Multichannel E-Commerce Fulfillment
In a survey by AlixPartners, 60% of respondents said they browse for products based on their preferred shipping options. Consumer expectations around shipping change over time and differ from region to region. But the trend is definitely moving toward faster, cheaper shipping, more flexibility and easier returns.
In many mature e-commerce markets, Amazon has contributed to heightening expectations. They introduced Prime in 2005 with free two-day shipping for members. More recently, they have moved to free one-day shipping for eligible purchases, and even same-day Prime delivery in some geographies.
You’ll likely never invest as much as Amazon has in logistics, but with the right tools and right partners, you can still match evolving customer expectations and sales channel SLAs.
Understanding Channel SLAs
When working with a variety of channels, it is important to understand and meet Service Level Agreements (SLAs). Marketplaces and drop-ship networks typically measure seller track records (e.g., percentage of orders fulfilled on time, percentage of orders canceled). Those who frequently fail to meet the agreement could face penalties or even suspension. For instance, Amazon Sellers can obtain the Prime badge if they commit to maintaining one- and two-day delivery speeds.
Conversely, it might be unnecessarily expensive to use high-end, fast shipping solutions that perform beyond the SLA baseline. As your multichannel distribution grows, the most optimal fulfillment stack may consist of a variety of logistic partners. But what you get in saved costs, you may lose in added strain on your resources, unless you can automate how your orders get routed between fulfillment methods.
Implementing Standardization and Scalability
Fulfilling orders through multiple channels requires balancing customer satisfaction, SLAs, shipping costs and inventory levels. It also means your brand will have to deal with more shipping scenarios, varied SLAs, packing requirements, returns, tracking — and that’s on top of the increased volume of orders.
Whatever your fulfillment strategy, its success depends on how standardized and scalable your operations are.
Standardization comes from automation. You want to get your distribution to a place where no one has to think through every order. You can leverage business rules to determine the best shipment method for each order depending on factors such as SLAs, the weight and the size of the package and the respective cost of each method.
Scalability means your capabilities can handle more volume or steep variations in volume (during holiday shopping season, for instance). If your brand experiences large variations in order volumes, whether it is due to growth or seasonality, relying on your own fulfillment capabilities can quickly become either inadequate or inefficient.
Working Out of Your Own Warehouse
Smaller brands typically have their own warehouses and ship their own orders.
As they connect with more and more channels, they find themselves logging through different seller portals to download packing slips. Shipping label printing can also become an issue when you are handling hundreds or thousands of orders every day.
Ideally, your warehouse employees should only have to pick, pack and ship.
That’s where being equipped with the right warehouse management software (WMS) comes into play. Ideally, this middleware is connected to all your selling channels, merges different workflows into just one and makes some decisions for you based on automation rules.
As brands grow, they usually move away from shipping orders themselves and turn to a network of third-party logistics partners (3PLs).
3PLs come in all shapes and sizes and picking the right one(s) is among the most crucial strategic decisions.
Consider these data points when evaluating different 3PL opportunities:
- Current and future volume of daily orders
- Current and future number of SKUs
- Size and weight of your items
- Storage requirements (e.g., temperature control, flammable, food-grade certified, dry storage)
- Location of your shoppers/geographies you want to cover
- Shipping speed requirements from your channels
- Special requirements of your channels, like Seller Fulfilled Prime for Amazon
- Your current software systems
- Need for customer service, tracking, returns
- Special considerations (e.g., tracking serial numbers for electronics)
Regardless of your choice in partners, the next big priority is to get everything to work in sync: your factory/warehouse, your orders and your partners.
Leveraging Marketplace Fulfillment Capabilities
When marketplaces such as Amazon, Walmart or Zalando have their own fulfillment capabilities, it’s definitely worth considering.
Advantages of marketplace fulfillment options include:
Compliance: Easily meet the fulfillment requirements of the marketplace — it’s easier than getting the Merchant Fulfilled Prime validation. Plus the marketplace handles all the complexity attached to fulfillment, such as customer service and returns.
Conversion: Your products show as fulfilled by the marketplace, which is a plus for some shoppers.
Expansion: It allows you to open new markets without developing any other foothold in the region.
Disadvantages of marketplace fulfillment options include:
Complexity: Because you’ll probably still need to use 3PLs for other channels, marketplace fulfillment could become one more partner to handle.
Dependence: As you integrate further with one marketplace, you could become over-reliant on a single channel. During the first weeks of the pandemic, Amazon halted the shipment of nonessential items. Sellers with their own fulfillment capabilities were the only ones who could still sell.
Cost: The gains in compliance and conversion come at a cost. Marketplace fulfillment can sometimes be pricier than other options.
There are, however, ways to mitigate the complexity. For example, it may be possible to use marketplace fulfillment to ship orders from other channels, such as through Amazon Multichannel Fulfillment. Additionally, proper software automation could help automate business decisions and save time and work on every order.
List your products across more channels.
ChannelAdvisor helps connect your products to hundreds of global channels, including marketplaces, digital marketing channels, retailers with whom you have a wholesale or drop-ship relationship and your own webstore.