PL option, especially if the strain placed on your in-house approach is leading to poor customer experiences. These can quickly become the kind of negative reviews that dissuade customers from shopping with you.
- Running out of inventory storage space. If customer demand means you must order so much product that you can no longer store it, it might be time to look at using a third-party ecommerce warehouse. This way the revenue you can achieve isn’t limited by storage space; with the amount you’re paying for increasing as the business grows.
A fulfilment service like FBA may be ideal if:
- You want to provide the Amazon Prime experience to your customers: When you choose FBA, eligible offers fulfilled using FBA also carry the Prime badge, bringing with it the Amazon promise of fast delivery and trusted customer service. Amazon provides 24/7 customer support for enquiries, returns and refunds in the local languages of Amazon’s European stores.
- You want to access the Amazon logistics network: Using FBA means you can quickly gain access to Amazon’s entire logistics network. Doing so can result in a better customer experience that could boost sales by making conversions more likely.
You may want to look to use dropshipping if:
- You have low upfront capital. Dropshipping may be ideal for these businesses because it may mean money isn’t tied up in inventory. In addition, it can also reduce overheads by meaning stores don’t have to pay for inventory storage.
- Paper or bubble mailers
- Packing material such as bubble wrap or air fillers
Factors about your business to consider when choosing a fulfilment option
There are several key aspects of your business you can evaluate to help ensure you are using the most appropriate approach to fulfilment. These range from operational factors, such as the number of orders you need to fulfil, to expansion plans, like whether you’re looking to ever sell internationally.
Below we outline some points about your business you could consider before deciding on an ecommerce fulfilment option. Often, an approach is made clear by just evaluating your business needs, rather than trying to fit a fulfilment method you think sounds appealing to a business that isn’t quite ready yet.
The size of the business:
- The size of a business determines the scope of its operations, including the number of orders it fulfils.
- As a result, this information is helpful in determining a fulfilment method. For example, in-house fulfilment might not be suitable for a business doing thousands of orders a day, just as 3PL might not work for a company shipping 10 orders a week.
The type of products being sold:
- The nature of what you’re selling can also determine which fulfilment method to use. Not all products can be stored in the same way, especially those that may need special treatment to arrive at the customer in the correct way.
- Size also plays a factor. For example, heavy and bulky items may be perfectly suited to 3PL or FBA, as they might require inventory storage and management expertise. Conversely, customised items or smaller orders could be handled in-house, particularly if they are delicate products prone to breaking in transit.
How many sales channels you’re using:
- Not all ecommerce fulfilment services work across every retail channel. Companies will need to check this before choosing a service to use, meaning that several services could be required to cover all channels. While this may result in having to manage several different fulfilment partners, it can be a great way to expand your customer base by starting to sell on new channels.
- In addition, this could also be a great time to evaluate which retail channels you need to prioritise. For example, if one channel is not covered by a major fulfilment service, is it worth continuing to sell on there? Likewise, if you’re paying for a fulfilment service bespoke to a particular channel and it’s not leading to any sales, do you need to keep that channel going? Making these kinds of calls can save money while leading to a more focussed approach to selling.
Whether the business sells internationally:
- International expansion can be a way to fuel business growth. You can go from selling to just your local area to hundreds of countries across the globe just by partnering with a new fulfilment service. Not all fulfilment services offer international shipping, however, so you will need to check if your plan is to go global.
- Once one has been found that offers international shipping, businesses then might want to check how the service manages international orders.
The price of the fulfilment service:
Fulfilment services come with a range of associated costs. These include inventory storage fees for products held at an ecommerce warehouse, receiving costs and product costs.
Whether the business needs fulfilment software:
- Smaller businesses can often manually handle the fulfilment process using tools such as spreadsheets. This, however, might not be scalable, and could soon become ineffective as order numbers ramp up.
- When this is the case, specialist fulfilment software may be required. This could automate inventory management, produce pick lists and allow ecommerce retailers to track the status of customer orders.
- Better tracking can help ensure the fulfilment process runs smoothly and there are no issues. Companies can have a much greater oversight on where both their stock and customer orders are, helping to spot and correct potential issues long before they become a customer complaint or unfulfilled order.
With the right fulfilment process in place, you can have satisfied customers and business growth
The right ecommerce fulfilment approach for your business can act as a springboard for an increase in sales and therefore growth. Whether you manage orders in-house or outsource to a third-party, it’s important to ensure your fulfilment method is matched to your business needs, as well as future expansion plans. If this is the case, you can gain a competitive advantage over rival businesses by offering faster delivery options supported by excellent customer aftercare.
Failure to do so can result in hard-earned revenue being wasted, the knock-on effects of which can quickly be felt. In addition, any faults in your ecommerce order fulfilment process can cause delays for customers waiting to receive a product or incorrect and broken items. Not only can this reduce the chance of a repeat purchase but can lead to negative online reviews. These can then dissuade new customers from choosing to shop with you, which might lead to missed sales and losing out on revenue to competitors.
FBA can help your business grow
Using FBA to sell on Amazon means fulfilment of your orders is supported by Amazon’s logistics network. In addition, your products can be listed as Amazon Prime, arriving with customers the next day for free. As a result, you can focus your attention on the parts of your business that matter the most to you, safe in the knowledge everything from inventory storage to returns is being taken care of.
FBA at a glance
- Let Amazon handle your ecommerce fulfilment process, from storage to shipping to customer returns.
- Offer your products with free next day and same day delivery to Amazon Prime members.
- There’s no minimum amount for the products you can send to Amazon fulfilment centres, so you can scale at your pace while still benefiting from the Amazon logistics network.
- Minimise costs with pay as you go pricing, meaning you’re only ever charged for the storage space you use.
How much do fulfilment services cost?
This varies depending on your business needs, such as how many orders you need to fulfil and the type of products you’re selling. Fees can range from just a few hundred pounds to several thousand, with each step in the fulfilment process typically incurring a separate cost.
What is FBA and how does it work?
Anyone with a professional seller account
can use FBA. After you send products to an Amazon fulfilment centre, we then store, package and ship every eligible product sold. In addition, we also deal with any resulting customer service enquiries.
How much does using FBA cost?
The cost to use FBA broadly depends on the amount of inventory you are storing and how much of it is sold. These are known as inventory storage fees and fulfilment fees respectively. On top of this, you can also incur some occasional fees, such as when processing a return or removing inventory from an Amazon fulfilment centre. The full rate card for FBA, including a complete breakdown of all fees, can be found here
Should I outsource my order fulfilment?
There is no one-size-fits-all approach to ecommerce fulfilment, with the right approach for your business being dependent on how it operates. Below are a few quick points you might want to consider before outsourcing or using an order fulfilment service:
- Do you experience seasonal sales spikes? A short-term switch to a fulfilment service can be ideal for addressing these.
- Are you seeing an increase in orders? This might soon overwhelm your current order fulfilment process, something that might be remedied by a fulfilment service.
- Is fulfilling orders taking up too much of your time? Using a fulfilment service means you could remove yourself from the order fulfilment process, giving you the time to focus on what matters most to your business.