This chapter introduces the four options for e-commerce order fulfillment (covered in more detail in the following chapters). It also spotlights two major fulfillment opportunities, Amazon FBA and international shipping.
Order Fulfillment Options
- Direct fulfillment (also called self fulfillment). You are responsible for all aspects of fulfillment, such as stocking, taking orders, invoicing, storing, and shipping.
- Third-party fulfillment. A third-party logistics (3PL) provider is responsible for storing your goods, processing your incoming orders (pick and pack) and shipping everything for you.
- Drop-shipping. You work directly with your supplier to distribute their product. You take charge of accepting orders from customers and the supplier is responsible for stock, packaging, and shipping to the customer.
- Cross-docking. Some 3PLs provide this service. When your shipment arrives at their warehouse, it is unloaded and reloaded for sales fulfillment, cutting the warehouse storage stage from the supply chain. This service has recently become popular with crowdfunding and e-commerce flash sales.
Deciding on your fulfillment strategy depends on your business goals:
- If you’re just starting out and only process a few orders per month, direct fulfillment is a good way to remain hands-on with your business and learn along the way.
- If your business is starting to pick up, outsourcing your logistics to a 3PL will help you save time and focus on more important areas.
- If you’re looking to test the waters without investing heavy amounts of capital, managing stock, or figuring out logistics, drop-shipping can help you sell different products, understand your target market and hone your marketing strategies.
Some e-commerce sellers even use several fulfillment types at the same time. One scenario is to use drop-shipping high margin products, 3PL for low-margin, high volume products, direct fulfillment for trying out new products and cross-docking for a flash sale.
Fulfillment By Amazon
Amazon FBA is a popular example of third-party fulfillment for e-commerce sellers because it comes with access to the Prime shipping network. On Prime, customers orders can qualify for free two-day shipping or free standard shipping. This service clearly gives sellers an edge in closing a sale.
Other benefits include access to Amazon’s 24/7 customer service and returns management, which takes most of the burdens of customer service from the seller. Because FBA is known as being dependable, being an FBA seller can also convince potential customers to trust that the seller will deliver.
However, Amazon has very high requirements for accepting products into their warehouses. Amazon’s requirements are covered in the Amazon Shipping & Receiving Requirements chapter.
Selling to customers in other countries and fulfilling orders around the world sounds daunting at first, but it’s a great way to take your business to the next level.
In many countries now, you will find savvy customers who shop cross-border. Small businesses can pick up on this opportunity with tools that offer discounted shipping rates to any international destination, and that also help streamline fulfillment and shipping processes.
There are fewer restrictions to shipping parcels to other countries than there are with importing freight. But, before you start shipping internationally, you should research:
- Shipping insurance.
- Whether your product is shippable by plane.
- Whether the target markets have import restrictions, tax and/or duty on your product.
- Whether those countries have special delivery requirements. In particular, some countries, like Russia and India, require recipients to provide additional personal documentation before they can receive packages. You have to build an extra step into fulfillment so that your customers in those countries can pick up their goods.
- You may need to prepare for slower delivery times in some countries, like Brazil.
When choosing a courier, think about your shipping goals and what you expect from them, such as speed, cost, service quality, tracking.
Expert TipYou don’t need to stick to one fulfillment strategy. It’s common for businesses to choose third-party fulfillment for international customers, and direct fulfillment for domestic customers.
- There are four options for order fulfillment, to be covered in more detail in the following chapters.
- Amazon FBA is a popular third-party fulfillment service that provides the opportunity to reach Amazon Prime customers, although it has stringent requirements.
- International fulfillment is another major opportunity to reach new customers.
- E-Commerce Basics: Order Fulfillment
- International Shipping: Definitions, Strategies, And Why It’s Important
- Ten E-Commerce Destinations You Should Be Targeting
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