Order fulfillment can make or break your e-commerce business. It sounds cliche, but a reliable e-commerce fulfillment partner will help your brand delight customers and grow your business. In contrast, a poor e-commerce fulfillment service will cause you to lose your customers and leave your brand reputation in tatters, no matter how awesome your product is.
So, how do you choose the right e-commerce fulfillment partners? What are the best criteria?
Before we delve into the essentials to help you make the right choice, here’s a brief introduction to help you understand e-commerce order fulfillment services a bit better.
What are e-commerce fulfillment services?
Think of an e-commerce fulfillment service as a command center for your e-commerce business that deals with the post-checkout process of delivering online orders to the customer.
However, e-commerce fulfillment is much more than placing a parcel on a customer’s welcome mat. Fulfillment includes receiving and storing inventory, processing orders, picking items, packing boxes, and shipping the items to the customer’s destination, along with the requisite communication to both internal parties and the end customer.
Who would need e-commerce fulfillment partners?
- Businesses that run on a direct-to-consumer model and have no high street store or storage facilities
- Companies that have simply outgrown in-house fulfillment capabilities to the point they can no longer dispatch orders at scale
- Omni-channel businesses that are looking to add an e-commerce channel
Typically, most fulfillment services run on large warehouses on the outskirts of cities, but modern-day fulfillment solutions make use of multiple small-scale warehouses called micro-fulfillment centers. These micro-fulfillment centers are set up in metro areas and rely on automation to cater to customers’ needs and fulfill the goals of faster and more sustainable delivery across different geographic locations.
Difference between e-commerce fulfillment services and traditional 3PLs
Although traditional 3PLs share some overlap with e-commerce fulfillment services, most 3PL companies focus on just providing basic functions of logistics, i.e., pick and pack, warehousing, distribution, etc.) whereas full-service fulfillment centers offer more comprehensive services, including customer support and returns.
- Delivery speed – given their model, traditional 3PLs lack the means to enable instant delivery for brands; they can cut down the wait time to two days or one day (next-day delivery), at best. However, cutting down on delivery time is costly for them. But this is where modern e-commerce fulfillment services like Ohi shine; Ohi, for example, is able to provide deliveries same-day and often in under two hours.
- Cost – 3PLs often charge based on weight, time, and distance, whereas modern e-commerce solutions like Ohi charge a flat fee. Instant commerce solutions often forward-position inventory in micro-fulfillment centers around the country, significantly reducing the transportation and delivery required on a per-order basis, even if the number of dedicated deliveries increases significantly.
- Sustainability – another key difference is proximity to end customers, which allows these modern e-commerce fulfillment services to use eco-friendly transportation (walkers, bicycle messengers, and electric vehicles) and reduce the need for wasteful cardboard packaging. In contrast, this is far from possible with a traditional 3PL.
While there are a few patent differences, 3PLs and instant commerce providers like Ohi tend to serve different needs. Because providing two-hour or same-day delivery coverage throughout the nation (including in rural areas) is impractical and unrealistic for any fulfillment service, many merchants leverage modern e-commerce fulfillment providers like Ohi alongside their 3PL in synergy, to offer an incredible instant commerce experience (where available) and reasonably fast delivery elsewhere in the country.
How to choose the right e-commerce fulfillment partner?
According to an eMarketer report:
“The biggest challenges facing retailers today include transportation, scalability, inventory management, order processing speed and accuracy, and profitability.”
You need a fulfillment partner that can reliably provide services to reach and exceed KPIs in all five of the areas above. This guide will walk you through key factors to keep in mind as you go fulfillment hunting for the right e-commerce fulfillment service.
1. Delivery speed
If your customers are like most shoppers today, they expect fast delivery (and will expect it to get faster and faster).
According to PWC’s recent global consumer insights survey, fast delivery is shoppers’ #1 overall consideration when buying online (ranked top three by 41% of respondents).
With the emergence of same-day and two-hours or less delivery options, the benefit or strength of two-day delivery as a competitive advantage has started to wane. This is because these options are no longer considered fast enough by modern shoppers. Therefore, growth-mindset e-commerce retailers are increasingly pivoting to instant delivery, as this is a proven strategy to improve their customer experience and help enhance customer acquisition and retention.
With instant delivery fast becoming the expectation, longer delivery times may propel your customers to shop from your competitors, hurting your business.
2. Warehouse locations
Nowadays, consumers increasingly are not satisfied with two-day delivery. And it’s near impossible to meet the delivery speed needs of today’s customers with outdated fulfillment models that solely rely on gigantic warehouses based in the middle of nowhere, where land is cheap. While this may seem attractive on the surface, consider what that fulfillment approach means for your last mile delivery experience and delivery speed.
If speed is what you’re after, you need to look for a micro-fulfillment-based solution that utilizes small warehouses (or micro-fulfillment centers) in densely populated urban areas, to shorten the time/distance to the end customer. By keeping your inventory hyperlocal to customers, the last mile delivery experience can be extra quick, since a delivery courier can then deliver one order at a time (point-to-point) instead of hundreds of orders by the truckload.
3. Scalability
A good potential partner should be just as focused on your company’s continued growth as you are. Furthermore, they should be flexible and prepared to acclimate and grow with you as your business grows. You should see evidence that they have the capacity (or are actively adding the capacity) to meet your growing order volume in a way that maintains a high standard of operational excellence and your all-important customer experience.
In summary, make sure you team up with an e-commerce fulfillment provider who is flexible, adaptive, scalable, and capable of tackling unprecedented situations and volume spikes.
4. Data tracking
The only way to scale your business is to have complete visibility into your metrics to maximize your efforts on areas of growth and create solutions for bottlenecks discovered. In addition, as a critical component of brand differentiation, e-commerce businesses must be able to provide excellent customer service, which is dependent on having accurate and timely data at their fingertips.
Choose a fulfillment provider that provides these critical data tracking capabilities in as near real-time as possible:
- Inventory levels for your products (as well as forecasted ordering schedules)
- Real-time customer order tracking for all your deliveries
- Real-time inventory order tracking so you know your products are available
- Analytics for better insights into product purchase trends
5. Order fulfillment technology and integrations
Technology is critical when it comes to selecting the best e-commerce fulfillment provider. The two most important aspects of this are how your online store communicates with the fulfillment services and how they help you with data leveraging.
With the right technology, you can send product orders from your e-commerce platform to your fulfillment provider for distribution without needing additional insight from you or your team. Furthermore, the software automatically updates order statuses and inventory levels in the warehouse and your company’s website. These should be simple, automated processes designed to streamline your operations and ensure that your online store functions reliably.
Look for a fulfillment service that offers these features:
- State-of-the-art software
- Automated fulfillment processes and accurate reporting
- Integrations with the top e-commerce platforms on the market, i.e., Shopify, Magento, etc.
6. Returns management
92% of consumers in a survey said they would buy again if the product return process was easy, whereas 79% of consumers expect free return shipping. (source)
E-commerce fulfillment entails more than just delivering packages to customers. Many providers also help merchants with receiving returns and processing refunds, referred to as reverse logistics. An experienced third-party logistics provider understands how to manage returned products efficiently. They can assist a retailer in developing a return policy that keeps profit margins way above the red line.
7. Costs
It is reasonable to expect some initial costs associated with offloading your order fulfillment needs to an e-commerce fulfillment service provider. However, when you do so, you will most likely later save a considerable amount on labor, overhead, packing supplies, and other variable expenses down the road. Furthermore, if you choose a modern e-commerce fulfillment solution, such as one that practices micro-fulfillment with fewer overhead costs, like Ohi, you can often benefit from transparent and low flat-rate pricing, as inventory is forward-positioned and last mile delivery is greatly simplified.
It’s important to understand that cost is often overemphasized as a criterion when looking at e-commerce fulfillment providers. By enabling fast delivery, retailers often see outsized ROI via gains in conversion rates and customer loyalty metrics like repeat purchase rates and customer lifetime value, which more than justify the initial cost of enabling these fulfillment services.
‘Modern problems require modern solutions.’
Outdated traditional e-commerce fulfillment solutions might still dominate the e-commerce landscape today but will increasingly fail to meet the needs of modern customers who want instant delivery. Look beyond a single 3PL partner approach and consider using a mix of fulfillment partners that together address your customers’ needs.
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.