This article gives an overview of the range of options for fulfilling orders in this world of e Commerce.
Fulfilment is the process of getting products from a warehouse (either yours, or somebody else's) into the hands of your customers. In other words, fulfilment involves packing, shipping and delivering products to customers; handling returns and customer services, taking payments, managing your product lines. (You may choose to only outsource some of these activities, and keep those particularly sensitive like payment processing and customer services in house).
1. In house fulfilment
When it comes to eCommerce, in house fulfilment is about taking responsibility for the complete order process and customer journey within your own business. Typically though, with in house fulfilment, delivery to customers is outsourced to a courier or postal service, unless you have some great friends/employees willing to jump in their cars after work and deliver!
Pros of Self-Fulfilment
Fulfilling orders yourself has four key advantages:
- Anyone can do it. As long as you've got somewhere to store products, you can print address labels, pack parcels and stand in line at the post office, then you can fulfil orders yourself. You don't need any special contacts to make it happen.
- It's low-cost. You only pay shipping costs, making it the most cost-effective option, especially for eCommerce traders who are just starting out.
- Trust. You know how products are packaged and when they've been shipped, because you did it yourself.
- Confidence. You are sure you have everything accurate, from receipt of the order to dispatch; you are completely in control of your brand and your customer’s experience.
Cons of Self-Fulfilment
The advantages of in house fulfillment should be balanced against some significant disadvantages.
- It's time-consuming. No matter how efficient you get at packing up products, once the orders start rolling in you'll find it takes up much of your day. Eventually, you'll have to hire help, which removes the cost-advantage of in house fulfilment.
- You need a warehouse. You can hold a small amount of stock in a spare bedroom. If you do, you should check with your insurer on whether your home is insured for holding business stock; just as important that any personal data you collect on your customers is stored under the proper controls and regulations.
- You limit your product range. You can only sell products that you can purchase yourself and store in the facilities you have available.
2. Outsourced Fulfilment
With outsourced fulfilment, you hand over control of the whole fulfilment process to another company. They store your products in a warehouse on your behalf, and they package and ship products for you. All you do is send them order details, and they handle the rest.
Pros of Outsourced Fulfilment
Outsourcing fulfilment has two significant advantages:
- Saves Time. By outsourcing fulfilment, you save yourself a heap of time which you can use to focus on growing your business.
- Low hassle. Outsourced fulfilment means no more headaches of discovering your packaging supplier is out of stock, the most irritating customer calls and complains for 3 hours, or the post office is closed.
Cons of Outsourced Fulfilment
The advantages of outsourced fulfilment should be weighed carefully against the disadvantages:
- Cost. Outsourced fulfilment is not cheap, it will dent your profit margins. Negotiate your contract wisely however and you can operate a “turn on turn off” operation to cover busy and slow periods.
- No control. How products are stored and packaged is out of your hands, so you've got to trust the company you've outsourced to is doing a job that's good enough for your customers.
- Overstocking costs. As you're renting space in someone else's warehouse, having too much inventory not only means you've got cash locked away in stock, it also means you're paying more than you need to.
Dropshipping is where products are shipped direct from the manufacturer or wholesaler to your customer's doorstep. When someone orders from your website, you send the order through to the wholesaler, and you both take a cut of the profits. With dropshipping, you don't have any excess stock, because you only buy stock when a customer places an order.
Pros of Dropship
Dropshipping has three major advantages:
- Low hassle. You've no need to get stuck in a mess of packing tape and polystyrene chips!. The dropshipper does all the hard work of packaging and shipping products on your behalf.
- Boost your product range. Dropshipping gives you the option to stock and sell products you might never dreamed were possible to have in your store.
- Low risk. Because you only pay for what you sell, you'll never have cash flow problems because you've bought too much stock.
Cons of Dropship
However, dropshipping isn't for everyone. Here's why:
- Low margins. Because dropshippers are shouldering the risk on your behalf, and because they're handling the shipping for you, they'll expect a significant cut of your profits. For this reason, dropshipping works best with high volume or high margin products.
- You need the right contacts. You can find dropshipping suppliers with an in-depth internet search, but finding the right products at the right price is time-consuming. Having industry contacts is a big help.
- The chicken and the egg conundrum. Dropshippers will want to know you can move their products, so chances are you'll need to impress potential suppliers with past sales stats, or at least a stunning website. If you're just starting out, you've probably got neither of these.
- Shipping is out of your hands. If you've got a broad range of dropshipping suppliers, they may all charge different rates for shipping, and have differing standards on how quickly orders should be fulfilled. This can be confusing for your customers, some of whom may order 2 items and assume they are despatched from the same warehouse - and arriving together - which may not be the case. Customer experience can be negative using this option.
4 Hybrid Fulfillment
Hybrid fulfillment involves using a range of fulfillment options to get products to the doorsteps of your customers. For eCommerce traders, this can provide the best of all worlds. A good combination is to:
- Use self-fulfillment or outsourced fulfillment for low-margin, high volume items.
- Use Dropshipping for high margin products, and to bulk out your store with items you couldn't stock yourself, but that draw a crowd.
- Use self-fulfillment to try out new products. When you know how many you'll sell, you can transfer them over to outsourced fulfilment.