What’s eCommerce fulfillment and what are the types of fulfillment available?
When it comes to product fulfillment, it actually involves far more than fulfillment companies grabbing products in a warehouse and sending them to your customers.
There are several types of eCommerce fulfillment, some of which don’t require any third-party company, while others don’t even need you to look at the products before sending them to customers.
eCommerce fulfillment is a seamless process that makes your online business more agile. Fulfillment could be outsourcing the storage, packaging, and shipping of your products, with an integration directly into your eCommerce platform.
It could also mean finding a warehouse and shipping center that is flexible for you to expand as your business scales.
In short, four steps/components are included in the fulfillment process:
- A software integration between your eCommerce store and the fulfillment center. This lets your fulfillment center know orders.
- Product acceptance and management, where you send the items to your fulfillment center for organization and placing it into inventory.
- Order fulfillment, which includes packaging, shipping, and potential branding.
- Processing returns when customers don’t want the products.
These fulfillment steps change depending on the type of eCommerce fulfillment you opt for. For instance, some fulfillment options don’t need software integrations or to send products to a different company for storage.
Below, we’re going to show you three main eCommerce fulfillment models in use today. Each section starts with a bird’s-eye-view of what’s going on with your eCommerce operation based on the type of eCommerce fulfillment that you opt for:
eCommerce fulfillment option #1: self-fulfillment
The name self-fulfillment says quite a bit about how the operation functions.
The business owner does all the work.
You may utilize some software or services to expedite the process or save money, but in general, you’re handling all of the following:
- Accepting products from the supplier
- Inventory management and storage
- Handling returns
Smaller businesses can run fulfillment processes in apartments, houses, or garages. Running to the post office or UPS is manageable with smaller order counts. However, you eventually may have to rent out a warehouse to store your items.
This warehouse then functions as your full distribution center, and many times you’ll have offices there.
- Your company has full control over the fulfillment process. Quality control is improved.
- This method is typically cheaper for smaller businesses, especially if you’re storing items in your own residence and sending out the items yourself.
- Branding is much easier.
- Customer service improves since there’s no disconnect between you and a fulfillment center. You know exactly what happens in the fulfillment process.
- Self-fulfillment takes lots of time out of your own day.
- You may need to hire additional workers to send out orders.
- The entire operation may actually end up costing more, since there might be expenses like warehouse leases, equipment, and software.
? When to use self-fulfillment
Startups and small companies should always explore an inexpensive fulfillment option like storing and shipping goods from a garage or home.
There are two other reasons you may go with self-fulfillment.
The first is if you’re running a “box of the month” club, like StichFix. All of the items are curated, so it makes sense to keep things in-house. This is true for made-to-order products, like custom embroidered shirts. You can’t have a fulfillment company completing the embroidery for you.
Finally, self-fulfillment may prove useful for larger corporations to speed up shipping and improve branding. It’s like Amazon. They have full control over every step and even use some of their own shipping vans.
eCommerce fulfillment option #2: third-party logistics
Third-party logistics, or 3PL, takes place when you partner with an outside fulfillment company. This way, the fulfillment company takes care of the majority of shipping and handling steps.
In exchange, you typically pay a monthly fee for everything involved. You don’t own or rent the warehouse. Instead, the following elements are often included with your subscription:
In short, the product sits on shelves in your fulfillment company’s warehouse until an order is placed. Then, the logistics company sends the items to your customers.
Note: Amazon Fulfillment Services (FBA) is considered a third-party logistics solution. It works similar to other fulfillment companies, where Amazon stores, packages, and ships products from its own warehouses around the world. However, it’s only available for products sold on Amazon, and you need to be an Amazon Prime customer.
- You free up so much time to work on other parts of your business.
- Third-party fulfillment typically becomes less expensive when you reach a certain order count.
- The best third-party fulfillment companies integrate with your eCommerce platform for efficient order processing.
- You save on things like hiring additional workers, packaging, shipping warehousing, and even returns.
- You lose a bit of control over the shipping process.
- Some third-party logistics companies lack certain benefits like branding or quality software integrations.
- Shipping times may vary depending on the company you partner with. This is why research is so important.
? When to use third-party logistics
Quickly scaling companies usually consider a third-party logistics company to save money and free up time for tasks like marketing, design, and product development.
This is also a nice solution once you decide to switch from something like dropshipping to wholesale purchases. Companies do this because ordering bulk products from China, and other places, is always going to yield higher profits.
eCommerce fulfillment option #3: dropshipping
The world of dropshipping is exploding, so all eCommerce professionals should consider the shipping option depending on your situation.
Dropshipping means that your company doesn’t have to package, store, or ship your products. Instead, you partner with a company or link with software that has all of these services. Below is how it works with Oberlo:
An item is shipped out when it is purchased from your website. It’s different from wholesale purchases, because dropshippers don’t sell in bulk. You could register five orders on your site, and the dropshipper sends them out individually.
Overall, you don’t have to purchase any inventory.
- You can quickly launch a business without any upfront costs for inventory.
- There’s no need to spend time and money on inventory management.
- Packaging and shipping is handled by the dropshipping company.
- You don’t need to buy in bulk.
- You can partner with on-demand printing companies that also dropship.
- There are millions of products to choose from, and it’s easy to quickly get rid of a product from your site that isn’t selling well.
- You gain significant free time for marketing and other business tasks.
- You do have the option to order test samples for a bit of quality control.
- This fulfillment method offers the least amount of quality control, since you never see the product before it goes into packaging.
- The packaging often lacks branding.
- Many dropshipping companies ship from China, which is never a good idea because of shipping times and the quality of packaging.
- It’s very difficult to compete if your products aren’t unique. That’s why we often recommend dropshipping custom printed items.
- Your profit margins are much smaller.
? When to choose dropshipping
Startups should think about dropshipping because of the low cost of launching an eCommerce business. The main reason we like dropshipping is for testing products before committing to wholesale purchases. You can see if items sell well or not, then opt for higher margins with wholesale purchases.
Dropshipping is also nice for custom, unique products. For instance, bloggers may make their own artwork and put it on shirts and mugs. Then, you can partner with on-demand printing and dropshipping companies like Printful or SPOD.
How to choose a fulfillment company
Whether going for a third-party fulfillment company or dropshipping, there are a few elements to look into so that your products are being stored and delivered properly.
For instance, it doesn’t matter if the fulfillment company is located near your business. The key is to have your products warehoused and shipped from locations nearby your customers.
Here are some other elements to consider when choosing a fulfillment company:
- ⌛ Shipping time
- Catering to consumer expectations, many reputable third-party fulfillment companies are offering two-day shipping with large warehousing networks. If dropshipping, look for a supplier in the country where you’re shipping.
- ? Shipping cost
- Shipping costs are cheaper with fulfillment companies, but you may not see these savings until you begin increasing sales. Dropshipping shipping costs are usually very low.
- ?️ Batch fulfillment
- Filling multiple orders at the same time is a must-have.
- ? Coast-to-coast warehousing
- Only partner with fulfillment and dropshipping companies that have warehouses near your customers. Ideally, you want providers with large order fulfillment networks.
- ? Custom materials and packaging
- Dropshipping almost always has unbranded, somewhat junky packaging – especially when ordering from China. Reputable fulfillment brands allow for branding, quality packaging, and more.
- ? Quality support
- Ideally, your fulfillment company has a 24/7 customer service center. Online tools are nice, but you’ll want to be able to talk to a real person on the phone, even if it’s 3 AM.
- ? eCommerce platform integrations
- From Shopify to Bigcommerce, and WooCommerce to Magento, integrations are essential for your fulfillment to work. Check to see if the fulfillment companies work well with the platform of your choice.
The best eCommerce fulfillment companies to partner with
Once you decide on the type of eCommerce fulfillment you want to pursue, it’s time to figure out which companies you’d like to partner with.
We put together a list of the most reputable fulfillment options based on the type of fulfillment you go with.
As we learned above, self-fulfillment means that the majority of the work rests on your shoulders. Therefore, storage, packaging, and shipping is all completed in-house. However, we recommend looking into shipping, labeling, and other types of software and apps to assist you.
For that reason, you should choose a quality eCommerce platform in the first place – one that will allow you to integrate your store with all the shipping providers, payment gateways, tax calculators, and other side tools that you’ll need.
- From our experience, Shopify does a great job at that if you want to have something easy to use that’s hosted by an external company.
- If you want to be a little more in control of your setup, you’ll get all the features and integrations from WooCommerce (running on WordPress) as well.
The most popular type of third-party logistics would be shipping through Amazon. Amazon is an option, but it’s also far more important to focus on your fulfillment outside of Amazon. After all, Amazon requires you to sell on its site in order to take advantage of its service.
We’re more interested in boosting sales on your own site. Here’s a list of our favorite third-party fulfillment companies with that in mind:
- ShipBob – Excellent shipping times, rates, and integrations.
- ShipStation – A top-notch fulfillment company with inventory tracking, cheap shipping, and return management.
- Red Stag Fulfillment – For both B2C and B2B online stores.
- ShipMonk – Beautiful software options for inventory, orders, shipping, and warehousing.
- GoShippo – Extremely discounted shipping rates, great integrations, and a large network.
The best dropshipping companies have shipping centers near your customers. This is essential for good shipping times.
Here are some options for you:
- SPOD – This is one of many print-on-demand companies for creating unique designs on merchandise and having them dropshipped.
- Printful – This is a print-on-demand company that integrates with your store and also provides third-party logistics services.
- Oberlo – Links your store to AliExress, which is a marketplace for primarily Chinese suppliers. The prices are good, the products are plentiful, and the shipping takes a long time. Oberlo also has great integration with Shopify.
- Spocket – This company curates its products better than Oberlo, and it has shipping facilities in the US and UK. Therefore, you can sell higher quality products and the shipping times are reasonable.
Now it’s your turn to start your eCommerce fulfillment plan!
Your next step is to start contacting some fulfillment companies to find out prices and details. After that, you can make a better decision.
If you have any questions about eCommerce fulfillment in general, let us know in the comments below!