Did you, as an eCommerce store owner, know that for online retailers, the average cost to fulfill an order is about 70% of the average order value?
Shocking, right? After all, there is hardly time to calculate and reach this figure. Especially when you’re busy managing several large and small functionalities that form just a part of the entire selling process.
Be that as it may, there are always alternatives that can help a business owner like yourself reduce such costs. In fact, you can even utilize them to maximize profits, boost your reputation, and expand your customer base alongside retaining the existing ones. One such alternative is known as an auxiliary service provider, otherwise known as fulfillment centers.
But what is eCommerce fulfillment and how can it help in customer service and retention? That is one of the many questions that we aim to answer in this article. So, let’s begin.
What Is eCommerce fulfillment?
eCommerce Fulfillment involves the delivery aspect of your business. It includes the pickup, packing, and timely delivery of an order placed on your site.
While many small businesses opt to manage this step on their own with the help of courier services, the same is rarely the case for the bigger players of the market. eCommerce stores that receive a heavy flow of orders on a regular basis frequently look to outsource their fulfillment services to professionals. The decision to choose the best suitable vendor is crucial and is based on multiple factors like the speed of delivery and shipping cost, etc.
Why is eCommerce fulfillment an important tool for customer retention?
Statistics suggest that about 38% of customers abandon their carts if the expected delivery date for the order is over a week later. At the same time, 25% of online shoppers leave before check-out if unexpected shipping costs are found added to the final bill. Additionally, with one-day and two-day shipping offered by select platforms, that is what customers now expect from other eCommerce businesses as well.
eCommerce fulfillment is an important auxiliary service for online retailers looking to make a name in the market through their customer service efforts and activities. It extends a whole array of benefits to both the business and the customer. Benefits such as 24/7 support, embedded return processes, refunds, and consistent delivery speed to name a few.
Before we move on to discuss the advantages of eCommerce fulfillment in more detail, let us take a quick look at the various models available to you. Each option has a range of benefits and drawbacks that can help with customer retention.
What models of eCommerce fulfillment are available?
eCommerce fulfillment is available in 3 different business models—self-fulfillment, 3PL fulfillment, and dropshipping. Let’s take a look at how each option functions and what makes them unique.
Self-fulfillment is when an online store decides to undertake the entire process of inventory management, shipping, and delivery. Here, you are responsible for all order fulfillment-related operations like storage, order management, packaging, return processing, and so on.
This method is suitable for smaller businesses with a low or medium inflow of daily orders. It does require a lot more work to maintain orders yourself but can be more cost-effective. When the number of orders you receive is less or restricted to only a certain geographic area, the efficiency with which the deliveries are made increases. And you don’t need us to tell you how much a customer appreciates a quick and appropriately packaged shipment, delivered to their doorstep.
Self-fulfillment allows you to pay attention to each package personally which in turn ensures that you’re doing the best you can for your buyers. That is exactly how a loyal customer base is constructed.
Frequently used by the top names in eCommerce communities, 3PL or the ‘Third-Party Logistics’ model is just as the name suggests. It is built upon the basic idea of outsourcing all storage and distribution operations to another company that specializes in the task.
The 3PL businesses are known to provide an array of customized solutions like B2B processing, temperature-based storage, custom packaging, and more. They not only store your pre-purchased products in optimal conditions but also ensure all shipments are delivered on time and in a good state to their respective buyers.
And just as we established in our discussion above, customer service is no longer restricted to only the post-sales efforts you put in. It is also highly dependent on the quality of both your product and its delivery. 3PL is best for companies who have a high quantity of and/or different kinds of orders coming in on a daily basis from a national and international platform. Its wide range of services and professional personnel ensure that all your orders are delivered in good condition and on time.
It is only when you take care of your customers’ wishes that you may be able to serve them in a manner that turns you into a trusted brand. And who doesn’t want to be associated with a business that is known for its customer service efforts?
When built upon a dropshipping business model, an eCommerce store simply acts as a platform where one may order a product. The order is then sent to the manufacturer or wholesaler who will be taking care of the fulfillment process. Unlike third-party logistics, you do not own any of the inventory that is sold in your store. Instead, you simply act as a liaison for the customers to get the required items through the manufacturing company.
The profit margin is lesser in this model as compared to the 3PL, but so is the investment requirement.
The one thing that makes dropshipping a worthy option is the surety that your customers will be taken care of appropriately. By transferring your shipping responsibilities to the manufacturers who actually own the product and know the best ways to safely and quickly transport it—you put your customers in the hands of experts. There’s no learning curve or trial and error on your side in trying to understand the best way to ship the product. The only thing to really keep in mind is that you partner with manufacturers that have a solid reputation in customer service.
Self-fulfillment services or an external provider?
With all of these options in mind, it’s important to ask yourself if self-order fulfillment is right for your business.
This decision is heavily based on factors such as the:
- Average number of orders you receive in a given time period
- Types of product(s) you deal in
- Geographical location you’re serving
- Amount of time and monetary investment you can make
- Your customers’ expectations
If you’re a smaller business with a limited product variety and a smaller number of orders per month it’s likely best to start with self-fulfillment. It may also be a viable option if your competitive advantage revolves around personalization and cutting delivery costs for the end-user. However, if you find yourself struggling to manage your order volume in a timely manner, it may be time to explore leveraging an external fulfillment provider.
Advantages of using an external fulfillment provider
There are various gains to be reaped from using an external eCommerce fulfillment provider’s services, especially when it comes to effective customer service and retention. Some of them include the following:
When operating in a dynamic work environment that comes with an online store, infrastructure that is both appropriate and feasible often comes into question. For instance, if you wish to follow the self-fulfillment model discussed above, you will have to first purchase the inventory outright. That in itself takes a huge chunk of investment.
Then, you also need to rent or buy a space that can safely stash the items until sold. Safety equipment and personnel to handle all these functions will need to be recruited as well. All in all, it will take a substantial amount of capital to run your own store’s fulfillment process.
Instead, outsourcing these activities to an eCommerce fulfillment provider will save you a lot of time, money, and energy. They will not only store your goods in suitable conditions, but also help you regulate the packaging, shipping, and even the returns at a reasonable cost.
This ensures that your customers are receiving good service with timely and safe deliveries. It also allows you more time to take care of those core activities of your business that help keep your buyers loyal.
Reliance on trained experts
You may have a booming eCommerce business, but are you trained in the nuances of packaging and shipping? Is your staff?
With self-fulfillment, you will not only have to recruit but also train additional people to ensure that your inventory is optimally managed. They will also need training in the best ways of packaging and shipping along with the know-how of troubleshooting issues that come up in this stream.
However, if your fulfillment is outsourced, all you’ll have to do is buy the product. From picking up the items to their proper storage, record-keeping, safety, neat packing, and shipping to the customer — everything is handled by the trained experts and professionals at no extra cost to you. That means your buyers receive quality work at reasonable prices without you having to worry about the additional overheads.
Increased focus on core functionality
As discussed above, outsourcing the fulfillment tasks frees you of a lot of responsibilities. You no longer have to fret about taking care of each and every detail right from picking up the right product to getting it packed a certain way. You also don’t need to keep an eye on the several employees who carry out these tasks for you.
That leaves you with your business and its core functioning to focus on. Since several of the post-sale tasks are diverted through the fulfillment centers, you can concentrate on optimizing the pre-sale operations and after-sales service. Everything from the marketing strategies you need for the site, refining advertising copy, and even the outreach programs you have in place to reach more customers or receive feedback from existing ones.
Dip in shipping costs
Let us imagine a scenario here. You have a small store that has been gaining popularity over the last few years. Up to this point, you’ve been doing your own fulfillment but have started seeing more and more orders from outside your geographic focus. Now, you need to deliver the same level of quality and timely service without raising the cost, even though your own costs are starting to increase.
In such situations, it may be wiser to transition to a fulfillment center model. That is because they already have a wide network of delivery executives and channels that can make this shipment possible at much lower costs. They also have the ease of being able to transport with the orders (of other sellers) from the same region, further decreasing the cost you may have to bear.
This has a direct effect on the shipping charges levied on the buyer as well as the time taken for the final delivery. Both of which affect the customer’s experience with your store.
Use of better technology
Once again, when compared to the self-fulfillment model, the outsourced models stand taller. This is because they have access to far superior technology than the small store owners who have limited orders to be delivered every day.
Keeping track of your inventory and its delivery with only a pen and paper or even a workbook is easy only when dealing with small quantities. Since larger numbers make it difficult, 3PL partners often offer a dashboard where you can monitor:
- Real-time inventory in-store alongside the orders received and shipped
- Forecasts about inventory replenishment
- Sales performance reports of different regions
- Personalized sales metrics
This allows you to not just keep an eye on all deliveries and anything that may be going wrong, but also in taking further steps to make shopping with you an enjoyable and happy experience for your customers.
How to optimize your eCommerce fulfillment
Choosing the right fulfillment process for your business is only the first step. There’s no guarantee that your stup will be efficient long-term or that unforseen issues will pop up after setting up your fulfillment process. Thus, optimizing this experience becomes a task to be taken up as the foremost priority. Here are some tried and true methods to optimize eCommerce fulfillment.
Vet your fulfillment options carefully
Choose the right fulfillment company to ensure the timely and safe delivery of products. This choice should be made keeping in mind the nature of your business, the kind of products you’re selling, as well as the number of orders you’re catering to.
Keep an eye on your sales channels and patterns for each kind of item to maintain inventory accordingly. If many of your offered products are out-of-stock half the time, the customers would instead switch to another seller who can fulfill their requirements, as and when needed.
Focus on your landing pages
Optimize your product pages with relevant on-page and off-page SEO to make it easier for customers to find the right product. They should not have to spend more than a couple of minutes to find the item they require in the maze you call your catalog. And one way to optimize the product pages for search engines is by getting them ready for every imaginable keyword a consumer may use while conducting the search.
Free shipping qualifications
Offer free shipping over a certain pre-specified minimum purchase amount. Because why would a buyer want to pay delivery charges of another few bucks when they’re already spending a large amount of money on the products? By eliminating this cost for them, you also make them feel cared for and like they have actually saved some amount by shopping with you.
Simplify the checkout process
Keep your checkout process simple to avoid abandoned carts. If you try to put your customers through multiple hurdles, they might simply quit and shop someplace else. After all, shopping is supposed to be easy and fun, not stressful.
Update your customers
Keep the buyers updated about the progress of their order and the status of shipment. This is again a way of making your consumers feel cared for by ensuring them that you’re doing your best to deliver their products timely.
Importance of customer service and retention
How essential customer service has become to any industry is evident by the fact that it influences about 84% of customers in their decision-making regarding a purchase. And why not? After all, how well an eCommerce platform is able to deliver on its promise of a quick and safe delivery is an important measure of its reliability. No customer wants to purchase from a seller who isn’t reliable and this affects the market share as well as the reputation the store holds in the industry.
Ultimately, what matters for every eCommerce retailer is that their customers are satisfied with their service and keep coming back for more. And good product and marketing strategies alone cannot ensure that.
Fulfillment of the orders is a crucial task which when done right, can help them grow exponentially.