What Is eCommerce Fulfillment? Three Main Types Of eCommerce Fulfillment

eCommerce fulfillment is the heart of the customer experience, isn’t it? Definitely, eCommerce fulfillment is a core of customers’ expectations.

• 61% of customers responded leaving a transaction due to an extra cost such as shipping fees.
• 96% of customers say that a positive delivery experience would motivate them to purchase from the same company again in future. 
• 94% of consumers blame retailers for poor delivery.

Undeniably, eCommerce fulfillment, today, is one of elements increasingly driving customer loyalty and keeping customers coming back to your eCommerce business rather than to your rivals. Although eCommerce order fulfillment may not be the most interesting phrase of running an ecommerce business, it is an aspect that directly affects your bottom line. The best eCommerce fulfillment strategy helps transform logistics from a cost center to a revenue-driver by enhancing conversions and boosting more sales. 

Hold on, before you streamline and optimize your eCommerce order fulfillment process, you must know what it is.

What is eCommerce fulfillment?

eCommerce fulfillment is an important eCommerce business process referring to a process of preparing and placing the products you sell online to the customer’s hands. The process mainly involves warehousing, processing, packing and shipping the orders as well as managing any exchanges and returns. Every eCommerce business is responsible for order fulfillment whether they handle in-house fulfillment by themselves or outsource a third-party providing order fulfillment service. 

In fact, eCommerce fulfillment definitely has been an integral part of every eCommerce business from the start. So, an effective and reliable eCommerce fulfillment gains trust with customers, retains them and keeps them satisfied. What if product delivery doesn’t meet customers’ expectations, or items are damaged during transit? Fulfillment problems like these can truly hurt your business.

Deciding an eCommerce fulfillment strategy to use

1. Third party logistic – 3PL

Third-party logistics, short term as 3PL, is used interchangeably with fulfillment warehouses or fulfillment centers. A third-party logistics company provides the same task of a fulfillment companies including all tasks of the order fulfillment process within their fulfillment centers:

• Transportation
• Warehousing
• Picking and sorting
• Inventory management
• Packing
• Last-mile delivery
• Exchange and return management
• Quality control

Different 3PL services companies specialize in different types of fulfillment and warehousing that will vary depending on your needs, including kitting, custom packaging, B2B orders, FBA prep, temperature control or refrigeration, and more.

Advantages: 

• Reduce operating cost: Renting inventory, acquiring technology infrastructures such as monitoring inventory to tracking shipments, payment processing to customer data security, hiring employees and purchasing packing supplies require a huge financial investment. Working with an order fulfillment service provider is a budget solution for small business and eCommerce retailers.

• Lower shipping cost: Fulfillment centers normally have a contraction with national and global shipping companies resulting in bulk delivery discounts. Strategic partners, or tiers, are frequently given discounts on services. Using fulfillment service means that your package will be treated as a tier account item rather than a general customer.
• Scale up your business: Fulfillment process, supply chain management, global trade tariffs and other regulatory issues can be complex and daunting for SMEs to expand their business nationally or globally. With its distribution networks and global expertise, modern machinery and highly qualified and experienced staff, fulfillment companies will help you take your business to the next level and increase sales in new locations and markets.

Disadvantages:

• Loss of control: When you outsource 3PL means your ability to monitor and control product quality is reduced as you can’t directly involve in the order fulfillment process. There are many uncontrolled factors like shipping problems, item damage, or wrong item delivery. That is all about 3PL company’s faults, but your eCommerce store has fully responsible for these unexpected problems and negative feedbacks from customer 
• Sometimes it costs too much: If your eCommerce business is still in its infant stages, working with a 3PL might require more costs than you have on hand. So our advice is you should use order fulfillment service only if your eCommerce store receives an overwhelmingly large amount of orders.
• Lack of customization: Custom packaging generates a memorable and personalized unboxing experience that is an effective way to build customer loyalty, but some third-party logistics providers force their customers to use their own standard packaging instead of letting you use your own custom packaging. 

2. Dropshipping:

Dropshipping is an order fulfillment method that doesn’t require the merchants to keep products in stock, order inventory in bulk, or physically fulfill the order in any way. Instead, the sellers sell their products, and pass on the orders to a third-party supplier whenever the orders have been placed, usually a wholesaler or manufacturer to fulfill orders. That means the sellers don’t have to directly handle the products. All you have to do is set up an online storefront and focus on marketing, branding, and customer service to attract more potential customers. After adjusting the marketing costs, the profit you get is the difference between the price you pay suppliers and the price your customers pay you.

Advantages: 

• Less capital is needed: Since you don’t have to invest a lot of money to open a brick-and-mortar store, own inventory, hire employees, or manage the fulfillment process, dropshipping has the potential to lower your overhead costs.

• Multi-channel selling: You can use dropshipping for your business while selling on your own domain, through a store on Amazon, Shopify, eBay, or other social media channels.
• Flexible operating location: Dropshipping allows you to expand your businesses globally regardless of your operating location, opening up a possibility to work from anywhere.
• Scalability: Leveraging suppliers can make it feasible to access wider customer segmentation and more orders without increasing the investment for logistic and inventory management.
• Easier to test: Since you don’t need to store any inventory. There is no chance to get inventory backlogs of any products that cannot be sold.

Disadvantages:

• Large competitors: Since dropshipping doesn’t require as much operational capital as the traditional retail model to get started, it is a highly competitive field. 
• Less control over product fulfillment : Do dropship means your ability to monitor and control product quality is reduced as you can’t directly involve in the order fulfillment process  reduces your involvement in the order fulfillment process. 

• Branding: Because the products you sell may not be unique or distinguishable from similar offerings by other sellers, it’s quite difficult to differentiate your offering to other rivals. 
• Profit margins: The cons are the nature of the business model is expensive, you miss out on the economies of scale that come with purchasing in bulk. So your bottom line isn’t as good, but your risk is a lot lower.  Plus, if many sellers sell the same product, your bottom line can suffer as the prices need to be adjusted down to stay competitive.

3. In-house order fulfillment 

As the name implies, in-house order fulfillment or self-fulfillment is when an eCommerce store is responsible for handling all the stages of the eCommerce order fulfillment process, from storing, managing inventory to picking, packing and shipping the products to the end customer by themselves instead of outsourcing a third-party fulfillment service provider. 

Advantages:

• Complete control: Self-fulfillment means you can thoroughly control over the end-to-end process. You’re in charge of everything from packaging each order to making sure each parcel is shipped out correctly. 
• More opportunities for branding: Packaging is a core part of building a brand’s image and identity as well as relationship between customer and your , in some cases, long after the sale has been made. So, another big perk of keeping fulfillment under your roof is that you can custom your packaging! Let’s make fulfillment a great marketing opportunity.

Disadvantages: 

• Time-consuming: The entire process of eCommerce self-fulfillment is rather cumbersome taking many valuable time that could otherwise be spent on developing new products, planning marketing strategies, acquiring and retaining customers.
• Limited product diversity and quantity: Storing and shipping orders from your place of business is a common approach for smaller brands. This option may limit the variety and quantity of products you can store and sell, and it could increase your overhead expenses.
• Additional costs:  You have to acknowledge that the cost of managing inventory goes beyond renting a warehouse. You have to factor in various additional costs, software, equipment, employee salaries, and other financial expenses, such as insurance.