Fulfillment Is At The Epicenter Of E-Commerce Enablement
When e-commerce brand owners start out, they often think of order fulfillment as the last, easiest and most exciting step in the sales process. They’ve already done all the hard work of setting up a website, marketing and making the sale, so how hard could it be to get the merchandise to the customer? They soon learn that the bigger they get, the harder and more critical it becomes.
As a brand grows, the fulfillment process becomes more and more complex, while the need for efficiency, accuracy and transparency increases. At the same time, mistakes become more costly, with U.S. retailers' 2020 returns previously estimated at $550 billion.
Getting the right product to the right customer, affordably and on time, requires the seamless integration of multiple entities using multiple technologies. Brand owners must be able to store, track and replenish inventory, prioritize orders from multiple channels, manage volume spikes, accurately pick and pack orders, source affordable shipping options and handle returns. A hiccup at any one point causes customer service nightmares. Rather than being the last thing they worry about, fulfillment becomes central to their success or failure.
Fulfillment also becomes one of their largest line-item costs, right behind material goods. An independent study by Fulfillment Companies found that fulfillment costs averaged 10%-15% of gross sales but could reach up to 20% if there is little automation in place. While fixed costs per order will decrease as order volume increases, labor costs will only go up. To lower its cost per order, the business must either invest in its own warehousing technology and automation or find a third-party logistics provider that can provide it for them.
Working with a third-party logistics provider enables e-commerce businesses to tap into infrastructure and technologies that they might not have access to or be able to afford on their own. This can take a huge burden off the shoulders of an e-commerce business. Good third-party providers should also take on a consultative role in helping brands vet partners and build an efficient tech stack, as well as create unique, value-added solutions that improve customer experiences and build their brand.
Online brands are notorious for dramatic seasonal spikes in volume and unexpected periods of rapid growth as they get discovered and add new sales channels and technologies. Whether the brand can take advantage of these growth spurts depends heavily on its fulfillment capabilities. Here are some factors to think about when it comes to fulfillment in your company:
Spikes In Volume
Even the best-laid business plans can end in disaster if your fulfillment operations aren’t nimble enough to handle peak seasons and promotions. A sudden spike in volume can easily overwhelm a labor-intensive fulfillment process, cause inventory shortages and result in shipping delays. Warehouse automation can enable brands to quickly scale during peak periods. Warehouse management systems that offer granular, real-time data can give brands full visibility into inventory levels and shipping status.
Scaling The Business
Shopify, the leading shopping platform for DTC brands, recommends that when an e-commerce business reaches an average of 200-500 orders per day, it’s time to shop for an ERP system to help it analyze data and drive down costs. At this point, lots of other mechanisms need to be reexamined to see whether they still work, given newly attained volumes. It’s no coincidence that this is also often the breaking point for fulfillment operations. If the company can’t deliver the right kinds of services, locations, integrations, data and real-time visibility into operations, no efficiencies will be gained and scaling will be difficult.
Selling Through The Channel
An e-commerce brand that gets picked up by a big-box retailer or marketplace, thereby adding B2B fulfillment into the mix, requires an electronic data interchange (EDI) system that enables them to manage the highly specific vendor requirements of large retailers and marketplaces. Naturally, if they use a fulfillment company, that partner must also be able to make this transition, both in terms of technology and fulfillment capacity.
Brands that want to expand internationally usually find that the demand is there, but the fulfillment piece is incredibly daunting. That’s because it involves cross-border shipping, customs and duty fees, tax collection, language barriers and multiple payment systems in multiple currencies. There are solutions that can make this infinitely easier, but only if the company has the necessary international capabilities and integrations.
No matter how you look at it, every aspect of e-commerce enablement is determined by the brand’s fulfillment capabilities. Strategic partnerships, seamless integrations and easy access to technology and automation can make all the difference as the business scales.