In the world of online retail, your customer experience must be smooth and consistent, especially when it comes to your order fulfillment—the process of delivering your product to your customer.
Next-day and same-day delivery-once an option that e-commerce stores could choose to offer -is now an expectation in online shopping rather than the exception. Fast delivery is no longer enough, today’s online shoppers now want instant delivery. 70% of e-commerce customers say convenience is one of their top reasons for shopping online. 41% of customers are willing to pay for same-day delivery.
It follows that a key to any successful e-commerce business is fast and efficient e-commerce order fulfillment services.
Whether you’re trying to set up a new online e-commerce platform or just improving your existing operations, this easy-to-read guide explains everything you need to know about e-commerce order fulfillment.
From the process of fulfilling an order to order fulfillment success strategies and everything in between, we’ll walk you through the basics of e-commerce order fulfillment to keep your customers coming back, boost your brand reputation, and give your business a competitive edge.
What is e-commerce order fulfillment?
E-commerce order fulfillment is an essential e-commerce business process that incorporates the entire process of receiving, processing, packing, and delivering goods to a customer. It begins from the moment a customer places an order on an e-commerce platform/website and ends when they physically receive their order.
In certain cases when a customer seeks an exchange or reimbursement of the items, the return process also becomes a part of the order fulfillment process.
Some retailers and companies take care of the entire fulfillment of orders in-house, while others use a third-party logistics (3PL) provider to shoulder some of the burdens. There is also the option to outsource your order fulfillment to a micro-fulfillment provider like Ohi, to enable two-hour, same-day, and next-day delivery in key metro areas.
What are the steps in e-commerce fulfillment process?
Your e-commerce fulfillment process is something that should be streamlined and optimized to get your orders from the warehouse to your customers’ doorstep as quickly as possible.
While there is no one-size-fits-all order fulfillment strategy, the broader steps that a product moves through within the order fulfillment process are very similar, regardless of the company size or type.
1. Receiving inventory
The first step in the e-commerce order fulfillment process is the retailer receiving their products at a nominated distribution location.
This can either mean receiving the goods first-hand at your place of business or outsourcing to a 3PL provider to manage to receive the stock at an external storage location such as a warehouse or a fulfillment center.
You also have the option of joining a micro-fulfillment center network, which can work very well if you’re a DTC brand with an urban client base. In this scenario, you can inject inventory into the network at one or more hubs, which are traditional distribution centers that then handle the transfer of your inventory throughout the micro-fulfillment center network (and into all major cities).
2. Inventory storage
This refers to the location when and where orders are logged into inventory and stored ready to be filled.
Ideally, each item must have a Stock-Keeping Unit (SKU) identification code associated with specific storage space. This space can be as small as a spare room or as large as a warehouse, depending on the size of the business and its merchandise.
Well-managed, organized, easy-to-access inventory storage is essential to the process of e-commerce order fulfillment to mitigate delays in customers receiving their goods.
3. Order processing
Once the customer completes their online transaction, the order is received and processed by the retailer’s e-commerce platform, ready to be filled at the storage facility.
This stage of order fulfillment includes item selection, packing the product/s suitably for transit (including choosing the right packaging to minimize costs and damage), and preparing the order for shipment.
A few considerations to ensure smooth order processing are:
- Accuracy: Small mistakes in your order can quickly snowball into logistical disasters or customer disputes that go from bad to worse. Keeping your inventory in fulfillment centers that are close to your customers is helpful here, especially for enabling instant delivery.
- Supply chain visibility: Knowing how your orders are selected and packed before shipping can help you identify bottlenecks in the fulfillment process.
- Packaging: Amazon sellers are instructed to select the right kind of packaging for their products, but this applies to e-commerce fulfillment in general. Choosing the right boxes and packing materials can help ensure your orders arrive in good condition. For example, any fragile or hazardous materials need to be identified and given clear, corresponding labels indicating they need special handling. If you are using micro-fulfillment (such as Ohi’s instant commerce solution), you may need little or no exterior protective packaging, since orders only need to travel a short distance to the end customer.
At this stage, the order leaves the storage location and is shipped to the customer via a variety of methods of transportation.
Small businesses usually opt to ship their orders via services like UPS or FedEx. Larger brands and e-commerce companies with the resources to do so have access to a wider variety of shipping methods, or often choose to partner with micro-fulfillment services like Ohi, to ensure that each order is accurate and arrives quickly, which can drive increased conversions and improve customer loyalty.
Shipping logistics are a crucial element in the e-commerce order fulfillment process. A 2018 study showed that 83% of US shoppers said that free delivery/shipping was their most important deciding factor when ordering online. The study also showed that shipping costs are a major factor in customers’ online shopping cart abandonment, whereby 54% of shoppers did not proceed with their order because of e-commerce delivery fees.
97% of online shoppers want full transparency when their orders are shipped, including live updates at each step, from when it leaves the fulfillment center to when it’s dropped off. It minimizes the anxiety they have about their orders going wrong – and practically the worst thing you can tell a customer when they ask you how their order went missing is “I don’t know.”
Integrating live-tracking and giving customers SMS and email updates when their order gets loaded onto the delivery vehicle leaves the fulfillment center, starts its transit, and arrives at their location gives them confidence in your brand and makes it more likely they’ll have a positive experience and possibly even leave a positive review for you. It also reduces the burden on your customer service team because it reduces the margin for error that causes complaints and disputes to happen.
Be sure to also keep your messaging consistent with your live-tracking updates and overall brand guidelines—it’s an essential part of your post-purchase experience.
5. Returns processing
When you are considering your e-commerce order fulfillment process, it is advisable to plan beyond the shipping stage and consider customer exchanges, returns, and reimbursements, too.
A fast, accurate, and hassle-free process for dealing with returns, restocking, and discarding of damaged items, as well as customer refunds, must be established as part of your online order fulfillment service.
This need is inherent in almost every e-commerce business. It’s how you manage it that will make all the difference.
Types of e-commerce order fulfillment
There are a few different ways in which to manage your e-commerce order fulfillment. We’ve outlined some of the most popular here.
Third-party logistics (3PL)
Many third-party logistics providers will handle the warehousing, packing, shipping, and even return steps of the order fulfillment process for e-commerce businesses.
As businesses grow, outsourcing order fulfillment becomes necessary to ensure all online orders are fulfilled to meet customer expectations.
Using a third-party fulfillment service also tends to speed up order fulfillment as many of these companies use automation technology to complete the process faster than manual completion. Shopify acquired 3PL provider Deliverr this year to simplify their inventory management and offer two-day and next-day shipping for this reason. Similar services from other providers can offer DTC e-commerce brands reliable nationwide order fulfillment capabilities, which they can later augment with instant delivery services (for faster delivery to end customers) via providers such as Ohi.
Micro-fulfillment involves the strategic placement of smaller-style storage facilities in densely populated areas, or near your target market demographic.
Online shopping and e-commerce platforms are driving the micro-fulfillment center trend, allowing e-commerce brands to forward-position their inventory closer to their customers’ geographic location, reducing the cost of transportation and offering their customers instant delivery.
This is a popular approach for larger businesses and e-commerce brands that have the resources to do all their fulfillment themselves, in their own spaces, and within their own management. Doing order fulfillment in-house gives you a higher degree of control over your logistics, but also requires that you store and process your orders yourself.
However, doing your own fulfillment in-house can be very resource-intensive and is therefore beyond the ability of many e-commerce brands to execute. In-house fulfillment requires an extensive network of brick-and-mortar stores and distribution centers (if delivery speed is a priority) and the personnel to ensure reliable and accurate order processing.
In dropshipping, most of the supply chain process is outsourced for a more hassle-free and hands-off experience. However, you uniquely never actually own the merchandise you are selling.
Dropshipping is when a seller purchases their inventory from a third-party middleman rather than keeping it in stock themselves—they only buy products to fulfill when the customer makes an order. This way, the e-commerce seller doesn’t have to handle the fulfillment logistics themselves. e-commerce stores that make use of dropshipping often work with multiple suppliers to fulfill orders.
Outsourcing your warehousing requires low overhead and smaller upfront investment, but it comes at the expense of losing supply chain visibility and control over the fulfillment process.
How to plan your e-commerce order fulfillment strategy?
To determine which e-commerce order fulfillment process and strategy is going to work best for the nature of your business, there are a few important factors to consider.
To cut shipping costs and keep delivery time to a minimum, it’s advantageous to forward-position your e-commerce order fulfillment centers close to your customers or at least have them in a central location (to ensure consistent, if not fast, delivery speed).
Location is especially important in micro-fulfillment-and it’s also one of its major advantages. 3PL service providers often store inventory in rural areas where warehousing costs are lower. Ideally, DTC e-commerce brands should have access to a national distribution network where they’re able to fulfill their online orders across the country in two days or less.
3-5 day delivery no longer cuts it. We live in an age when customers want their online orders instantly, in minutes rather than days.
In a 2018 study, 53% of shoppers identified speed of delivery as the second most important factor when it came to evaluating online or e-commerce purchases, with 24% canceling their orders due to poor delivery speed.
Customers want their products fast, and because e-commerce order fulfillment begins with the customer placing an order, the management of everything leading up to the delivery phase is just as important as the delivery of the product itself.
Creating a Standard Operating Procedure (SOP) for any in-house order fulfillment, as well as being clear about any 3PL processes and the estimated timeframes for fulfilling an e-commerce order, can assist in saving time across the board.
With delivery speed being one of the most competitive advantages in the e-commerce order fulfillment industry, it is not surprising that repeat purchase rates tend to be higher for retailers who offer the shortest delivery times.
It’s come to the point where instant delivery is what customers expect, rather than just a nice-to-have option. In the last part of 2020, Target increased its same-day e-commerce fulfillment by 273% over the previous quarter.
To achieve this speed of service, some companies team up with an instant commerce provider like Ohi—we offer businesses the ability to provide instant or next-day delivery that is also carbon-neutral; another big plus for any consumer in our current climate.
When devising your e-commerce order fulfillment strategy, you also have to consider how many types of products you sell (your SKU count), and how quickly you can fulfill and ship them.
How many different types of products do you offer? How big or heavy are they? How quickly can you deliver and ship them to the end customer? How quickly does your inventory turn over?
Micro-fulfillment tends to work best with smaller products, smaller inventory variety (and fewer SKUs as a result), and fast-moving inventory.
How you support your customers, particularly in an online environment on e-commerce platforms, is central to your order fulfillment strategy’s success. Some things to look out for include:
- Reply times must be short;
- Online chat, click-to-call, and SMS text support are preferable;
- Having an in-app chat is a great way to offer quick support; and
- Additional and complementary social media customer service is also highly favorable.
Supply chain tracking
Tracking and managing your supply chain in e-commerce order fulfillment is another important consideration.
The supply chain includes:
- Logistical and transportation services.
Effectively managing the different stages and steps of the supply chain will help you to continue to meet your customers’ ever-evolving expectations. Supply chain management ensures you have all the necessary inventory and logistical means to deliver almost instantaneously and to create an on-brand positive customer experience.
The challenges of e-commerce order fulfillment
Despite the perks that a well-executed e-commerce order fulfillment strategy can bring, several challenges must be addressed within any online order fulfillment strategy.
Delays in shipping
Modern consumers expect fast delivery, and where instant delivery is not an option, finding ways to reduce shipping time is the key.
Streamlining your processes and being strategic with your business or warehouse locations are two ways you can do this. In particular, the location of your e-commerce fulfillment centers will dictate how quickly your products can get to your customers.
Most customers also want either free shipping or shipping at a very low cost. This can be achieved by bringing up the price of your products to include the cost of shipping, or by adding free shipping on orders over a certain amount.
Shopping cart abandonment
The rate of online shoppers abandoning their carts is high, especially when compared with in-store shopping purchases.
This can be for a variety of reasons, particularly when additional costs are too high (such as shipping), when they’re forced to create a new account, or when your website doesn’t support an adequate variety of payment methods.
One way to combat the high rate of abandoned shopping carts is to create easier online checkout and payment options for consumers. Research suggests that avoiding the requirement for customers to create an account to be able to purchase with you can also reduce cart abandonment on e-commerce platforms.
With the pandemic accelerating the shift to e-commerce and online order fulfillment, the market is much more competitive than it used to be. That means your customer service needs to be spotless for your e-commerce brand to be competitive.
Creating a positive overall customer experience includes customer service communications options like automated chatbots and a dedicated customer support email. Having systems like these in place makes ordering from you streamlined and hassle-free, and makes cancellations and returns less likely.
Returning orders promptly is just as important to the success of your e-commerce fulfillment as delivering them.
Your fulfillment centers (or at least one of your fulfillment centers or partners) must be able to quickly receive, evaluate, and restock returned goods as well as manage any exchanges that may be required.
Additionally, offering your customers the option of free returns can be a major perk that will help your e-commerce brand stand out.
At Ohi, we’ve flipped the script for e-commerce fulfillment, transforming it from what is traditionally seen as a cost center into a growth engine. Brands join the Ohi platform to deliver powerfully fast, brand-focused, and memorable post-purchase experiences that enable them to grow. Want to learn more about how Ohi enables instant commerce? Get in touch today.