The global ecommerce market continues to grow exponentially every single year, and is expected to reach a total value of $5.55 trillion by the end of 2022.
Of course, growth in the space was accelerated by the coronavirus pandemic, so many ecommerce ventures may have scaled incredibly quickly without creating the necessary infrastructure to cope effectively with rising demand.
Your order fulfillment can often bear the brunt of this, so it's important to create a clear logistics strategy that suits your small business. Here's our brief guide to help you on your way!
Understanding Fulfillment and Your Options as an Entrepreneur
Before we delve into some of the key components of fulfillment and the potential benefits of outsourcing this as a small business, it's important to consider your main options.
In truth, there are several methods of ecommerce fulfillment available to SMEs, depending on the size of your venture, its scale and the nature of the products that you sell. Here's a brief breakdown:
- Self-Fulfillment: We'll start with an often used option among SMEs, with self-fulfillment requiring you to stock, ship and manage your inventory independently. This requires expertise and demands a considerable time commitment, but it can also reduce financial costs and theoretically save smaller ventures money.
- Dropshipping: With this method, you'll effectively buy and sell products on demand, purchasing them directly from a manufacturer or simplier for their retail value. You'll then sell them directly to your customers at the recommended retail price (RRP), realizing the difference as your profit while negating the need to hold any inventory at all and effectively outsourcing logistics.
- Outsourcing or Third-Party Fulfillment: With this option, you'll outsource complete responsibility for your ecommerce fulfillment, from order receipt and processing to packaging and their eventual shipment. This requires a strategic partnership with a service provider like Salesupply, and while it requires a financial commitment, it often delivers significant time and cost savings to your small business while optimizing customer satisfaction over time.
The Key Fulfillment Components - Helping You Make an Informed Decision
Each of these options has its own unique pros and cons, while requiring you to take responsibility for different aspects of fulfillment?
But what are the key components of your ecommerce fulfillment? Here are a few to keep in mind:
Packaging is integral to ecommerce logistics and fulfillment, whether you want to showcase your company's branding, reduce its carbon footprint or simply ensure that products are shipped safely and without incurring damage.
Of course, you may want to tick all of these boxes with your packaging, with the latter point particularly important when you consider that damage caused while a product is in transit remains the primary trigger for customer complaints and returns.
If you intend to commit to self-fulfillment, you should invest in affordable and recyclable materials such as cardboard, with two-sided boxes particularly cheap when procured in bulk and providing a secure vehicle for shipping even fragile goods when combined with bubble wrap.
When it comes to pricing, shipping costs are usually dictated by cumulative package weight and dimensions, and it's important to calculate your precise shipping costs before making definitive decisions. After all, there may be considerable cost differences between self-fulfillment and outsourcing, especially as third-party providers can usually ship in considerable bulk and target a wider range of locations more easily.
Insurance is another key aspect of ecommerce fulfillment, particularly if you want to protect against any damage that is caused in transit.
For example, courier insurance safeguards against a broad range of risks that you may face when goods are in transit from one location to another, and it's a necessary cost that you'll need to handle independently when engaging in self-fulfillment.
Conversely, most third-party providers incorporate comprehensive insurance coverage into their planning and the pricing they offer to clients.
In fact, they'll usually offer different policies and products to suit different needs, with key points of variation being the price and the highest amount that can be reimbursed.
#3. Warehousing and Returns
One of the biggest fulfillment challenges revolves around the procurement and storage of inventory, as this can require a significant capital investment and careful management.
For example, you'll need to maintain and fund the requisite amount of warehouse space at all times, while scaling and managing your inventory to cope with real-time demand (while attempting to minimize costs).
This is highly challenging if you don't have experience or count warehousing as a core competency, which is why third-party fulfillment and outsourcing may provide a more viable option in this respect.
For example, we operate multiple inventory fulfillment centers in three separate continents across the globe here at Salesupply.com, through which we can hold inventory on behalf of clients and expedite deliveries into international markets (particularly in the US and Europe).
This not only enhances the scale of your operation and helps to optimize the service delivered to customers, but it also simplifies your costs and arguably delivers a superior return on your spend.
By outsourcing the control and storage of your inventory, you can also create a vehicle through which to manage returns. This is a major concern for all ecommerce stores, particularly those that are smaller in nature and looking to scale rapidly as demand increases.
In the US alone, the cost of returns for all retailers in 2020 peaked at $550 billion, some 75.2% higher than four years earlier.
Incredibly, this figure doesn't include the expenses incurred by storing returned items and putting them back on sale (where applicable), with an estimated 20% of companies hiking their retail prices to cover the additional costs.
But how exactly does outsourcing help in this respect? Well, here at Salesupply, we strive to offer our client's customers a local return address in 17 different countries, simplifying the process considerably and making this much cheaper.
In addition to regional returns processing and storage, our return hubs also have the capacity to handle testing, refurbishment and even the destruction of faulty products where required.
Above all else, our third-party fulfillment service is able to either create a viable returns policy from scratch or match an existing model.
So, you'll retain some control over your returns policy and how this is enacted by service providers, while simultaneously reducing costs and improving the experience from a customer's perspective.
#4. What About Tracking?
When products and deliveries are in transit, it may be preferable to provide tracking to customers. This enables them to know precisely where their purchases are in real-time and offers access to accurate shipment and delivery times.
However, the software that provides this type of insight can be extremely costly and difficult to integrate for SMEs, and while custom software solutions can contribute to savings over time they also require a significant upfront investment.
When combined with the cost of other necessary software packages such as Enterprise Resource Planning (ERP) programs, the outlay can be prohibitive for small businesses and make it hard for them to effectively track shipments and manage their fleet efficiently.
Once again, however, outsourcing and third-party fulfillment offers you immediate access to existing and in-built software systems, which can provide real-time tracking and communicate this information succinctly to your customers.
The Bottom Line - Why Outsourcing May Be For You
As we can see, ecommerce fulfillment comprises a number of different elements, many of which require significant intuitive management and infrastructure investment in your business.
However, it's also apparent that third-party fulfillment centers (such as those provided by Salesupply) offer a particularly viable option to small businesses, which often lack the expertise and resources to manage fulfillment effectively and deliver goods to customers on time.
Outsourcing can also reduce the cost per order of shipping. This is because third-party providers are able to deliver items in bulk and at a considerably reduced cost, while their use of multiple distribution centers can reduce shipment times and allow for more expedited delivery.
Here at Salesupply, we have years of experience in ecommerce fulfillment services, providing both domestic and international support across three continents.
So, by getting in touch with our team today and discussing your ecommerce customer experience needs, you can optimize the performance of your ecommerce venture and its fulfillment while focusing on other strategic elements of the business.