Ecommerce fulfillment has taken on increasing importance as a result of the COVID-19 pandemic. While eCommerce has skyrocketed forward, delivery and other fulfillment operations are lagging behind. That’s why eCommerce brands and retail companies are reevaluating their fulfillment services, both in terms of managing capacity and meeting expectations for the customer experience.
We never imagined a world in which peak season relied so heavily on online purchases, rather than in-store shopping. This move to online order fulfillment comes with new challenges.
Retailers must ask, is my eCommerce fulfillment just ‘good enough’, or on a competitive footing with the rest of the market? Is my eCommerce business profitable – and if not, how can we change that?
These questions must be addressed, if retailers want to maintain customer loyalty and their market share through their eCommerce fulfillment.
In this guide, we’ll dive into everything you need to know about successfully creating a competitive ecommerce fulfillment strategy – including what the order fulfillment process looks like, outsourcing ecommerce fulfillment, and the technology solutions available to engineer efficient, convenient fulfillment models that your customers will appreciate.
What is eCommerce fulfillment and why is it so important?
At first it seems relatively simple. You run an eCommerce business. The product is shipped through various channels to the relevant fulfillment center, warehouse or store. A customer orders your product. You pick it from the shelf, package it and send it off. The customer receives their order (and hopefully love it). The retailer’s job is done.
This paints a picture of eCommerce fulfillment a few years ago. However, in today’s age, it’s not nearly as simple. As more and more companies (of all sizes) understand the importance of eCommerce, order fulfillment services and seamless logistics are now a large part of how customers rate from, and choose, what they want to order.
That’s why eCommerce Fulfillment covers the entire process of guaranteeing that a product ordered online arrived safely in the hands of the customer who placed the order.
A typical eCommerce fulfillment process looks like this:
- Checkout – the shopper surfs an online site or retail marketplace, fills their shopping cart, and places an order. That order is directed to the business’s point of sales (POS) system.
- Inventory – Inventory should be sourced to fulfill the relevant order. For many, that can be from a regional fulfillment center, a micro fulfillment center, or even a local store. Keeping up to date inventory is a challenge that must be addressed for all online sellers. If products aren’t located in the correct locations in order to be shipped or picked-up in reasonable time, customer service will suffer and customers won’t return to the store in the future.
- Order Processing and Staging – Once your customer places an order, the fulfillment center or store begins the work of picking and packing the products for shipping. This includes getting the correct products together, packing them and staging the shipment ready for pickup by a delivery driver or customer.
- eCommerce Shipping – Once the order is ready to be shipped, a driver (either from an internal fleet or a third party carrier or logistics provider) picks up the package from the fulfillment center for shipment, or it is staged for in store or curbside pickup. Some eCommerce sellers may use a logistics provider for this step (more on this later).
- Returns – Returns are an important step of ecommerce order fulfillment. Good customer service will allow customers to return products ordered online easily and conveniently. This requires returns processing and an Inventory management system that can be updated quickly, and ensure that customers get their money back promptly.
With the boom in eCommerce came a surfeit of near-identical products. Fulfillment – specifically eCommerce fulfillment services, and the overall experience – has become a prime way for a retail company to stand out from the competition.
The effect of Covid-19 on eCommerce fulfillment
The effect of COVID-19 on online shopping has been vast. The eCommerce world has grown in 2020 in ways that were expected to take years. Much larger percentages of retailer’s revenue is all of a sudden coming from online sales. This change is welcome and exciting, but results in order fulfillment difficulties and challenges that must be addressed immediately.
Black Friday 2020 is the ultimate example of this change. Black Friday online was a tremendous success, representing the continuing shift to online. Sales hit a record-breaking $9 billion, an increase of 21.6% from 2019. Store traffic decreased 48% to 52%! In-store spending was down approximately 30%. Empty malls on Black Friday is a sight that all of us will remember.
COVID-19 pushed new customers into the online scene and boosted existing buyers to buy more than before. Baby boomers are among the newest online buyers; many, for example, doing their grocery shopping online and trying out grocery delivery for the first time due to the pandemic.
While most eCommerce businesses welcomed the boom in sales, eCommerce order fulfillment came to the forefront of priorities. If in the past brands and retailers were able to deal with their eCommerce business on their own, many found themselves seeking out retail fulfillment services in order to keep up with demand. Third party delivery companies which provide logistics services (such as supplying a temporary fulfillment center or last mile delivery services) became essential partners in order to get orders out on time and efficiently.
However, shipping and the logistics involved are not the only challenge on hand. As Amazon and the other leading players in the field upped the expectations of customers nationwide, new eCommerce retailers (or experienced stores who want to keep up with the times) need to meet growing customer expectations.
There’s a lot that goes into creating the perfect eCommerce fulfillment process. Let’s take a look into what you’ll need to make this happen as well as if you should keep the process in-house or outsource.
Optimizing your eCommerce fulfillment – what you need to know
Order fulfillment is a tricky but integral part of the success of any eCommerce business. Standards are high. Customers expect to receive their orders within hours or 1-2 day shipping, they want to receive their orders when expected and in the way that is most convenient, safe and low cost.
When launching or optimizing an eCommerce fulfillment process, your business will need to answer some important questions relating to your different types of fulfillment services, use of fulfillment centers and fulfillment services for inventory storage and management, use of a third party delivery provider, and more.
In this section we will take a look at the most critical elements that will define whether or not your eCommerce fulfillment is or will be profitable:
To work with a marketplace or create your own eCommerce site?
The big question here is whether to partner with a marketplace or to create or upgrade your own site. Both have advantages and disadvantages and this decision should be taken with great care: the implications can be wide and serious.
A marketplace is a website that offers products (and sometimes services) from multiple sellers. You can think of it like an online mall or shopping center. You arrive in one place and have a wide range of options from various different brands.
The advantages for the buyer are clear when using a marketplace. Everything is organized in one place, it’s often possible to buy various products together in one shipment and shipping terms tend to be convenient. Amazon, eBay and Etsy are just some of the most popular marketplaces today.
When it comes to order fulfillment, using a marketplace has its advantages. The marketplace will often handle your inventory management and take care of eCommerce order fulfillment from beginning to end. While this may sound nice, it comes at a cost. Marketplaces often take a large fee for each order, have inventory storage fees and more. Moreover, you’ll have little control over the delivery process and subsequently of how you meet customer expectations for the
Independent eCommerce site
Many retailers and brands today choose to invest in their own eCommerce site. While this is a great deal of work (and often expense), the advantage of having your own site is that you are in full control of the buyer’s journey and customer data. You’ll dictate the customer experience, choose your own inventory storage process, choose your own order fulfillment services, third party delivery providers, customer service and more.
Many businesses choose to combine the two methods, selling direct to consumers on their own site while making sure they have a presence on the marketplaces where their customers are. However, those brands and retailers with a strong brand loyalty among consumers are moving away from marketplaces – as Nike and Ikea did back in 2019.
What do shoppers really want from their eCommerce fulfillment services?
Convenience and cost are the main factors when it comes to what customers are looking for from their eCommerce order fulfillment experience.
The Amazon effect is strong. Amazon has taught customers to expect fast, often free delivery as well as to expect a multitude of convenient, competitive eCommerce fulfillment services. COVID-19 has also changed the preferred fulfillment option for online shoppers. In-store pickup has surged 208% during the pandemic as people want the option to pick-up quickly and safely. In fact, 60% of online shoppers have said that they will favor a store that gives the option of faster or more convenient options for shipping and order fulfillment.
Which eCommerce fulfillment services are customers looking for?
Omnichannel fulfillment is all about spreading the order fulfillment process across multiple channels. The best ecommerce fulfillment channel for one one region or target audience may not be the same for another. However, it is widely agreed that customer satisfaction will be highest when you provide multiple pickup and shipping options, so that each customer can choose what is best for them.
- BOPIS – Buy online pick up in store. As noted this has skyrocketed during the pandemic. BOPIS gives customers the advantage of being able to show up to a store when convenient for them and to receive their orders quickly. BOPIS requires organized inventory management, essentially turning stores into fulfillment centers. BOPIS also raises the question for companies on how to train and retain their staff to deal with pickup while providing excellent customer service and experience. BORIS (buy online return in store) should also be taken into consideration when setting up your BOPIS service.
- Curbside pickup – This is perhaps one of the most interesting developments in the COVID-19 era. While order fulfillment and delivery were always an option and many eCommerce sites provided in-person pickup, curbside pickup is a result of our new pandemic reality. Safety is perhaps the utmost priority in receiving orders today. People don’t want to be exposed to other people in a store (therefore buying online) but also don’t want to wait to receive their order through eCommerce shipping in certain cases. This is where curbside pickup comes into play. 75% of customers surveyed stated that when subscribed to multiple delivery services, they would continue choosing the option that provides curbside delivery! This is a critical point for eCommerce stores to take into consideration if they have retail stores and locations.
- Same day shipping – Same day shipping is a phenomenon that provides both fast and usually convenient fulfillment. Today, expectations have expanded to the point that same-day isn’t enough for many customers – they want on demand delivery. Whether it’s a two-hour or same day delivery, cost is a factor here, and most eCommerce retailers are not set up to be able to provide same day order fulfillment unless they have advanced technological systems set up and ready to go.
- Scheduled delivery – Scheduled delivery is the most traditional form of eCommerce order fulfillment. In this case, fulfillment companies (or in-house services), schedule delivery for the days following the initial order. Even in this case, when customers are seemingly less “desperate” to receive their orders ASAP, speed is important. In fact, 10-15% of customers surveyed said they would shop elsewhere if a store didn’t have retail delivery services faster than “over 5 days”. With scheduled deliveries it is important to tell customers when their order is expected to arrive and to stick to the timeline. This is why choosing a reliable fulfillment company is essential. Otherwise, you’ll find yourself with disappointed and potentially angry customers.
- Alternative delivery or pickup locations – These can be anything from local corner shops, to lockers, to partner retail stores. Offering alternative pickup locations can dramatically reduce costly missed deliveries, and customers appreciate the flexibility of picking up orders when it suits them. It’s a win-win, and a fast-growing fulfillment model, especially for a business with limited brick-and-mortar locations.
Inventory challenges: Technology and capacity
Many stores today have both in-store and online sales options. When setting up your eCommerce site, you’ll have to fully integrate with your POS (point of sales) system, to guarantee that your inventory management stays up-to-date and relevant.
Integrating POS and WMS (warehouse management system) together is a complex mission. Companies must keep tabs not only on overall inventory but where stock is located, how accessible it is, how and when it can be sent to customers, if it’s available for in-person pickup, etc.
eCommerce fulfillment providers must be able to integrate with the system each eCommerce seller has in place in order to provide updates and receive and send shipments. If your fulfillment centers don’t have the proper goods in stock, order fulfillment becomes impossible, customer expectations aren’t met, and you’ll have a hard time staying in the increasingly competitive eCommerce game.
Then there’s the question of fulfillment. Many retailers like Walmart are launching ‘pop-up’ eCommerce fulfillment centers inside of their regular distribution centers. These pop-up fulfillment centers can be scaled up or down per demand, and can be modeled for faster distribution and shipping of online orders. Use of popup fulfillment centers alongside ship-from-store and micro fulfillment centers (MFCs) will help businesses ship goods faster and offer more competitive eCommerce fulfillment services to shoppers.
Hyperlocal fulfillment capabilities
Local has become the focus when discussing eCommerce order fulfillment today. The more localized service can become, the cheaper and quicker it can be. However, when looking to deliver from stores, warehouses or MFCs, organization and technological solutions are essential in order to have visibility into inventory availability, and sync that information with your online checkout options. This way, for example, only customers with inventory located nearby would provide shipping options like same day and next day delivery, and the retailer ensures that they develop a reputation for reliable eCommerce fulfillment services.
Putting a hyperlocal focus on your order fulfillment means superb inventory management and logistics services. You’ll need to know exactly where the inventory is, if it’s available for pickup and when, how quickly it needs to reach the customer if choosing delivery options, and how you’ll get the delivery out to them (at the end of the day, many customers don’t want to choose BIPOS or curbside delivery).
This is where order fulfillment services become critical. Being able to bring fulfillment services to the local level can be a massive benefit, if done correctly, because it opens up same-day and even one or two-hour delivery. Technology is critical here to ensure that fulfillment centers can provide the right orders at the right time to the right customers. This will allow your online store to display the correct options. For example, if a certain product is located in-store or in a local fulfillment center, you can provide the option for same day pick-up or delivery. If not available, other options will be displayed. Accuracy here is key.
Another critical question that eCommerce businesses must ask themselves is where and when to outsource fulfillment in order to meet their rapidly growing fulfillment needs.
Outsourcing delivery – For delivery, the choice of using an internal fleet or work with an external fulfillment provider (or multiple providers) often comes down to shipping costs. Many companies start out by using an internal fleet in order to kick-off their ecommerce sales at their own pace and to set their own standards and potentially minimize shipping rates and costs. An internal or “owned” fleet is any fleet where you can control the delivery operations yourself (such as handling the route optimization) and can control the customer experience. This visibility and control, as well as the ability to ensure an end-to-end branded delivery experience are big advantages to using an internal fleet.
A third party fulfillment provider or delivery provider gives companies the opportunity to scale where and when relevant but come with their own set of challenges. More information about third party delivery can be found here.
Drop shipping – Some brands are turning to drop shipping to increase their eCommerce sales without building up their own ecommerce fulfillment service.
Should you outsource eCommerce fulfillment?
Now that we’ve explored the main challenges and questions around order fulfillment, it’s time to discuss outsourcing eCommerce fulfillment to an external fulfillment provider. This could be anything from a dedicated fulfillment company, expanding to additional fulfillment centers as necessary. There is a wide variety of fulfillment companies and order fulfillment services on the market today whose goals are to make your eCommerce order fulfillment easier, quicker and more successful.
There’s a reason that Amazon ranks #1 in the online retail world. When customers want to get an order quickly, with various order fulfillment services, they know that Amazon will provide the right answer. Amazon has become the benchmark of how to meet customer expectations, consistently upping the bar and challenging other eCommerce sellers to meet demands.
Marketplaces used to be the main way to outsource eCommerce fulfillment
Traditionally, eCommerce stores that didn’t want to deal with the headache of order fulfillment (among other things) would work with marketplaces. Marketplaces replace the need for a website (as discussed above) and allow a company to essentially outsource everything.
However, this is problematic. When you outsource the fulfillment process (as well as sales and marketing), stores are left with zero customer data, little or no performance stats and analytics, and perhaps most importantly no customer recognition in order to build and retain customer loyalty. While using marketplaces may be beneficial or make sense to certain eCommerce businesses, it is best to use multiple eCommerce sales channels, including your own online store.
The advantages of working with an external fulfillment provider for DaaS (delivery as a service)
eCommerce fulfillment is a complicated process that requires experience and expertise. This is why using an eCommerce fulfillment provider is the obvious choice for many online stores. This is not to say that there are no challenges involved when it comes to third party fulfillment management. There are, and therefore choosing the current fulfillment service is critical.
8 Top advantages of using an external fulfillment provider:
1. Using the optimal providers for your business needs- You’ll be able to choose the eCommerce fulfillment providers that best suit your business logic and operational requirements. This may include integrating various fulfillment companies and third party logistics providers in order to create the ultimate order fulfillment process.
2. Using the correct order fulfillment services for each delivery- An external fleet gives you the ability to choose the correct fulfillment provider and center for each delivery. This depends on inventory location, delivery method, delivery location, etc.
3. Optimize for cost, quality and availability – At the end of the day you want to keep costs down with efficiency high. This is what customer service is ultimately all about. Using an experienced fulfillment company and advanced tech, you’ll be able to provide 1 or 2 day shipping or pick up experiences, at a minimal cost.
4. Automate delivery flows and processes – A company that wants to grow its eCommerce fulfillment capacity cannot operate the logistics side manually. Automated eCommerce order fulfillment allows your entire order fulfillment process to move smoothly, lowering costs and providing much more efficient fulfillment services. Automated delivery flows can assign certain drivers to each delivery depending on route, decide how many packages should go out together, when and where customers should pick up in-store or curbside and more. (Routing capabilities will depend on your provider’s route planner app.)
5. Inventory management and synchronization, packing and shipping – External fleets will organize your inventory as well as the pack and ship process, allowing your business to focus on what’s important.
6. Offer a consistent brand experience – This is one of the major benefits of having an independent eCommerce store and it’s therefore important to maintain it with your eCommerce fulfillment providers. At the end of the day, it doesn’t matter to your customer who delivers their orders, they want the best experience possible. With a fulfillment company, you’ll be able to control the branding experience including which eCommerce fulfillment services, packaging, etc.
7. Measure and improve performance – When you’re in control of the order fulfillment process, all of the data is at your fingertips. You can measure and control your fulfillment services, meet customer expectations and maximize the eCommerce shipping and fulfillment experience.
8. Integrations – When using an external fulfillment provider for shipping, you won’t have to build and maintain integrations with your various pieces of software, inventory management, CRM, etc. Your order fulfillment provider will take care of all of the necessary integrations to make the process flow as needed.
Measuring your eCommerce fulfillment services: Where do retailers stand today?
As eCommerce shopping becomes the norm for many people, businesses must assess where their eCommerce fulfillment operations stand compared to the industry standards.
Retailers can be grouped into three main categories:
- Omnichannel maturity – Retailers with their own eCommerce sites with a wide range of fulfillment and shipping options. These retailers typically use external and internal fleets or atleast multiple carriers for each area. Curbside pickup is an option at retail stores. These retailers must focus on increasing their use of technology in order to up efficiency and drive down costs.
- Emerging omnichannel operations- Retailers with new eCommerce sites with heavy reliance on marketplaces. These retailers typically use one provider for deliveries and don’t have same-day or even 1-2 day shipping. In some cases curbside pickup is available, but must be improved and automated. These retailers must expand their fulfillment offerings, increase efficiency and automation to keep customers satisfied.
- Late Omnichannel Adopter- Retailers who sell exclusively through marketplaces. With the impact of COVID-19 and the cut that many of these retailers took on their brick-and-mortar stores, many have now realized the importance of an independent site and fulfillment process.
How to use technology in eCommerce fulfillment
Using tech applications to digitize and automate your order fulfillment process will boost your customer experience, lower shipping rates (for the business) and shipping costs (to customers), and make the entire eCommerce shipping system work in your favor.
How? Technology will help you use the existing resources in your business such as your teams and locations to manage and perform much of the eCommerce fulfillment. This could be in the form of packing and shipping orders, dealing with in-store and curbside deliveries, allocating deliveries based on inventory management, setting customer expectations with a transparent delivery process and many other essential features.
Technology today can do things that we may have never imagined were possible. By optimizing your order fulfillment process with appropriate fulfillment companies and the right technology, you’ll be able to offer incredibly efficient and accurate deliveries/pick-ups. There’s no better way to lock-in customer loyalty than by providing amazing customer service, at the right price.
The key to efficient and profitable eCommerce fulfillment: Digitize, Automate, Unify
These three main steps to guaranteeing that you succeed at eCommerce fulfillment, no matter how big your eCommerce business grows:
1. The first step is to digitize and connect your eCommerce, CRM, retail, fulfillment center and delivery teams. It’s no longer possible to rely on various databases that aren’t connected and don’t serve your ultimate needs. By using a system that encompasses all of this essential data, you’ll be able to create the ultimate order fulfillment process based on fulfillment centers with updated inventory and customer data.
2. Automation is essential when dealing with an omnichannel ecosystem. As we’ve discussed, you want to provide your customers with a wide range of order fulfillment services. You want to give them the opportunity to meet your business where and when they desire. This could mean at home, at a store, at the curbside or at a pick-up locker.
It is impossible to control this data and each delivery/pick-up through inefficient processes done by staff. Automation is essential in order to scale and to provide the same day shipping.
3. Arguably most importantly, the best results will come when you unify the resources, systems and technologies behind your eCommerce fulfillment operations. Your business must aggregate and maintain all of this information on a single platform in order to efficiently and cost-effectively manage multiple order fulfillment channels.. This includes the entire omnichannel chain: orders, inventory management, fulfillment locations and teams, fleet management and availability, drivers and the customers themselves..
With unified delivery and fulfillment, you’ll be able to manage staff and various fulfillment services and models while reducing overhead and overall costs. At the end you’ll achieve optimal speed, costs and efficiency, the goal of every eCommerce business.
A Data-Led Platform for customer-centric eCommerce fulfillment
At Bringg, we work with leading global retailers, brands and manufacturers to quickly launch and scale high-performing, data-led fulfillment models that boost efficiency while engineering exceptional customer experiences. Our off-the-shelf, modular technology lets retailers rapidly deploy solutions that match their omnichannel business needs, while leaving room for future growth. To learn more, you can visit Bringg.com/retail or get in touch with a Bringg representative.