Ecommerce Fulfillment Explained

Fulfillment refers to the process of preparing and shipping goods to the buyer. And it’s a facet of ecommerce automation software. While large companies carry out all the business processes themselves and optimize planning and monitoring by implementing ecommerce fulfillment software, small firms and internet stores prefer to outsource the fulfillment process to companies specializing in it.

What is ecommerce fulfillment?

Fulfillment is a set of operations that the seller performs from the time the buyer places the order to when the order is delivered to the buyer. Most often, fulfillment is a core function for online retailers. The fulfillment essence lies in the transfer of all logistical processing of an order to the appropriate fulfillment center.

The fulfillment services include storage, order acceptance, order processing, picking and packing, delivery arrangements, receiving money from buyers, and processing returns. The process of sending merchandise to a customer often involves many steps of work other than the direct packaging and shipping to the destination:

• Storing the product or its components in a warehouse
• Manufacturing and assembling the products
• Packing the order using paper envelopes or special boxes
• Creating a shipping note
• Sending the goods using the most convenient and profitable transport companies
• Sending emails to buyers with tracking numbers
• Processing payments from buyers and transferring funds to the company

You don’t have to pay for all of these features when using fulfillment services.

Advantages and disadvantages of outsourcing ecommerce fulfillment

The advantages of outsourcing ecommerce fulfillment include:

• Reduced costs
• Reduced cost of maintaining the warehouse and packaging
• Increased speed and quality of delivery
• Inventory management
• Work with returns
• Ability to track KPIs
• Ability to arrange for self-delivery
• Reduction of the number of tasks to be performed by a salesman

Disadvantages of outsourcing ecommerce fulfillment include:

• Availability of a middleman and dependence on him
• Information risks – all order data is kept by a third party
• The seller does not have free access to the warehouse
• Withdrawal times (if the operator accepts payment) and document cycles are longer
• You have to pay for the warehouse regardless of the workload
• Bundling errors are beyond the seller’s control

If you are an entrepreneur who does not want to spend extra money on maintaining a warehouse and hiring warehouse personnel but finds it increasingly difficult to cope with the increasing flow of orders, consider fulfillment services.

For whom is ecommerce fulfillment ideal?

For small companies, partnering with a fulfillment company often comes down to time. There may not be enough time to prepare the product and ship it to the customer, and sometimes there just isn’t enough time to handle the flow of orders.

This is especially true for seasonal businesses. In this case, hiring additional employees is not always justified from a financial point of view. Cooperation with a fulfillment company can fully cope with the sudden influx of buyers. But working with a fulfillment organization doesn’t have to be only for the sudden growth in the volume of orders. They can cope with the rapid growth of orders and handle all the necessary actions in time. 

Another problem lies in space. Do you have enough space to store products? Or should it be used for other needs? Only you can answer this question correctly.

And the last point is the quality of product packaging. Do you always have the ability to follow product handling and packaging standards? If not, it may be worth starting a partnership with a fulfillment company.

So, fulfillment helps ecommerce solve the following problems:

• Reduce cart abandonment rates. Customers happen to abandon carts if they are not satisfied with delivery options. Fulfillment offers more options, faster delivery times, and often lower shipping costs than if the seller delivers the goods in-house.
• Bad feedback. Fulfillment operators can handle input for the seller and improve service.
• Inventory mismatch. Fulfillment operators can manage inventory and make recommendations to the seller.
• Handling a large number of orders. A salesperson may have difficulty handling a large number of orders, whereas a fulfillment operator has disproportionate resources to do so than a small store.

Amazon is considered the fulfillment pioneer. It was the first company to provide packing and delivery services to sellers trading on the marketplace.

How do ecommerce fulfillment companies get paid?

Each fulfillment company has its operating structure and capabilities. Some companies can print and create books, while others keep finished products in-house and send them to customers as orders come in.

Most fulfillment firms are based on payment for each shipment of merchandise. The more order flow you can provide, the lower the price per checkout. With this payment method, it’s easy to see if you can afford to outsource or if it’s better to continue doing all the work yourself.

Outsourcing to fulfillment is highly recommended for online stores, even when the turnover is not yet too high. You outsource part of the responsibilities, and you get the time that can be successfully spent on business development.

When choosing a fulfillment company, you should pay attention to:

• Size of storage space. The bigger, the more reliable the fulfillment company is and the more technical possibilities it has.
• Number of delivery options and work with many services. The more possibilities the fulfillment company has, the more chances that the goods will be delivered to the most remote corners of the world at the best price.
• Staff. The more it is, the better and quicker orders will be processed and delivered, which is especially important during the holidays and high sales.

Thanks to commerce evolution, businesses now need fulfillment services to build logistics and ensure the smoothest possible order fulfillment. Fulfillment as a service is good for online stores, and they often outsource it to specialized fulfillment centers (operators). This avoids problems with returns and reduces the likelihood of negative feedback on delivery.

Conclusion

Ecommerce fulfillment is suitable for online stores that, for whatever reason, cannot hire staff and maintain a warehouse. It is more profitable for them to outsource order fulfillment, and they can increase the number of orders themselves. Using fulfillment can also increase the level of service. The seller does not have to spend a lot of resources on training and hiring new employees. In addition to online stores, ecommerce fulfillment is used by wholesalers and entrepreneurs involved in foreign trade.