For enterprises engaged in e-commerce, order fulfillment has become a key focus to acquire and retain customers.
After price, shipping speed and cost are the most important factors in consumers’ purchase decisions. A recent study by Walker Sands Future of Retail found that free shipping was the number one motivation for people to shop online, followed closely by one-day delivery and free returns.
For small businesses, having a forward-looking, customer-friendly transportation policy is just as important as having a quality product at a good price.
That’s why e-commerce businesses are looking for ways to optimize their e-commerce fulfillment processes and maintain the integrity of their brands from the purchase process all the way through to the shipping experience. There are many ways to optimize your order fulfillment. Some e-commerce entrepreneurs outsource the shipping process to third-party order fulfillment companies that store, sort, pack, ship and return inventory. Others want to maintain control and be responsible for shipping themselves.
There are also order fulfillment methods in which retailers and suppliers do not process or even view the products they are technically “selling”. Instead, they act as a sort of conduit between wholesalers and customers. This is often called “direct selling”.
Many businesses like direct selling because it allows them to focus on what sets them apart in their space — their marketing, their advertising, their product development, innovation, etc.
Fulfilling orders on your own
If you want complete control and oversight of all content, you can store, select, package and send all content to customers yourself.
This approach has some real benefits. You can ensure quality control of inventory; You will retain all communications with customers internally to ensure a timely response to any service issues; Your margins will be higher (allowing you to write bigger checks or reinvest more in your business); And you are not responsible for another company’s shipping errors.
Here, you have complete control over how your company receives orders and sends them to customers. If you have a good inventory management system and can easily coordinate between various shopping channels (your own website, Shopify, Amazon, and any other outlet), you can build a reputation as a reliable order fulfillment person.
Being able to add any and all personal touches to your shipment, from your logo to personalized thank you cards, is another huge brand driver, especially for small volume sellers.
Third party standard order fulfillment
You can outsource performing duties to any number of qualified and respected third party services. There are several different ways this can work: Maybe your business is still making the product, but then shipping it to a third party for storage and final shipping. Perhaps your supplier is sending the product directly to a third party.
Make sure you get a well-known and highly respected fulfillment service.
Either way, you’ll be asking another company to handle your order fulfillment, which makes them an integral part of the customer receiving the product. Make sure you get a well-known and highly respected fulfillment service.
After selecting this option, you don’t have to worry about carrying costs of inventory, starting with renting and maintaining warehouse space, but including cargo insurance, etc. You may think that once you buy or produce inventory, you’ve already paid for it, but the truth is that you can still end up paying for them while they sit on the shelf unpurchased.
You can also perform mixed order fulfillment, where fulfillment services handle some orders and your company handles others directly. This is helpful for companies that are primarily regional but want to extend their brand name and operations to new parts of the country or world. You can process goods closer to home, while fulfillment services process orders closer to their warehouse.
Order fulfillment by dropshipping
Another type of fulfillment is called direct selling. Unlike other ways of working with retailers and fulfillment companies, in direct selling, retailers have nothing to do with inventory other than selling their ideas to customers.
Instead, retailers essentially buy products from wholesalers or manufacturers on behalf of their customers and tell them, “Hey, instead of sending it to me, how about mailing it directly to the customer?” Retailers then take the difference between the selling price and the purchase price as their profit.
It’s a win-win for all parties: retailers can use large amounts of inventory that they can’t handle or store themselves, while wholesalers or manufacturers don’t need marketing or promotional inventory at all to make a sale.
One area of concern, then, is your brand. If you are just the middleman between the customer and the manufacturer, how will your company be attractive enough that consumers will choose to search inventory through you instead of themselves? If consumers buy your product and then their package comes from “Some Other Company, Inc.,” it doesn’t do your brand much good.
You can partner with order fulfillment companies that provide “white label” shipping, including private labels. The white label is just a generic packing list included in the package, so the consumer cannot identify the distributor and try to buy through them next time.
But private label consignment is when an affiliate adds your company’s brand and company address to a package that looks like it came directly from your office. Choose this option if you have a nice logo, want to give customers priority, or just want to reinforce the brand name.
Other benefits of going with a third party
Whether you use standard order fulfillment or consignment, there are other benefits to giving up on this side of the business.
First, if you’re not focused on product development, marketing, innovation, sourcing, staffing, and customer experience, then you’re not really focused on what makes your business your business. Getting rid of the details and bolts of getting your product into the hands of customers frees you up to spend more time and energy improving the areas you already excel at.
Second, if you use a highly regarded fulfillment company, you’re less likely to have delivery and fulfillment issues that make customers refuse to shop with you altogether. If you don’t have an item in stock, 23% of your customers will jump straight to a competitor’s product. That’s how you turn a loyal customer into a loyal customer for another company.
It is becoming standard operating procedure for companies to outsource parts of their business that they are not good at handling. Order fulfillment is one of those areas that generally makes sense from a financial standpoint as well as a logistic standpoint. Focus on what makes your business special and worth your customers’ time, and let these other companies focus on what every business needs: a reliable receiving and shipping process.