Did you know that some numbers predict that ecommerce sales will make up 24% of total retail sales worldwide by 2026–nearly a quarter?
There is more to the success of your online shop than just a well-designed site and savvy advertising strategies.
Logistics, or how you plan to fulfill orders placed by customers, significantly impacts both customer satisfaction and the profitability of your business.
Likewise, the timeliness and precision of your delivery can significantly impact your clients' overall experience and their likelihood of becoming loyal customers in the years to come.
In this tutorial, we'll go through the 4 most dominant fulfillment strategies for ecommerce stores that can be the most beneficial to your business in terms of fostering sustainable, revenue-generating expansion.
Let’s get started!
Ecommerce fulfillment is the process of fulfilling the orders that customers make on your site.
Several steps make up the fulfillment process to get your products to the customer's doorstep, which we'll discuss shortly.
It's vital to remember that the fulfillment procedure begins with placing an order, continues with inventory management, and concludes with the goods delivered to the consumer.
Yet, return management is one of the most crucial components of ecommerce fulfillment in case a client wants to return or exchange an item.
Each ecommerce store will have its own set of criteria to consider when deciding on a fulfillment method.
Here are some of the factors that might influence which fulfillment method you utilize:
Clearly, it is the responsibility of the retailer to coordinate all of these actions so that the customer has a seamless ordering experience.
Now, let’s take a deeper look at each stage of the ecommerce fulfillment process.
Here, we'll examine the various phases of the ecommerce fulfillment process in this section in greater detail.
This way, you'll understand what to expect as an online seller, allowing you to determine the most appropriate fulfillment model for your business.
Providing stock is the #1 priority in any fulfillment system.
Before making wholesale or white-labeled products available to the general public, some online retailers add a markup to the price.
Conversely, other shop owners prefer to make their wares in-house rather than buying them from a distributor.
In either case, you first must determine the best way to fulfill customer orders.
For instance, if you are not making your products in-house, you must source an external provider who can deliver on both quality and cost.
Solutions such as Relex can bridge the gap between demand, merchandise, supply chain, and operations planning for retailers and consumer brands.
This platform is just an example of many out there that can help you organize your inventory correctly.
Thus, you should conduct some research in order to find the most suitable solution for your business.
This way you’ll foster a positive customer experience and reduce product returns.
Finding warehouse space to keep inventory is the next step in creating a fulfillment strategy.
As part of the inbound logistics of an online store, you will either use a third-party ecommerce fulfillment center or set up and run your own warehouse.
A garage or a small storage space can be a good start for your fledgling online shop.
However, as your company expands, you'll need to find a bigger warehouse to accommodate your more complex order fulfillment requirements.
A Fulfillment by Amazon (FBA) account is an excellent solution for both - a service that enables sellers to store their inventory in Amazon's facilities (regardless of the inventory size requirements).
Storing your stock in a warehouse ensures its continued security. And, if you locate one near your customers, you can cut shipping times and costs.
With a solid fulfillment strategy it is also crucial to closely monitor stock levels, even after placing your initial order or finishing production.
The bottom line is that you need to keep products in stock at all times, but you also want to keep inventory from building-up to the point where it disrupts cash flow.
For instance, manufacturing, distribution, retail, ecommerce, brands, and third-party logistics providers can all benefit from Streamline's inventory forecasting capabilities (GMDH software).
You can do some forecasting on your own, with the help of tools, or you can consult a warehousing partner for insight.
Once a customer purchases on your website, you'll need a system to monitor its progress and ensure prompt shipment.
To process orders quickly and accurately in real-time, it is necessary to integrate your sales channels with the warehouse management system.
Let’s briefly overview 3 most important aspects of order processing:
After the warehouse receives the order or you process it yourself, the products in the order must be packaged and ready to ship.
Since you don't want your customers to receive the wrong products or have parts of their orders missing, accuracy is essential during this stage.
Therefore, once the package has all of the necessary contents, it can be delivered to the logistics company.
Finally, customers receive their goods.
Today's consumers care about shipping costs and speed, so nailing both can boost your business.
Thus, positive delivery experiences can increase customer word-of-mouth and repeat purchases.
We'll discuss self-fulfillment, drop shipping, third-party fulfillment, and Amazon FBA below, but many small ecommerce stores do this.
Ecommerce returns processing is the final stage of fulfillment strategy.
While returns are inevitable for any online retailer, they can be kept to a minimum with careful packaging and high-quality products.
Restocking for new orders, issuing exchanges, and processing refunds are all part of the reverse logistics process.
Despite the difficulty it may cause for retailers, with a streamlined return policy you can ensure long-term business and happy customers.
Following the fulfillment process's steps can give you a clearer picture of what needs to be done after a customer places an online order.
However, your online store's specific requirements will determine the best fulfillment model for your company.
Let’s walk you through the major models that you can choose from.
With this in-house strategy, you handle everything on your own, from storage to returns.
As your business expands from your garage to a warehouse, the time and money required to continue manufacturing your products in-house will become too much to bear.
This model gives you the most control over the fulfillment process but requires you to invest in insurance, software, hardware and hire staff.
Online merchants often use dropshipping as a distribution strategy.
Using this approach, you won't need to worry about stocking or managing any physical goods.
Instead, you list products on your website, and when an order comes in, a dropshipping partner with a fulfillment center handles the order and ships the product directly to the customer.
Many online shop owners prefer this method because it requires little effort.
However, doing so gives you very little say over the procedure and the quality of service your customers receive.
Like dropshipping, using a 3PL provider enables you to outsource the entirety of the fulfillment process.
However, since the manufacturer or distributor typically fulfills dropshipped orders, this can lead to order fragmentation and higher shipping costs if products are shipped to different addresses.
When you use a 3PL service, the fulfillment center will consolidate shipping orders to customers.
Although the initial cost of hiring a third-party logistics provider (3PL) to handle your logistics may be high, doing so could save you money in the long run.
By taking advantage of Amazon's Fulfillment by Amazon service, online merchants can more easily sell their wares to Amazon's customer base.
This eliminates manual steps for retailers by automating order processing and shipment.
Furthermore, Amazon also handles returns and warehouses goods for FBA sellers.
For a fee, sellers can have Amazon store their stock, process their orders, and handle the rest of the fulfillment process.
This is a viable option for new online retailers, especially for those products for which extensive research is available on Amazon.
With a better understanding of each of the steps in the fulfillment process and the number of different models available to online sellers, let’s review some of the main considerations to make when choosing the right model for your business.
The essential element of a solid fulfillment strategy is cash flow - the amount of money that flows in and out of business over a given period.
It is the lifeblood of any business, ensuring that it can meet its obligations and continue to grow:
✔️ Inventory management - Businesses must maintain sufficient inventory. This means they must balance meeting demand with avoiding overstocking, which can tie up capital.
✔️ Order processing - Businesses need personnel, equipment, and software to process orders quickly. Businesses need cash flow to invest in these resources to process orders promptly and efficiently.
✔️ Shipping and delivery - Businesses must cover postage, packaging materials, and transportation costs. Returns and exchanges can strain cash flow, so businesses must be able to pay for them.
Businesses that want to stabilize their cash flow should practice proactive cash management.
Actions like lowering costs and raising revenues can help improve cash flow, which should be monitored and planned regularly.
The ability to quickly and efficiently fulfill orders is crucial to a company's growth and success, and you can achieve it through cash flow management.
It can be difficult for new companies to keep their cash flow steady.
If your business falls into this category, asset-based funding may present a great opportunity to cover all of your expenses at reasonable interest rates using only your assets as collateral.
One such company is Myos.
Smaller online shops may not make enough money to justify the high cost of fulfillment by a third party.
However, fulfilling orders in-house may become too complex as your company expands.
At this point, you may want to investigate alternatives like dropshipping, 3PL partnerships, or Amazon Fulfillment by Amazon (FBA).
The weight and volume of your products will influence the types of order fulfillment you can utilize.
This is because larger and heavier products will cost more to store and ship.
Plus, any products with hazardous materials or perishable items will have unique storage and transportation requirements.
Outsourcing fulfillment for lightweight products tends to work well with 3PL providers since they’re actually storing your inventory.
Dropshipping or using Amazon FBA, on the other hand, can be more cost-effective.
If you have a smaller store and you’re able to order, track, store, and restock inventory on your own, you may be able to utilize self-fulfillment.
As you grow your business, you may need to consider outsourcing for more accurate inventory planning and forecasting.
In contrast to dropshipping and 3PL methods, Amazon FBA sellers are responsible for inventory tracking and ordering.
It's important to plan ahead for where you'll keep unsold stock.
For instance, you might not need to outsource fulfillment if you sell relatively small items and can store a reasonable amount of inventory in your own home.
However, you may need to outsource if you're selling larger goods or products that need to be stored in temperature-controlled spaces.
Plus, the more business growth you experience, the more stock you'll need to keep at hand.
Lastly, you need to consider how you’ll return the items.
Ecommerce sellers deal with a high level of returns, so having a good return policy and procedures in place to deal with returns and exchanges is crucial.
The most control comes from self-fulfillment, though Amazon FBA and 3PL return management tends to be effective as well.
An online store's success depends on several factors, including the choice of a suitable fulfillment model.
It has far-reaching effects on your ability to scale and grow your online business and your access to external financing.
The ecommerce industry is dynamic, and keeping up with it can be expensive when you have to foot the bill.
However, as we discussed, the steady cash flow you can achieve with asset-based lending can help you investigate possibilities more thoroughly.
Let's see how Myos company fits into that picture.
Myos is a top asset-based lender that helps online sellers apply in minutes with lean document requirements and limited business history.
In addition, Myos doesn't require any personal guarantees for the funding, as all their lending decisions are based on the future potential of the goods you sell, not your credit history.
They have also built up a solid network of warehousing partners across Europe and the UK, allowing you to choose from a variety of fulfillment options or zero in on the one that best suits your needs.
✔️ No personal guarantees
✔️ Scheduled payments that can be adjusted at no extra cost
✔️ It is not necessary to inform your vendors or clients that you have taken out a loan.
✔️ Easy and fast transactions based on the current market price of your goods
✔️ Dependable financial and expanding companion
✔️ Money available: €10,000-€2,500,000
Get your non-binding offer right now to effortlessly start growing your business today.